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CALIFORNIA EMINENT DOMAIN LAW BLOG

Studio City Residents and Community Groups Seek to Stop Property Owner’s Redevelopment Plains: Open Space vs. Condos

Open Space vs. Condos

Proposed development of a portion of the privately-owned 17 acre Weddington Golf and Tennis, located on the banks of the Los Angeles River in Studio City, is a hot topic of debate between Studio City residents and the Weddington owners. The public golf and tennis facilities have been a neighborhood gem for many years providing rare open space within the densely developed neighborhood.

In 2008, the Weddingtons submitted a development proposal to the City of Los Angeles for a 200-unit senior housing condominium complex where the tennis courts are presently located. The proposed development would include six four-story buildings and 635 parking spaces. In July, a Draft Environmental Impact Report for the Project was issued for review and comment. Currently, the Weddingtons are preparing for the development by lobbying for necessary development approvals, including a requested change in zoning from agricultural to multi-family residential.

While the Weddingtons seek to develop part of their property, and generate income, local residents want the property to remain as open space.

This debate brings to light the often conflicting interests of the public and a private property owner.

The Community’s Perspective

The surrounding community would prefer that the Weddington Golf & Tennis facilities remain as open space available to the public. Although it is private property, opponents of development argue Weddington Golf & Tennis is a community amenity similar to public parks and designated open spaces. As it has been there for many years, the property has become an established community fixture. Now, the community has a vested interest in its future and views the property as a key feature of the community.

Because the property has become like a public park, some argue that the simple answer is for the City to simply purchase it and permanently establish it as a public park.  This, however, would come at a substantial cost: Councilman Paul Krekorian, who represents the area and is opposed to the project, has attempted to find funding for the City to buy the land from the Weddingtons, possibly resorting to the use of eminent domain. So far, his attempts to secure the $20 to $30 million necessary to purchase the land have failed. Unless the Weddingtons are willing to donate the land, or accept a steep discount, this scenario does not appear likely.

Since the community is opposed to development of the site, can the City simply prevent the Weddingtons from building 200 condominiums on their private property? To answer briefly, possibly. However, the explanation is multi-faceted and the line between government’s reasonable regulation of private land use (called the “police power”) and government’s regulation effectively taking private property (“eminent domain”) is not always clear.

Because development of the Weddington’s private property requires development approvals, the City does have the ability to deny outright, or limit, the Weddingtons proposal for the condominiums. There is an established development process that the City and Weddington are following, including a public review and consideration of the proposed Project. This process allows the community to voice its concerns about the Project and its potential impacts. As long as the process is followed, the City’s ultimate determination – granting or denying development approvals – would probably be technically legally valid.

As a property owner, though, the Weddingtons are permitted to use their property in an economically viable manner– including potentially the right to change the use of their property. What are the incentives for the City to stop the Weddingtons from developing their property as proposed? The public’s dissatisfaction with the Project may influence City officials to side for open space and preserve access to the LA River.  The Weddingtons, however, would probably be entitled to develop their property to some extent – which would probably result in the elimination of some of the existing recreational facilities.

Studio City Residents Association and Save LA River Open Space have submitted their own development impact report to the City outlining impacts of the Project, one of which is the destruction of what they characterize as “rare, irreplaceable open space.” Their intentions are to keep the area open and convert it to the Los Angeles River Natural Park which would include the existing tennis courts and golf course.

The Property Owner’s Point of View 

The Weddington’s have the right to use their private property in an economically viable way. The fact that they have opened their property to the public for many years, and provided an important recreational facility to the community, does not negate their rights as private property owners. One of the most important elements of American society is the concept of strong private property rights and a mechanism for upholding those rights.

Economist Armen A. Alchian does not differentiate between property rights and human rights stating “property rights are human rights.” Private property rights are protected under the Fifth Amendment of the Federal Constitution, “…nor shall private property be taken for public use, without just compensation” and Article 1, Section 19 of the California Constitution, “Private property may be taken or damaged for a public use only when just compensation … has first been paid to … the owner.”

Private property rights are often described as a bundle of rights – including the right to exclude others from your property. Another aspect of property rights is the “exclusive authority” to determine how to use that property. However, the phrase “exclusive authority” is subject to the “police powers” of the government. This means that the government can reasonably regulate such things as one’s use of their private property in the interest of the public health and safety. In this situation, the City’s has some discretion regarding the use of the Weddington property under its “police power.”

Many residents say they relied on the open space and recreational facilities of the area – including Weddington Golf & Tennis – when purchasing their homes in the Studio City neighborhood.

