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CALIFORNIA EMINENT DOMAIN LAW BLOG

Eminent Domain Appeal Denied: Sacramento On Track For Kings’ New Arena, 4/21/14

After months of deliberation, negotiation and court appearances, the city of Sacramento won its appeal for possession of the former Macy’s building. The last piece of the puzzle completes the needed land for the new $448 million Kings arena scheduled to open in 2016.

But the battle for the ex-Macy’s building remains fierce. The City made an offer to the owners of the building, CalPERS and some mortgage certificate holders, for $4.35 million for the property. However, the ex-Macy’s owners believed the property is worth more than $10 million.

The disagreements during negotiations led the City to file an eminent domain lawsuit in January of this year. CalPERS was not against the City’s plans to acquire the property. However, the certificate holders were objecting to the plan. Their attorney, George Speir, raised the issue that the owners were not given a proper chance to object to the taking. He also argued that the City had incorrectly handled the eminent domain lawsuit. Ultimately, those arguments failed with the court holding that they City could proceed and the owners’ remedy was to challenge the amount of the compensation.

As the scheduled opening of the arena is in 2016, the Kings are wasting no time. The Kings future arena will be underway soon as demolitions begin in June. Sticking to a strict timeline, the NBA has stated that should the construction of the arena go beyond 2017, they have the right to buy the Kings from the City and move them out of town. Although Sacramento has acquired the property for the $448 million arena, it will be paid for by the Kings. The Kings have already spent $36 million on the Downtown Plaza for the rest of the needed property for the arena.

“Just compensation” for the property will be determined in trial and will include expert testimony on appraisal of the property. Meanwhile, the City still needs to complete its environmental review, create a financing package and develop an agreement with the Kings in regards to payment and development of the new arena. The development agreement will be introduced to the City Council late April or early May. The City has also indicated that it will be contributing a $258 million subsidy towards the project. Stay tuned for more updates on the new Sacramento King’s arena.

Author: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, please visit http://www.eminentdomainlaw.net/aboutAJH.php.

California Town Uses Eminent Domain To Eliminate Private Water Company

Notwithstanding the public backlash following the U.S. Supreme Court’s ruling in Kelo v. City of New London several years back, government agencies are getting more and more creative with stretching reasons to support exercising eminent domain. The city government of Claremont, California is attempting to take over a private water company using eminent domain and justifies its attempts by claiming that the residents are unhappy with their water bills.

Claremont’s “solution” is to take the water company. A municipal utility is nothing new. But taking an already existing private utility is suspect and a potentially flawed plan. The residents are not certain about how the City would go about paying the offer of $55 million to Golden State Water Company and they definitely do not have reassurance that the pricing difference will benefit them. But, putting aside those concerns, there is a bigger issue lurking mischievously in the background. Is it really appropriate for a government agency take a private business away from its owners simply because some customers of the business are allegedly unhappy with their bills?

According to Claremont, they have good reasons for seeking to use eminent domain to replace the private water company. The fact that people are unhappy, however, may not be enough. The rules of eminent domain allow, under the U.S. and California Constitution, for the government to take private property for public use by paying just compensation.

In addition, California Code of Civil Procedure § 1240.030 requires:

The power of eminent domain may be exercised to acquire property for a proposed project only if all of the following are established:

(a) The public interest and necessity require the project.
(b) The project is planned or located in the manner that will be most compatible with the greatest public good and the least private injury.
(c) The property sought to be acquired is necessary for the project

While a utility can amount to a public use, here the utility already exists and is privately owned. It is questionable whether Claremont meets the Constitutional “public use” requirements, as well as the requirements of “necessity” set forth in CCP § 1240.030. Moreover, given that the Howard Javis Taxpayers Association estimates the value of the business at $200 million, it is questionable whether the City’s $55 million offer will ultimately amount to just compensation even if the City is allowed to move forward with the taking.

We’ll have to stay tuned to see how this one plays out.

