Upcoming IRWA Meetings -- Come See Me!

For all you Southern California right-of-way folks, the next few weeks have quite a bit in store.  Here's what's going on in the local International Right of Way Association (IRWA) Chapters:

  • IRWA Chapter 57 Meeting (2/6/13):  This Wednesday, February 6, IRWA Chapter 57 (Inland Empire) will be hosting its monthly luncheon at the Old Spaghetti Factory in Riverside.  The guest speaker is Mike Mason, MAI, from Overland, Pacific & Cutler.  Mike is a well-known eminent domain appraiser in Southern California, and his presentation is titled, "How Appraisers Lie Without Really Trying."  Sounds intriguing.  I'll be sure to take notes on all of Mike's admissions (so I can be sure to save them for a future cross-examination, of course). 
  • IRWA Chapter 67 Meeting (2/12/13):  Next Tuesday, February 12, IRWA Chapter 67 (Orange County) will be hosting its half-day Winter program, Right of Way Engineering and Title Seminar.  I'm told there was so much interest that the morning seminar portion is already sold out, but regular members can still catch the lunch meeting which will incorporate the seminar topic.  The great line-up of speakers includes Jeremy Evans from Psomas, James Staudinger from HDR, Chris Maziar from Lawyers Title, and Dave Woolley from Woolley and Associates.
  • IRWA Chapter 11 Meeting (2/20/13):  Finally, last but not least, the following Wednesday, February 20, IRWA Chapter 11 (San Diego) will be hosting its monthly luncheon at its usual spot, the Handlery Hotel.  I will be speaking with Ricardo Goni from Desmond, Marcello and Amster, and we're going to cover a case study on loss of business goodwill based on a recent eminent domain court decision, Caltrans v. Dry Canyon Enterprises.  Ricardo and I will provide the general framework on how to measure goodwill in a condemnation action, both in the "before" condition and "after" condition, followed by a summary of the Dry Canyon case and what it means for eminent domain attorneys, appraisers, business owners and public agencies.

Hope to see you all at some (or all) of these events! 

FHWA Resources

The FHWA recently published a series of useful short videos on its website.  For those of you working on transportation projects involving federal aid, check them out below:

  • Right-of-Way Coordination and Certification Requirements.  Before an agency gets to construct its project, it needs to coordinate and certify the right-of-way.  This video provides an overview of the initial coordination process when federal funds are involved, including what must be completed before putting a project out to bid, and the need to obtain physical possession of the impacted properties.
  • Acquisition and Negotiation.  A property owner is entitled to just compensation for the taking of property; the process for determining compensation, providing relocation benefits, and presenting the offer is described in the Uniform Relocation Assistance Act.  This video provides an overview of the federal regulations that apply to acquiring property, and the procedures that must be followed when agencies enter into negotiations.
  • Property Management.  Properly acquiring and managing property for project right-of-way is vital to protecting the public’s investment and securing Federal-aid funding.  This video provides an overview of the federal requirements involved in managing right-of-way before and after construction.

What do you think?  Useful?  Cheesy?  For more helpful information, check out the FHWA's website for (1) information on right-of-way regulations that apply to federal aid projects, (2) information on the Uniform Act and related regulations and guidance, (3) Federal regulations that apply to Federal-aid highway projects prior to authorizing construction, and (4) Real Estate Acquisition Guide For Local Public Agencies.

 

California Court of Appeal Confirms Valuation Method for Private Utilities in Public Rights-of-Way

A new published California court of appeal decision may be important for private utility companies with respect to the valuation of their possessory interests in public rights-of-way for property tax assessment purposes.  The case, Charter Communications Properties v. County of San Luis Obispo, provides that when assessing the fair market value of a utility's possessory interest, the County tax assessor will likely be able to disregard the utility's agreed-upon remaining term of possession and instead assume a much longer anticipated term of possession to match reality.  This, in turn, means private utility companies should expect to see higher property tax assessments.  

Some background:  Under article 13, section 1 of the California Constitution, property is generally assessed as a percentage of its fair market value.  Private possessory uses of public property may also be assessed for property tax purposes.  With respect to private utilities in public rights-of-way, such possessory rights are typically valued by capitalizing the annual rent.  The annual rent is based on the franchise fee paid in exchange for the utility's possessory interest for (1) the remaining term or (2) the anticipated term.

The term of possession therefore becomes very important for valuation purposes, as the longer the term of possession, the greater the present value.  In the past, the assessor typically relied on the franchise agreement between the public entity and the private utility company in determining the remaining term.  As terms came closer to expiration, private utility companies were taxed less and less.  