Is a homeowner’s reliance enough to trump private property rights? Generally, the answer is no. Should it matter that the Weddington’s property is privately owned and is not permanently committed as open space like a public park? Of course it should. The City must also consider the potential public benefits of development of the property as proposed – including significant property tax revenues.

Is There A Possible Compromise

Absent some form of compromise, or the City’s outright acquisition of the property, only one perspective is likely to win out. Or, is there a win-win solution in which both the interests of the public and the property owner are served? If so, both sides would need to compromise – with some open space being preserved, and some development allowed. This may not be palatable to either side – but often the best compromise is one in which both sides are equally unhappy.

 

By: Glenn L. Block, Esq.
To learn more about Glenn L. Block, partner at California Eminent Domain Law Group, visit

 http://www.eminentdomainlaw.net/aboutGB.php

Tug-of-War for Martins Beach Access: Possible Eminent Domain Case

martinConflict between Simi Valley billionaire Vinod Khosla and those seeking public access to Martins Beach will make its way to Gov. Jerry Brown. Last week the state Senate approved Senate Bill 968 which, in essence, requires the State Land Commission to negotiate with Khosla to acquire public access to his private property.

Khosla purchased the 87 acre coastal property in 2008 and, like prior owners of the property, he allowed public access to the road which leads to Martins Beach until 2010. Since then, Khosla has advised his property manager to block the gate which leads to Martins Beach Road.
If signed by Gov. Brown, the bill, written by Sen. Jerry Hill, D-San Mateo, requires that the State Land Commission negotiate with Khosla in an attempt to purchase an easement on his property. If negotiations fail and a compromise is not reached by January 1, 2016, the bill will authorize the power of the State Land Commission to use eminent domain to acquire the easement by providing just compensation for the property.

Earlier this month the bill passed the full Assembly, then was returned to the Senate where it was passed and is now awaiting Gov. Brown’s signature. Even if signed by Governor Brown, the decision of whether to exercise eminent domain would still need to be made by Lt. Gov. Gavin Newsom, State Controller John Chiang and State Finance Director Michael Cohen.

Acquisition of an easement on Khosla’s property would allow public access to Martins Beach just a few miles south of Half Moon Bay, a popular spot of surfers. So far, no comments have been made by Newsom and Cohen regarding their decision whether or not to implement the bill. A spokesman for Chiang stated that no decisions by Chiang have been made and he will take a position once all arguments are made and heard from the parties involved.

By: Glenn L. Block, Esq.
To learn more about Glenn L. Block, partner at California Eminent Domain Law Group, visit

http://www.eminentdomainlaw.net/aboutGB.php

Claremont to Vote on Possible Eminent Domain Action Against Private Water Company, 7/15/14

The City of Claremont is turning to its citizens to ascertain whether or not the city should forcefully take possession of the local privately owned water company, Golden State Water Co. The City Council unanimously voted that a $55 million bond measure will be placed on the November ballot relating to acquisition.

As the water company’s rates and prices gradually increased, so did the backlash from the Claremont city residents. Since 2004, prices have increased 100%. Whether or not the city’s proposed acquisition is to benefit the residents with lower bills, however, is unclear. City officials believe so but Golden State Water Co. spokeswoman, Julie Hooper, believes that the city is trying to convince its residence that its appraised value of $55 million is all that the city will spend for the acquisition. She notes that the city is not disclosing the additional costs for borrowing the $55 million nor the interest it will incur.
Furthermore, there is a major discrepancy between the city’s appraised value and the value the water company claims. According to Hopper, Golden State believes that the company is worth close to $135 million. The city refuses to release its appraisal report to Golden State; its offer stands, as of October 2013, at $55 million.

Nevertheless, Hopper has made it clear that the company is willing to work with the city to try to reach a compromise in the hopes that eminent domain proceedings can be avoided. City officials say that they will not be filing the eminent domain lawsuit until after the November vote on the bond measure, so the City Council can get a better idea of the public’s perception towards the takeover.

Richmond, California Has Yet to Exercise Eminent Domain to Seize Underwater Mortgages, 6/30/14

While the city of Richmond is the first municipality to approve the concept of using eminent domain to acquire underwater mortgages, the city has yet to actually do so.

The City Council has been unable to get the needed 5 out of 7 votes to go through with eminent domain proceedings. Therefore, the city is looking to team up with another municipality in hopes that together a joint powers authority will help carry out the proceedings.

Other cities, however, are reluctant to join in. Reasons for the hesitation comes in two major forms; the first being fear of lawsuits and complex litigation from banks and trusts, and the other being the threat of losing support from the Federal Housing Finance Agency (FHFA).

