California Eminent Domain Report

The California Department of Transportation (Caltrans) and the owner of Silveira Ranch are involved in an interesting valuation dispute stemming from Caltrans' acquisition of part of the ranchland needed for Highway 101 improvements.  According to an article in the Marin Independent Journal, Judge gives state a nod in Silveira ranch eminent domain case, the parties disagree on the property's highest and best use, and as a result, they are widely off on their valuation opinions.  Caltrans has offered the owner $1.8 million for the acquisition, while the owner is demanding $6 million.

The article reports that the Superior Court has issued a tentative ruling indicating that the property owner's valuation is inflated and fails to demonstrate that it is the probable amount of compensation that will be awarded.  The attorneys are to submit final arguments before a February 22 hearing, a week prior to Caltrans' scheduled date for construction of the $29.7 million Redwood Landfill interchange improvement project.

While it is not entirely clear, based on my reading of the article, it sounds like this is not a final determination on the ultimate value to be paid for the property (which is typically decided by a jury).  In fact, the Judge even states that in issuing the ruling, "the court is not suggesting herein that greater compensation might not be warranted after further development of the issues and trial on the matter."  

So what's going on -- why is there a valuation dispute at this point in the case?  My guess is that the property owner has challenged Caltrans' motion for prejudgment possession of the property.  One of the requirements for a government agency to secure prejudgment possession is the deposit with the Court or State Treasurer the "probable amount of compensation" to be awarded in the condemnation action.  This is typically accomplished by the agency's depositing funds equal to the original offer of compensation based on an appraisal.  The reason for this, of course, is that property owners should be able to access those funds to secure replacement property (or otherwise invest the money) at the time they turn over their property to the government.

In the past it was rare for the deposit appraisal to be challenged; if there was a dispute, it was usually done through a motion seeking an increase in the deposit of probable compensation.  However, it is now becoming common for property owners to dispute this deposit amount in an effort to delay the agency's taking possession of the property.  With construction delays potentially costing tens of thousands of dollars per day, this is the maximum leverage point for the property owner if they can find a way to delay the agency's ability to secure possession.