The Charter Decision:  In Charter, the private utility company had between four and eight years remaining on its franchise agreements with the County for the placement of its television cables in public rights-of-way.  Instead of using this remaining term for valuation purposes, the County assessor instead valued the private utility's possessory interest by assuming a much longer anticipated term of possession (15 years).  

Charter challenged the assessor's valuation methodology, as it resulted in over half-a-million dollars of increased assessment.  Charter claimed there was no basis to deviate from the agreed-upon remaining term and assume a longer anticipated term of possession.  The trial court held that the assessor appropriately relied on an extended anticipated term as opposed to the parties' stated remaining term, concluding that the evidence demonstrated that these types of franchise agreements are routinely renewed indefinitely, and in fact Charter expected its cables to remain in-place indefinitely.

The Court of Appeal affirmed, also concluding it was appropriate for the County assessor to assume a much longer anticipated term for valuation purposes.  Despite the stated length remaining for its franchise term, there was no question that the utility provider would have its franchise renewed and the utilities would remain in place well into the future.  

Private utility companies will now need to seriously analyze their property tax bills and determine the valuation methodology employed by the assessor.  If the assessor deviated from the stated remaining franchise term, the utility provider will need to decide whether the deviation is supported.

California Transportation Commission Announces Allocation of $101 Million for 90 Projects

Today the California Transportation Commission announced the allocation of $101 million to fund 90 state-wide transportation projects.  The CTC's updated project allocation list provides a full breakdown of all the projects.

In reviewing the project list, there appears to be a big push towards going "green":  many of the projects involve improvements such as tree planting, compressed natural gas (CNG) buses, pedestrian and bicycle trails, or acquisition of property for restoration and habitat protection.  There's also a handful of traditional right-of-way improvement projects such as the Encinitas Grade Separation Project and the construction of an auxiliary lane in Santa Ana for the Dyer Road off-ramp to Edinger Avenue.

Caltrans' press release focused on two items:  (1) the "Middle of Buckhorn" project on State Route 299 west of Redding; and (2) the approval of the first phase of the I-805 Managed Lanes North in San Diego County.  Caltrans' Director, Cindy McKim, touted that "transportation projects are providing jobs and improving mobility for people and businesses in California."

Huntington Beach Mobile Home Park Owner Challenging Eminent Domain

According to an article in the Orange County Register, "H.B. mobile home park owner fights city's property seizure," the owner of Pacific Mobilehome Park is challenging a street-widening project for which the City of Huntington Beach plans acquire eight mobile homes through the use eminent domain.  The street-widening project will widen Atlanta Avenue between Huntington Street and Delaware Street, and the mobile home park owner claims the project's environmental impacts were not sufficiently studied. 

The City's zoning administrator waived the need for an in-depth environmental impact report.  The attorney for the mobile home park's owner disagreed with the waiver, stating that "[a] road-widening project that will displace several families and result in the loss of the residential community characteristic of the area will clearly cause substantial adverse effects on human beings, either directly or indirectly."  The City's Planning Commission is set to hear the owner's appeal this week.

While the project was first recognized in 2006 by the Federal Statewide Transportation Improvement Program, federal funding still has not been obtained.  The City plans to obtain the funding in three phases:

  1. Preliminary engineering;
  2. right-of-way acquisition; and
  3. construction.

In addition to securing federal funding, the City will also have to obtain a coastal permit and a conditional use permit.

Stanislaus County Considering Eminent Domain for Highway 99/Kiernan Ave. Interchange

According to a Modesto Bee article, "Stanislaus County Board of Supervisors Watch," Stanislaus County will vote tonight on whether to utilize the County's power of eminent domain, if necessary, to acquire property necessary for the Kiernan Avenue / Highway 99 interchange project.  The County apparently believes it can secure the necessary property much quicker than state transportation leaders.  Construction is scheduled to begin in January 2012.

The County is also hoping to secure $46.5 million in state bonds set aside for Highway 99 improvements, and in order to obtain this funding, having all the right of way for the project may be necessary.  As we've seen in recently, bond/stimulus dollars may be driving the right of way acquisition timing more than anything else.

New Court Decision Addresses Eminent Domain Issues

The California Court of Appeal issued an interesting unpublished decision yesterday addressing a number of eminent domain issues, ranging from right to take challenges, entitlement to goodwill, severance damages, and jury instructions.  The case, City of San Luis Obispo v. Hanson, garnered enough attention that several third parties filed Amicus briefs with the Court.