Other cities take no comfort in the fact that Richmond recently won against the trustees for hundreds of residential mortgage-back securities trusts, mainly because the lawsuits were dismissed without prejudice. This means that after Richmond begins the eminent domain process, the trustees will more than likely file more suits. The potential liability of such lawsuits can carry a very high price tag which deters most cities from joining Richmond’s plan.

Furthermore, the FHFA’s position on using eminent domain for such purpose is another deterrent. The FHFA has made it more than clear it is against the use of eminent domain, arguing that using eminent domain to modify the mortgages would eventually be shouldered by taxpayers. Also, the FHFA fears that it would create credit restrictions for home buyers in the future.

The FHFA is not the only organization against the idea of using eminent domain to seize mortgages. The Securities Industry and Financial Markets Association (SIFMA), the National Association of Realtors, and the American Bankers Association have voiced their opposition as well. The fear is mainly the same; an increase in borrowing costs and restrictions on credit availability.

Richmond says it wants to help its residents come out of the slump that has been affecting many U.S. homeowners since the 2008 housing crisis, but does the city truly have its residents interest at heart? Richmond has been working closely with Mortgage Resolution Partners (MRP), a private investment firm that has been pitching the eminent domain route to numerous cities. The assumption is that if the city does acquire the mortgages, it will turn around and offer the mortgages for a lower price and pocket the interest. Only time will tell what the outcome will be; for now, it is still up in the air. And as the real estate market improves, the ostensible justification for using eminent domain to assist underwater homeowners becomes less and less compelling.

By: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, the managing partner at California Eminent Domain Law Group, visit http://www.eminentdomainlaw.net/aboutAJH.php

San Francisco Bay Commission Suing Feds to Stop Eminent Domain Attempts in Alameda County, 6/25/14

The San Francisco Bay Conservation and Development Commission is ready for a gruesome battle with the federal General Service Administration over McKay Avenue in the county of Alameda. The Commission’s decision to challenge GSA’s exercise of eminent domain to acquire McKay Avenue was reached during a closed session meeting held on June 5th.

After the state refused to grant GSA utility easement rights for McKay Ave, GSA filed suit against East Bay Regional Park District back in April. A number of citizens as well as state and local organizations raised enough signatures to get an initiative on the November ballot to rezone as open space the area where developer Tim Lewis Communities is planning to build luxury homes.

The Committee’s reasoning in regards to filing suit is to compel the GSA to show that it’s eminent domain lawsuit against the Park District is allowed under the federal Coastal Zone Management Act. This Act requires federal coastline projects to be consistent with state law.

The advocates for open space are also suing the city of Alameda for allowing rezoning of the area for residential development without complying with the California Environmental Quality Act. Back in 2008, Alameda citizens voted to use the surplus land to expand Crown beach; however, their bid was trumped by the developer’s near $3 million bid.

If successful, the Commission’s efforts will stop the eminent domain proceedings; though, only temporarily.

Updates on the McKay Avenue takeover will be posted on our blog, Facebook and Twitter. For other eminent domain and inverse condemnation issues and projects, please follow us on Twitter and like us on Facebook.

By: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, the managing partner at California Eminent Domain Law Group, visit http://www.eminentdomainlaw.net/aboutAJH.php

Feds Use Eminent Domain to Acquire Public Street for Supposed “Public Use,” 6/3/14

On April 17, the federal government filed a lawsuit against the state of California and the East Bay Regional Park District to acquire McKay Ave in the city of Alameda through the process of eminent domain.

Back in 2008, voters of Alameda passed Measure WW which gave the East Bay Regional Park District authorization to purchase a federally owned parcel of land to expand Crown Memorial State Park. McKay Ave falls within the parcel now owned by East Bay Regional Park District. The street leads up to the Crab Cove Visitor Center and connects with Central Ave.

The DOJ office leading the lawsuit is the Environmental & Natural Resources Division. The federal government’s claimed reason for pursuing acquisition of McKay Ave is to secure continuing operation of the federal building complex which is located on Central Ave. The federal government also stated, however, that acquiring McKay Ave will facilitate the sale of federally owned “surplus land,” to a private housing developer. Currently, McKay Ave is used by the federal government to access the 3.89 acre federally owned parcels and recently a bid was accepted for the sale of that land to a housing developer, Tim Lewis Communities.