By A.J. Hazarabedian

To learn more about A.J. Hazarabedian, please visit http://www.eminentdomainlaw.net/aboutAJH.php.

Kelo, Landmark Eminent Domain Case: The Aftermath, 4/1/14

Nine years have passed since the controversial 5-4 decision of the United States Supreme Court in the eminent domain case of Kelo v. City of New London. What the advocates for economic development argued, fought for and supported has resulted in a 90 acre vacant wasteland where the homes of 7 small town residents once flourished.

Seizing the private property of the 7 Fort Trumbull residents would allow the City of New London to turn the property over to private developers to build luxury apartments, office buildings, retail space, restaurants and many more recreational hot spots. Pfizer, a leading pharmaceutical company, was also on board with the intent to build a research facility to generate new jobs and tax revenue for New London. The City seemed ecstatic about saving their “distressed municipality” which faced high rates of unemployment and economic decline and the Supreme Court ate up their sob story. To the Supreme Court, the idea of economic rejuvenation apparently outweighed the cost of the owners’ property rights and all American’s Constitutional liberties.

The 7 residents, including Susette Kelo, argued that taking private property and turning it over to a private company such as Pfizer “does not qualify as… public use.” However, the Supreme Court held otherwise stating that “the City’s development plan was not adopted ‘to benefit a particular class of identifiable individuals.’”

The Supreme Court, agreeing with the trial court, concluded that the City was rebuilding for growth and prosperity to benefit its citizens and that Pfizer “was not ‘the primary motivation or effect of this development plan’; instead, ‘the primary motivation … was to take advantage of Pfizer’s presence.’”

Pfizer was offered an 80-percent, 10-year property tax abatement for a $300 million research facility which the Supreme Court did not find suspicious.

So the residents were forced to take the compensation for the parcels they called home and the City was allowed to acquire the properties to turn them over to the developers to build their Pfizer project. If only this was a happily-ever-after story. Today the lots of those residents are filled with overgrown grass instead of high-rise buildings and upscale pedestrian “riverwalks.” In 2009, Pfizer backed out of its plan to build the research facility and redevelopment plans seized just as abruptly as they began.

The waters were a little murky; what does it matter? Possibly, those murky waters would have been forgotten if there was some type of redevelopment and economic growth in Fort Trumbull. But there wasn’t. The whole plan turned to nothing and the Supreme Court’s decision spiraled into a disaster. It shocked and scared many because it set precedent for private companies to take interest of citizen owned lands for their own economic interests. It caused many states, including California, to pass laws banning or restricting use of eminent domain for the purposes of economic rejuvenation. Indeed, in the wake of the backlash at Kelo, California did away with redevelopment agencies altogether.

In the end, all that is left are the memories of the once flourishing Fort Trumbull. Although there were no high-rise luxury apartments or gourmet restaurants, the residents of Fort Trumbull were happy with their home town. They fought a hard battle to save what was theirs; they pursued their rights to life, liberty and property. However, where there is no security for rights to property there is, consequently, no liberty.

On a somewhat brighter note for the future, dissenting Justice Antonin Scalia later predicted that the decision in Kelo would be overturned. He reportedly stated, “My court has, by my lights, made many mistakes of law…but it has made very few mistakes of political judgment, of estimating how far… it could stretch beyond the text of the Constitution without provoking overwhelming public criticism and resistance. Dred Scott was one mistake…Roe v. Wade was another… And Kelo, I think, was a third.”

Author: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, please visit http://www.eminentdomainlaw.net/aboutAJH.php.

Rancho Cucamonga Moves Forward with Eminent Domain for New Shelby Place North Road, 7/12/12

By A.J. Hazarabedian

The city of Rancho Cucamonga began eminent domain proceedings to acquire a private dirt road from the Viramontez family, as reported by the Daily Bulletin.  The city plans on widening the road to 210 feet by 30 feet from Base Line to “connect the already developed Shelby Place, south of Base Line.”

