California Eminent Domain Report : a blog following condemnation, inverse condemnation, and regulatory takings written by attorneys with Nossaman LLP.

Want the scoop on what future challenges local government agencies face with respect to eminent domain and redevelopment?  Want to hear from some of the most well-recognized eminent domain attorneys across the nation?  Want to get some CLE credit?  Want to get all your questions answered?  Want to do it all from your desk, in a short one-and-a-half hour presentation?

Come join us on Thursday, December 1, at 10 a.m. (PST) for the online seminar, "Eminent Domain: Redevelopment Challenges for Local Government, Navigating Federal Funding Requirements, Challenges for Public Utilities in Right-of-Way Projects, and Objections to Taking for Public Use."  The panel is nothing short of outstanding:

• Rick Rayl and I will be giving an update on redevelopment, and in particular the potential nationwide ramifications of California's currently pending redevelopment lawsuit before the California Supreme Court. 
• Robert Thomas and Mark Murakami, our good friends at Damon Key (Hawaii), and authors of the blog inversecondemnation.com, will focus on strategies for handling and raising objections to a taking.
• Anthony Della Pelle from McKirdy & Riskin (New Jersey), and author of the blog New Jersey Condemnation Law, will focus on issues with planning for public utility takings and right of way projects.
• J. Casey Pipes from Helmsing, Leach, Herlong, Newman & Rose (Alabama), is the Owners' Counsel member firm from Alabama and Co-Chair of the ABA Litigation Section's Condemnation, Land Use, and Zoning Law Committee, and he will be covering how to navigate the waters of complying with federal funding requirements.

For more details and registration, please check out the Strafford website.  We're hoping you'll sign up.  There's a Q&A session at the end, so bring your questions.

And, as a final note, much thanks to Robert Thomas for getting the ball rolling on this webinar.  It's pretty exciting to be working with some of the top eminent domain attorneys across the country.

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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.

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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.

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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.

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Earlier this year, Nossaman sent out an E-Alert providing a status update on the use of federal stimulus dollars for California infrastructure projects.  Here on the blog, we've also recently reported on water-related property rights issues grabbing news headlines.  A recent Mojave Water Agency project -- backed by federal stimulus dollars -- ties the two topics together.    

According to a recent Victorville Daily Press article, "MWA uses eminent domain on land: Property is needed for R-Cubed project," the Mojave Water Agency is using eminent domain to acquire land necessary for its "Regional Recharge and Recovery Project."  The project, dubbed "R-Cubed," is a $60 million effort to expand existing ground water recharge basins, and will require the construction of 15 miles of pipeline, five to seven wells, and several turnouts for local water providers.  The project received over $13 million of federal stimulus funds earlier this year, and will have the initial capacity to supply enough water for 30,000 homes.  

Design of the massive project is essentially complete, and the MWA filed an eminent domain action to acquire four necessary Victorville properties earlier this month.  Utilities will run through two of the properties located on Mesa Street west of I-15; a street re-alignment will impact a third property on Mesa Street; and a turnout facility will be placed on the fourth impacted property located on the west side of Mesa View, south of Bear Valley Road. 

More details on the R-Cubed project can be found at www.r3project.com.  

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