The opposition to the sale of the land for residential development and the acquisition of McKay Ave is substantial not only in the Alameda community but by numerous organizations all over California and the nation. State Attorney General Kamala Harris has stepped up to speak for those in opposition to the taking. Her November 7, 2013 letter to the Department of Justice expressed her rebuttals against claims made by the federal government regarding the need for McKay Ave in order to operate the federal complex. She also addressed the State’s willingness to discuss the issues of access or security for the federal complex and her failure to see how a public street and sidewalk could be acquired for “public use,” particularly given that the State is willing to discuss any upgrades to the street that the Feds might desire. However, the federal government is confident it will be able to practice eminent domain over the street.

Recently, a group of 10 organizations opposed to the acquisition posted an open letter to the U.S. Attorney General urging the Department of Justice and the General Service Administration to not proceed with any and all eminent domain cases against California Parkland. The letter described the taking as “not defensible” and a “misuse “of state park property. The opponents to the taking want the land to be left as “open space.” Allowing a developer to build houses on the currently owned federal parcels is “a contrary notion that parklands are trivial…and can be easily undone.”

(The letter is available to view on Alameda Sun Time’s website.)

The elephant in the room is this: Is the federal government using their nearby federal complex as an excuse to proceed with an eminent domain case in order to make money? It seems a bit fishy that the federal government secured a bid for the sale of the 3.89 acre surplus property at the end of the street for a price that was double the parcel’s appraised value, and then went after McKay Ave. Although the federal government is not hiding the sale to the housing developer, it seems quite a coincidence that things have played out as they have.

Now the State of California must file a response to the lawsuit. It will be interesting to see how this case proceeds. One can’t help but to recall the infamous Kelo case and how its decision has influenced governmental acquisition of private properties for sale to private developers.

By: A.J. Hazarabedian
To learn more about A.J. Hazarabedian, the managing partner at California Eminent Domain Law Group, visit http://www.eminentdomainlaw.net/aboutAJH.php

California Eminent Domain Project News: Senate Committee Rejects Attempts at Another Vote for the California High Speed Rail

The ongoing tug-of-war between rail backers and opponents to the project has led to delays in California’s plan to build a high speed rail. Since its voter-back initiative, Proposition 1A, was passed back in 2008, the California High Speed Rail project has encountered numerous bumps in the road. The latest was the appeal denied by the Third District Court of Appeals regarding pending lawsuits between CHSRA and Kings County farmers. Now, the courts continue to delay the project because CHSRA is implementing a plan much different than the one voters approved back in 2008. Issues have a risen regarding CHSRA’s financial plan, lengthened travel times and higher operating subsidies. Courts have already held that the current financial plan is not in accordance with the terms of Prop 1A.

Senator Andy Vidak, R-Hanford, argues that a majority of California voters are now opposed to the high speed rail. Senator Vidak attempted to get 4 bills passed in hopes of derailing the project. This first bill, SB 901, was an attempt to get a referendum on the November 2014 ballot to prohibit sales of additional bonds to fund the project. SB 902 would have required CHSRA to disclose its funding sources before the use of eminent domain to acquire property and required a higher compensation for any properties taken through eminent domain. In Fresno, the CHSRA has already begun the eminent domain process for property needed for new train stations; however, it is unclear whether CHSRA has enough funds to complete its initial operating segment. SB 903 would have required CHSRA to reimburse counties for lost tax revenue because of the acquisition of private properties. Finally, SB 904 would have required officials and contractors of the project to identify themselves to property owners prior to pre-condemnation entry for eminent domain purposes.

All 4 bills were rejected by the Senate Transportation and Housing committee. Legislators have been reluctant to allow California voters to re-vote on the high speed rail project. The Senate committee stated “while voters today may not approve…Californians will be thankful the state continued to pursue it.” Unfortunately, these Legislators seem to have forgotten that they are in office to represent the will of the people they serve- not to dictate to the people what their will should be.

At least the opponents to the project can look to the courts which have been diligently attempting to uphold the legal provisions specified in the ballot measure. It seems clear that Prop 1A’s promises are not being met and rail backers seem to think it is not a big deal in the context of the high speed rail’s benefits.

Pre-Condemnation Entry: Procedure Can Be Unconstitutional, 4/25/14

The Third Appellate District Court of Appeals has ruled that pre-condemnation entry on to the property an agency is seeking to condemn may be unconstitutional. If upheld, it will ultimately create significant obstacles for agencies to overcome in attempts to progress with eminent domain actions.
Historically, California law entitled agencies to enter properties “to make photographs, studies, surveys, examinations, tests, soundings, borings, samplings, or appraisals.” The pre-condemnation entry statutes were enacted in 1976 and have allowed agencies to obtain a court order allowing testing of the property prior to condemnation.