According to the article, “Rancho Cucamonga proceeding with eminent domain for road,” the city offered $14,000 for the rights to the road and the Viramontez family made a counter-offer of $30,500, based on an appraisal obtained by the family’s hired appraiser.

Plans call for widening and paving the road, which as stated by the city’s director of engineering, Mark Steuer, would “provide better access to the subdivision tract, enhance traffic flow and provide access to public safety.”

For the Viramontez family, this private road has sentimental value as they have owned the land since the early 1940s and currently live on a 2.7 acre parcel near Baseline Road and Shelby Place.

It is important to note that a property owner is not required to accept the condemning agency’s offer. Instead, the property owner may make a counter-offer, as the Viramontez family did in this case, or may assert a higher value for his or her property if and when an eminent domain action is filed in court.

Often times property owners, tenants and business owners receive higher, and in some cases much higher, compensation than the amount of the condemning agency’s offer by asserting a claim for greater compensation.  An experienced eminent domain attorney should be contacted to evaluate each case on its own merits and assist in determining the appropriate course of action to the particular case.

At this point, if the City of Rancho Cucamonga rejects the Viramontez family’s counter-offer, the Viramontez family and the City will have to fight it out in the Superior Court – a prospect which given the relatively limited amounts involved, will probably not make much sense for either side.

Follow Up: Eminent Domain for Condeming Underwater Mortgages, 6/27/12

By A.J. Hazarabedian

In a recent post, we talked about the City of Hesperia voting on whether or not to join a Joint Powers Authority to begin acquiring underwater mortgages by eminent domain in an attempt to help homeowners.

Since our post, more information has been revealed providing the logistics to this interesting proposal.  A recent Reuters article outlined a plan by Mortgage Resolution Partners to find investors who will finance the process and then turn around and restructure the loans.

The idea is that a local government entity would acquire underwater mortgages by eminent domain, using the money funded by investors, and then pay the homeowners the fair market value for the property.  At that point, Mortgage Resolution Partners would work to restructure the loan so homeowners could keep their homes and have smaller mortgage payments.

Per Reuters, Mortgage Resolution Partners is “backed by a number of prominent West Coast financiers,” including Evercore Partners Inc and Westwood Capital, who would be paid back after the restructured loans were sold off to “hedge funds, pension funds and other institutional investors.”  This article, “Investors tout controversial “condemnation” for housing fix,” explains that Mortgage Resolution Partners would receive a fee for every loan condemned and restructured.

This is certainly one to watch in the coming months.  Many people have been looking for solutions to the housing crisis.  Let’s see if this idea gains any more traction.

Restaurant Owner in Riverside Suing the City for Lost Business Revenue, 6/7/12

By A.J. Hazarabedian

A restaurant owner in the City of Riverside is suing the city for lost business revenue after a relocation deal never came to fruition.  In the Press Enterprise article, Restaurant owner sues after relocation deal fizzles,” Lucky Greek restaurant owner Tony Georgopoulos argues that his business has been negatively affected by the City’s Magnolia Avenue underpass project.  The project, he claims, has decreased vehicular traffic by 90%, thereby decreasing his restaurant’s revenue.

Mr. Georgopoulous is seeking $750,000 in damages in a suit filed last month.  He asserts that the City did not follow through with a relocation plan they set out to execute over a year ago.  According to the article, the City had agreed to a land swap; moving his restaurant to the old Marcy branch library.  After some negotiations over the City’s offer, the deal was delayed and then scrapped when Jerry Brown eliminated redevelopment agencies earlier this year.  As noted by Riverside City Attorney, Greg Priamos, the deal was contingent on redevelopment dollars for funding.  Without the redevelopment agency, the deal could not move forward.

Tony Georgopoulos now indicates his business is struggling to keep the doors open, having had to shrink his staff from 17 down to 11.  A court will have to decide whether or not the City must pay damages in this case.