By way of background, the City of San Luis Obispo decided to realign a road partly in order to accommodate a newly approved Costco development.  The realignment required right-of-way acquisition from a property on which the Rose Garden Inn operated.  After Costco was unable to reach an agreement with the property's owner on the acquisition price, the City adopted an appraisal (which found no severance damages) prepared by an appraiser hired by Costco, made an offer based on that appraisal, and passed a resolution of necessity to acquire the property by eminent domain. 

The property owner's right to take challenge was unsuccessful, and the case proceeded to trial on compensation.  The trial court found the Inn was not entitled to lost business goodwill, and the jury returned a verdict finding only about a quarter of the amount of severance damages claimed by the owner.

On appeal, the following issues were decided:

  • The Road Realignment Met the "Public Necessity" Test:  While the road realignment was partly caused by Costco's project, and Costco would clearly benefit from the realignment, the project still met the "public necessity" test in that the road was needed by the public and the City had considered realignment regardless of the Costco development.
  • The City's Adoption of Costco's Appraiser's Value Was Appropriate:  The Court held that the City could adopt the opinion of the appraiser retained by Costco (instead of hiring its own appraiser to value the take), as long as the appraiser was independent and impartial, and the City was not required to turn over the full appraisal on which its offer was based (it was only required to provide a copy of the summary basis of appraisal).
  • The City was not Precommitted to Taking the Property by Eminent Domain:  Even though the Costco project was already approved (which required the realignment), the City did not abuse its discretion in adopting the resolution of necessity because it was not precommitted to the taking; the City substantially debated the issue and ultimately could have modified the realignment had it chosen to do so.
  • The City's Severance Damages Determination Was Appropriate:  The City's appraiser determined the severance damages suffered solely based on the cost to cure method of valuation, and it assumed that the City would build driveways on the remainder of the property.  The Court held that the appraiser was not required to value the remainder of the property before and after the taking, and that a condemning agency may agree to do work on the owner's property to reduce compensable damages (as long as it does not contradict the resolution of necessity).
  • The Trial Court Appropriately Declined to Allow Testimony on the Business' Alleged Lost Goodwill:  The business' goodwill appraiser determined that the business possessed goodwill equal to ten percent of total income, and that all the goodwill would be lost because of the uncertainty of the project.  The court appropriately excluded this testimony because it was already part of the appraiser's calculation of severance damages the business would suffer, and because the appraiser's ten percent figure was arbitrary and could not be supported.
  • The Jury Instruction Stating the Costs of the Acquisition Would be Borne by the Public Was Appropriate:  The jury was not told that Costco would be paying the ultimate costs of the acquisition, but instead that the public must pay the compensation.  The Court held this instruction was appropriate, as the jury need not be made aware of Costco's role, and ultimately, Costco may be partly reimbursed by the City if Costco paid more than its fair share of the roadway (since other property owners benefiting from the project must pay a portion as well through assessments/development impact fees).

In all, this was an exciting case for an eminent domain attorney, as it dealt with many issues that rarely occur in one case.  Although the case is unpublished, and therefore cannot be cited as law, it is useful to see how at least one Court of Appeal panel views these issues.

Government Considering Options for Pacific Electric Railroad Right of Way

From 1901 to 1961, the Pacific Electric Railway -- or the "Red Car" -- operated as one of Southern California's primary mass transit options, connecting Orange and Los Angeles Counties in a large series of rail corridors.  Now, officials are examining ways to reuse the West Santa Ana Branch Corridor, an abandoned 20-mile rail corridor running from Santa Ana to Paramount. 

According to a June 14 Orange County Register article, "Is reusing the old Pacific Electric Railway a possibility?, the hope is that someone can find a way to use the abandoned rail line to

connect the Los Angeles Metro Blue Line, Metro Green Line, and Union Station on the north end, and the Santa Ana Regional Transportation Center on the south end.

I have no idea whether such a project is economically feasible or whether it will get off the ground.  However, the ever-increasing costs of major right-of-way projects, coupled with the public's aversion to the government's use of eminent domain (often required for such projects), suggests that it makes a lot of sense to study whether an intact, existing right of way can be reused.  

Whether anything ever comes of this, I like the fact that officials are studying the issue.  We'll see what happens.

Note:  Photo from the National Archives, Pacific Region, in Laguna Niguel, California.

Report on IRWA Chapter 67's Renewable Energy Seminar

Yesterday, I chaired the International Right of Way Association Chapter 67 (Orange County) spring seminar, focused on the interrelationship between renewable energy, right-of-way acquisitions, and eminent domain.  It was a great success.  For those of you who were in attendance -- or for those of you that missed the seminar but would like a recap -- all of the speakers were generous enough to allow us to make their presentations available.