The case that turned the tables, Property Reserve, Inc. v. Super. Ct. of San Joaquin County, challenged the agency’s entry stating that the testing and investigations planned by the agency constituted a taking. In this case, the State of California was seeking to construct a tunnel to transport water. In order to do so the State needed to conduct specific environmental and geological testing. Such testing included drilling myriad borings up to 200 feet deep on the properties and inspecting the properties over a one year period. The property owners argued that they were entitled to just compensation for the investigations because they constituted a taking. The State of California petitioned for an order for entry but the courts ruled that the proposed geological investigations and environmental testing constituted a taking which compensation must be provided to the property owners. The court evaluated the environmental testing based on four criteria:

(1) Degree to which the invasion is intended;
(2) The character of the invasions;
(3) The amount of time the invasions will last;
(4) The invasions’ economic impact on the landowners and interference with their distinct investment-backed expectations.

All in all, the Appellate court held that pre-condemnation entry without just compensation may be unconstitutional. If upheld or allowed to stand, the decision will allow invasive testing on property only through an eminent domain action to allow testing or after the property is condemned. Given what is at stake, it would seem reasonable for the California Supreme Court to review the Appellate Court’s decision.

If the Supreme Court denies review or upholds the decision, this will create great obstacles for agencies to overcome; it may also have a negative impact for property owners. Property owners may see increases in the cost and the time it takes to defend against eminent domain actions instead of simply defending against entry before a decision is made to acquire the property. It must be noted that the decision does not preclude voluntary agreement between public agencies and property owners to allow the agency access to the owner’s property. However, there may be some additional procedural hurdles to seeking such agreements.

The court decision did leave a significant unanswered question as to where the line is to be drawn between an invasive entry and one which is not a significant invasion. The court did not offer any clear answer; it simply suggested that the Legislature can modify the right-of-entry statutes to insure the Constitutional rights of property owners.

If the Supreme Court does not grant review or efforts to depublish the Appellate decision fail, the next step will most likely take place in the Legislature. Stay tuned as this progresses.

California Eminent Domain Project News: Update, CHSRA’s Petition Denied by Appeals Court: Next Stop, Trial

Late Tuesday, three justices with the Third District Court of Appeals denied the California High Speed Rail Authority’s (CHSRA) petition asking the court to overturn a decision by the Sacramento County Superior Court. The Superior court had ordered a trial on one part of an ongoing lawsuit between Kings County farmer John Tos, Hanford homeowner Aaron Fukuda and the Kings County Board of Supervisors and CHSRA.

One part of the lawsuit is still pending appeal; however, the Court of Appeals decision on the second part of the lawsuit has paved the way for a trial to take place between the Kings County opponents and CHSRA as to whether the High Speed Rail project complies with state law. The lawsuit was filed against CHSRA by the Kings County opponents alleging that the CHSRA is violating Proposition 1A for numerous reasons. Prop 1A was a $9.9 billion high-speed rail bond approved by California votes back in 2008. The Kings County opponents allege that CHRSA’s idea to share electrified tracks along the San Francisco Peninsula goes against Prop 1A by not complying with the promise that the high-speed rail would have a line of fully dedicated tracks. Also, sharing tracks would mean that the CHSRA’s assurance of a 2 hour and 40 minute trip from San Francisco to Los Angeles would be unachievable. Furthermore, a public subsidy would be needed for the blended system.

CHSRA made promises when rounding up California voters to okay the high-speed rail project and now the Kings County opponents assert that the shortcomings to their promises add up to illegal spending of public funds.

CHSRA’s business plan in late 2011 calculated that a fully dedicated track for the high-speed rail would cost $98 billion for only the first phase. In efforts to cut costs, CHSRA decided that a blended track system would save them $30 billion.

Whatever CHSRA’s reasons may be, the Court of Appeals of the State of California has decided that the high-speed rail’s next stop is trial. Whether CHRSA will seek review from California Supreme Court is unclear at this time. However, the Court of Appeals will be deciding on two other rulings made by Sacramento County Superior Court. The first being part of the Kings County opponents’ lawsuit on the 2011 financial plan and the second on the Superior Court’s refusal to validate the sale of the Prop 1A bonds for funding to pay for the first phase of construction.

For regular updates on California High Speed Rail Authority look for “California Eminent Domain Project News:Updates” on our blog at http://blog.eminentdomainlaw.net/

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.

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COPYRIGHT © 2010 Arthur J. Hazarabedian, Esq.