This is just a tiny tip of the iceberg of the carnage that has been left in the wake of the sudden demise of redevelopment in California.  While reasonable persons can differ on the propriety of the use of eminent domain for redevelopment, the manner in which redevelopment agencies were killed almost overnight in California left many victims, such as Mr. Georgopoulos, in its wake.  People were informed their properties and businesses would be acquired.  They made decisions based on that information.  And now, they’ve been left hanging in the wind.

It is questionable whether Mr. Georgopoulos will have a legally viable claim, without any portion of the property he occupies actually being taken.  Generally, Cities and other public agencies are permitted to impact the flow of traffic without liability, provided reasonable access remains to the property.  It will be interesting to see how this one plays out…

City of Hesperia May Use Eminent Domain to Acquire Mortgages, 6/7/12

By A.J. Hazarabedian

The City of Hesperia is considering an interesting use of eminent domain during its upcoming City Council meeting.  The Victorville Daily Press reported this week that the City may decide to use eminent domain to acquire underwater mortgages in an attempt to help homeowners.

As the article describes, the City will discuss whether or not they will join a new joint powers authority (JPA) aimed at helping homeowners whose mortgages are underwater due to declining home values.  The joint powers authority would consist of the City of Hesperia, City of Fontana, City of Ontario and the County of San Bernardino.

What’s interesting is that the JPA would not be acquiring the homes themselves as is common in the use of eminent domain.  Here, they would be acquiring only the mortgages so that the loans could be restructured.  Kelly Malloy, spokeswoman for the City of Hesperia states in the article, “the city is really looking at participating in this in order to be part of the dialogue and to be part of the research project.”

Many cities have been left with blighted neighborhoods after homes have gone into foreclosure and the properties eventually end up in despair.  This JPA sounds like an interesting attempt to avoid such cases in Hesperia.

The council will meet Tuesday, June 12th at 6:30pm to discuss this and other issues.

Whether the JPA can exercise the power of eminent domain for this purpose is questionable.  Eminent domain can only be exercised for a public use.  While there is some ostensible public interest in preventing foreclosure blighted neighborhoods, this seems to be stretching the public use requirement to its limits.  If the City decides to proceed, we doubt the lenders will take it lying down (unless, of course, the JPA intends to purchase the loans for the full loan balance – which is doubtful).

Stay tuned on this one…

Modesto Considers Using Eminent Domain for Pelandale Freeway Project, 5/23/12

By A.J. Hazarabedian

The City of Modesto will consider acquiring properties by eminent domain for the Pelandale Avenue freeway interchange project at tonight’s city council meeting.  According to the Modesto Bee’s article, “Modesto considers seizing sites for Pelandale freeway project,” the City has been negotiating with affected property and business owners since March, yet an agreement has been made with only one of the eight parcels required for the project.

The Pelandale Avenue project plans to “replace an inadequate three-lane span with a seven-lane crossing at a better angle for traffic, with new southbound ramps,” as reported by the Modesto Bee.  The interchange was not built for the amount of traffic it now receives due to the popular businesses in the area.

A few businesses will be affected by this project, including a Quik Stop gas station and convenience store, Dolphin Spas & Stoves, as well as a vacant commercial property.  Temporary construction easements for up to one year are needed from neighboring properties, of which one has agreed to an offer of $4,800.

Under California’s Eminent Domain law, the government is required to pay the “fair market value” of the property.  The fair market value of the property taken is the highest price on the date of valuation that would be agreed to by the seller, being willing to sell under no particular or urgent necessity for doing, nor obliged to sell, and a buyer, being ready, willing and able to buy but under no particular necessity for so doing, each dealing with the other with full knowledge of all the uses and purposes for which the property is reasonably adaptable and available.