  • Dave Kilpatrick's presentation, titled "Energy Independence -- the Impossible Dream?" [PDF], focused on our nation's overall energy policy, dependence on foreign oil, and how reliance on renewable energy can solve -- at least partially -- our energy issues.  Mr. Kilpatrick painted the picture that while our decreasing supply of traditional energy sources is problematic, our bigger concern is the increasing demand not just from the US, but from other countries like India and China.  Mr. Kilpatrick also pointed out that while there are renewable energy options that could play a large part in helping solve our energy crisis, most of these options are plagued with economic limitations.
  • Rick Rayl's presentation, titled "Renewable Energy Meets Eminent Domain -- When Grandma's House Gets in the Way of Windmills" [PDF], focused on some of the unique laws that allow privately held utility companies to condemn property for energy projects, and some of the legal issues that arise in valuing impacted properties.  A hot discussion point was whether private utility companies should offer to pay impacted property owners up to $5,000 to obtain an independent appraisal.  Mr. Rayl concluded that while utility companies may not technically be required to make such an offer (an issue that remains unclear under current law), it makes good sense to do so.  Mr. Rayl pointed out that such an offer allows the property owner to feel secure in the utility company's offer, and it may result in the utility company's avoiding having to pay thousands -- and potentially hundreds of thousands -- of dollars in legal fees in an eminent domain battle.
  • Elizabeth Kiley's presentation, titled "Kicking the Dirt -- How Energy is Changing Land Use and Values" [PDF], focused on various appraisal issues involved in renewable energy projects and right of way acquisitions for such projects.  Ms. Kiley presented a somewhat rosy picture for those properties out in the "middle of nowhere" that previously had no real value, as they may now have a highest and best use as a solar or wind farm site, especially where the properies lie near major transmission corridors.  Although there have not been many "closed' transactions yet, many deals are in the works pending entitlement approval, and desert property values are experiencing an uptick.
  • Cliff Clement's presentation, titled "A Walk in the Wind" [PDF], walked us through a wind farm project from concept to entitlement to construction and, finally, to completion.  Going through the Power Point is definitely a must, as you'll be amazed at what goes in to selecting an appropriate site and constructing these massive wind turbines.

May 11 IRWA Seminar on Renewable Energy, Eminent Domain Issues

On May 11, Chapter 67 of the IRWA (Orange County) is hosting a half-day seminar focused on the interrelationship between renewable energy, right-of-way acquisitions, and eminent domain.  If tying renewable energy to eminent domain sounds like a bit of a stretch, you apparently haven't been following all the recent news about the struggle to entitle and build renewable energy projects.  Just yesterday, the White House Blog featured a profile on federal energy policies entitled Building a New Foundation for Energy and the Environment

Between the project facility itself and the right of way necessary to connect renewable energy projects to the grid, myriad eminent domain issues arise.  And, fights over energy projects in particular have made news lately in the ongoing battle over eminent domain reform.  Stories about eminent domain issues involving natural gas pipelines and wind farms have gone viral in the past six months -- and this is likely just the tip of the iceberg. 

The panel for May 11 includes a range of practitioners:

  • David Kilpatrick, President of Kilpatrick Energy Group will speak first.  He will talk about our overall energy policy, dependence on foreign oil, and how (if at all) reliance on renewable energy can solve our energy issues.
  • I will speak second about the legal intersection between renewable energy and eminent domain.  I will talk about some of the unique laws that allow utility companies (and, in particular, privately held utility companies) to condemn property for energy projects.  I will also talk about some of the legal issues that arise when trying to value a property both for energy projects themselves and when an energy use may qualify as the highest and best use for property being condemned for some other purpose.
  • Elizabeth Kiley, President of Kiley Company, will speak third.  She will talk about various appraisal issues involved in renewable energy projects and right of way acquisitions for such projects.
  • Finally, our lunch speaker will be Clifford Clement, Vice President, Land, for Third Planet Windpower, LLC.  Mr. Clement will walk us through a wind farm project, from concept, to entitlement, to construction, and, finally, to completion. 

If any of this sounds like it may impact your practice, please come spend the morning with us.  And, even if none of this sounds remotely interesting, come spend the morning anyway.  My colleague, Brad Kuhn (who is Chairing the Seminar), has worked hard to ensure attendees will receive four hours of credit for OREA, MCLE, and/or SR/WA

And, most importantly, if nobody shows up, I'll have to spend the morning talking to myself -- and while I do that on a regular basis, I try not to do it in public.  See you there.

San Diego Contemplating Eminent Domain on Behalf of Escondido Developer

Government agencies often require developers of large projects to build the necessary infrastructure to accommodate those proposed projects.  Examples include building a new roadway to reach the project, widening an existing roadway due to the project's adding extra trips to the daily traffic, and installing improvements for utilities and flood control, among other things.  But how do developers acquire the right-of-way when the necessary property is privately owned? 

The proposed Merriam Mountains residential development project in north Escondido is a perfect example of how the above scenario typically plays out.  In Morgan Cook's November 9 North County Times article, "ESCONDIDO: County could use eminent domain for Merriam Mountains development project," Cook explains that the Merriam Mountains 2,700-unit proposed residential development is conditioned upon the developer's widening Deer Springs Road from two to four lanes for a two-and-a-half mile stretch between Twin Oaks Valley Road and the I-15. 

Since this widening requires the acquisition of private property, the County of San Diego may exercise its power of eminent domain on behalf of the developer, NNP Stonegate-Merriam, in order to acquire the land from the necessary property owners. So what are the impacts of the proposed Deer Springs Road widening?  According to a study completed by one property owner, the widening will require the acquisition of 17.55 acres of private property. 

Mr. Cook's article explains that County policy requires the satisfaction of five criteria before the use of eminent domain may be exercised on behalf of a developer:

  1. The developer must have made reasonable offers based on a fair market value appraisal report and made every reasonable effort to acquire the property rights;
  2. Alternative locations for the public project must have been considered and found impractical;
  3. County staff must have deemed it unwise to abandon the public project altogether;
  4. The developer must have agreed to pay all the county's costs, including land purchases and eminent domain proceedings; and
  5. The Board of Supervisors must have mapped out the land to be acquired. 

Should government agencies be able to exercise the power of eminent domain on behalf of private developers?  On the one hand, some argue that it is unfair to use eminent domain to accommodate the proposed development of a private developer.  On the other hand, it is the government that is imposing upon developers the requirements to build the infrastructure improvements.  If the agencies that impose the requirements do not provide a means of implementing those requirements, developers may be left with no way to develop their properties, regardless of a project's overall merit.

Photo Credit: Cohdra from Morguefile.com

Tulare County Plans to Condemn Properties to Widen Road 80

According to Visalia Times Delta reporter Valerie Gibbons, in her October 20 article "Tulare County now wants 11 more parcels on Road 80," Tulare County is moving forward with condemnation plans for 11 properties in order to widen Road 80:

The county has been trying to acquire properties — many of which are in 40- to-60-foot-wide strips, and about a mile in length — since the beginning of 2008. Eighty-five other property owners along the route have reached sale-price settlements.

The widening project, designed to ease congestion between Dinuba and Visalia, has been planned for years.  According to Sarah Jimenez of the Fresno Bee, funds for right-of-way acquisitions were secured in 2006.  Regardless of the traffic problems the project is designed to alleviate, the County's decision to use eminent domain to acquire the final few properties along the right-of-way, is generating considerable controversy.      

According to an October 22 article in the Porterville Recorder,"11 more parcels grabbed for Road 80 project," the County is not taking the decision to use eminent domain lightly:

“It’s a difficult decision to make, but the necessity is there,” Supervisor, Dist. 2, Pete Vander Poel said.

County staff argued that without these parcels the Road 80 Project would be incomplete. The undertaking consists of widening Road 80 from two lanes to four lanes and creating a dividing center median from Goshen Avenue in Visalia to Avenue 416 in Dinuba that will improve traffic flow, alleviate flooding and improve access to Dinuba.

Based on the recent articles, it appears the disputes center not on the need for the project, whether the County should acquire it, or what the County is wiling to pay for the land it is acquiring.  Instead, it appears that owners are concerned largely with severance damages and loss of business goodwill that they believe the project will cause.  Of particular concern to some dairy farmers is that the loss of land will purportedly impact the number of cattle they may have on their remaining property, based on restrictions imposed by state waste-water treatment regulations.

It appears from its published Agenda for its October 27 meeting [PDF] that Tulare County may decide then whether it will expand the scope of the takings to include additional parcels (Ms. Gibbons' article indicates that three additional parcels are being considered).   

Notably, even as it moves towards filing condemnation actions, the County intends to continue negotiations to acquire the properties voluntarily.  In fact, the County reports that it recently began negotiating directly with the remaining owners in response to complaints that the relocation consultants the County hired were not adequately reponding to owners' concerns.