This is a bit different from the definition of market value used in the marketplace.  Put simply, owners in eminent domain proceedings are entitled to the “highest” price that might reasonably be expected.  This is determined by appraisal opinion, and the government’s and owners’ appraisers often differ substantially in their opinions of what the “highest” price should be.  The owners involved in this project are apparently dissatisfied with the City’s appraisals, so the City’s options are to either agree to pay the owners an amount that satisfies the owners, force the sales through eminent domain, or drop the project.

If the City decides to pursue eminent domain after tonight’s council meeting, these matters will then move into the hands of the Superior Court, and the owners will be entitled to a jury trial to determine the amount of compensation.  Stay tuned…

County of Santa Barbara files eminent domain lawsuit against Wal-Mart, May 10, 2012

By A.J. Hazarabedian

Recently, the County of Santa Barbara began eminent domain proceedings to acquire property from Wal-Mart for the Union Valley Parkway project.

As reported in the Lompoc Record article, “County files suit in UVP land case,” Wal-Mart Stores, Inc. owns three parcels that will be affected by the project.  These parcels are located on the east side of Orcutt Road near Foster Road.  According to the article, negotiations between the county and Wal-Mart have been ongoing for over a year and will continue to go on until their court date on July 5, 2012.

It appears that Wal-Mart is not disputing the project.  Rather, they want to be sure they are fairly compensated for the impact on their property.  Specifically, Walmart is complaining that “the county has not offered compensation to cover the cost of the four non-legal remnant parcels of land that will be created when the right of way is taken.”

The county has deposited $1.3 million with the state treasurer for the appraised value of the property being taken.  The county is also asking for prejudgment possession and per Scott McGolpin, Director of Public Works at the County of Santa Barbara, “if an agreement with Wal-Mart is not reached by June, the county will take possession of the property on or about the July 5 court date noted in the suit.”

Where, as here, only part of a property is taken, the take can sometimes have devastating impacts on the owner’s remaining property.  Walmart here claims that the part take is leaving it with four remnants that no longer comply with local land use ordinances.  If they are right, they may have a legitimate claim for severance damages.

As for the County’s request for prejudgment possession, prejudgment possession is fairly common in eminent domain proceedings.  California Code of Civil Procedure section 1255.410 authorizes the condemning agency to ask the court for possession of the property even before judgment has been entered in the eminent domain proceeding. The court may only do so, however, if the condemning agency has first deposited into the Court or the State Treasury the amount which it determines as the probable compensation to be paid for the property. In this case, the County of Santa Barbara has indeed deposited what they deem to be probable compensation.  If Walmart opposes the County’s request for prejudgment possession, the County will also need to prove that it has an “overriding need” for prejudgment possession, and that its hardship will outweigh any hardship suffered by Walmart as a result of early possession.  If the court grants the County’s request for early possession, Walmart may have as little as 30 days to turn over possession.

More is to be revealed in this situation.  We’ll keep an eye on the results of this case.

California Eminent Domain Law Group’s Glenn Block Speaking at IRWA Chapter 1 Annual Valuation Seminar

California Eminent Domain Law Group’s Glenn Block will be speaking at the IRWA Chapter 1 Annual Valuation Seminar on April 24, 2012.

The seminar will be held at Quiet Cannon Montebello.  Glenn will be speaking with Michael Farrand, ASA of Higgins, Marcus & Lovett, Inc. about “How Does a Significant Change in Economic Conditions Affect Loss of Goodwill Calculations?”

Glenn Block is a Partner at California Eminent Domain Law Group.  He has concentrated his law practice solely in eminent domain for more than 14 years.  A successful trial lawyer, he represents both business and property owners in direct and inverse condemnation litigation and has recovered over $100 million on their behalf.  He also represents public agencies in acquiring property for public use.

Mr. Block has been named to Southern California Super Lawyers Rising Stars® in the field of eminent domain.
To learn more about Glenn Block, please visit http://www.eminentdomainlaw.net/aboutGB.php.

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COPYRIGHT © 2010 Arthur J. Hazarabedian, Esq.