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CALIFORNIA EMINENT DOMAIN LAW BLOG

City files eminent domain suit over Mohanna’s K Street sites: The Sacramento Bee, 2/16/08

By Mary Lynne Vellinga

The city of Sacramento headed to court Friday to wrest control of two key blocks of the K Street Mall from property owner Moe Mohanna.

Even though the eminent domain filing was authorized by the City Council in December, Mohanna said Friday he was shocked that the city followed through on the threat to force him to sell his properties.

Mohanna said he has been meeting with City Manager Ray Kerridge in recent weeks in an effort to reach an amicable settlement on the fate of the 700 and 800 blocks of K Street, the pedestrian mall’s most run-down stretch.

“They’ve destroyed any hope of progress,” he said.

City leaders said they plan to continue negotiating with Mohanna, but decided to move forward with the court action in case those negotiations don’t produce an accord.

“Our goal is to get K Street redeveloped, however we can get there,” said Assistant City Manager John Dangberg.

Downtown’s leading developers and business leaders supported the city’s action.

“Something needs to happen,” said Michael Ault, executive director of the Downtown Sacramento Partnership. “We are losing opportunities downtown until this gets resolved. There’s not a week that goes by that we don’t talk to retailers or brokers or investors that ask about the area. With this issue unresolved, many people’s investments are going to be on hold.”

Mohanna’s lawyer, Myron Moskovitz, said Mohanna remains willing to keep meeting with city officials as well, despite the court case. Mohanna also has court actions pending against the city, one of them challenging its recent approval of development in the downtown railyard.

The city is seeking control of the 700 block of K Street so it can bring in Joe Zeiden, owner of the Z Gallerie furniture chain, to revamp the historic storefronts into a row of upscale retailers.

In 2006, Mohanna agreed to a complicated land swap in which he would exchange his 700 block properties with others controlled by Zeiden and the city in the 800 block. The idea was to let Zeiden develop the 700 block and Mohanna rebuild the 800 block with ground floor retail and high-rise residential. But Mohanna balked when some of the buildings in the 800 block were demolished after a fire.

In January, the city offered to pay Mohanna $11.8 million for all of his nine properties in the 700 and 800 blocks.

“We waited a couple of weeks to get a response but didn’t get one,” said Leslie Fritzsche, Sacramento’s downtown development manager.

Meanwhile, talks between Mohanna and Kerridge continue, with another meeting scheduled for next week. These talks are aimed at seeing if the two sides can work out a resolution under which Zeiden would redevelop the 700 block and Mohanna would keep the 800 block.

The Sacramento Bee: http://www.sacbee.com

Modesto school board OKs seizing land near Gregori site: The Modesto Bee, 2/12/08

By Merrill Balassone

Modesto City Schools can seize parts of several properties around Gregori High School in Salida if agreements are not reached with landowners within the next month.

The Board of Education voted unanimously Monday night to authorize the use of eminent domain to take pieces of seven properties along Stoddard and Dale roads.

Director of Planning and Research Dana McGarry said road widening and other street improvements must begin in 30 to 45 days to keep construction on schedule.

“We realize this has moved very quickly,” McGarry said. “Time is of the essence.”

Max Norton, 87, and son-in-law Jim Sahlman said the district’s offer of $68,000 to buy land and relocate a public utility pole onto their property was not “just compensation.” The school board gave the go-ahead to raise the offer 10 percent, to $74,800.

“It just feels as if we’re dealing with someone at a car lot,” Sahlman said. “We recognize this is property that needs to go to Gregori High. This is about just compensation.”

Norton, a former speech and language pathology professor at California State University, Stanislaus, spoke of his emotional connection to his house, which he said was designed by a protégé of Frank Lloyd Wright. He’s not happy about the district’s offer to erect a sound-buffering wall to muffle the noise of the widened Stoddard Road.

“This is more than just a house,” Norton said. “If you build something like that around (the house), I don’t think anyone in this room would be pleased.”

Norton’s house was featured in The Bee in 2004 for the stained-glass windows that Norton was inspired to design after a trip to Europe.

Board member Gary Lopez urged Norton and Sahlman to seek a second appraisal of the property, offered at the district’s expense, to come to an agreement and avoid eminent domain.

“We certainly want to be fair to all the landowners,” Lopez said. “(Gregori) has been delayed a long time. We don’t want to go this route.”

The district has acquired or opened escrow on seven of the 17 properties needed to widen the roads and move public utility poles near Gregori, scheduled to open in fall 2010.

The Modesto Bee: http://www.modbee.com

School board might seize land: The Modesto Bee, 2/10/08

By Merrill Balassone

School district officials will ask the Modesto City Schools Board of Education on Monday night for permission to seize parts of seven properties to make road improvements around Gregori High School in Salida.

A district official said Friday the use of eminent domain would be a “last resort” if agreements can’t be reached with property owners by next month.

“We’ve already had weather delays, we don’t want any other undue delays,” said Dana McGarry, director of planning and research. “If we aren’t able to come to an agreement, we can forge ahead and acquire the property through eminent domain.”

The district needs parts of 17 properties to begin widening Dale and Stoddard roads and move public utility poles near Gregori High School, which is scheduled to open to freshmen and sophomores in fall 2010. Since McGarry began negotiating with owners in August, the district has executed purchase agreements or opened escrow on five properties, she said.

The property needed to widen the roads ranges from a couple of feet to as much as 20 feet, McGarry said. Other property owners will be paid for having utility poles relocated onto their properties, she added.

McGarry wouldn’t give specifics on the offers given to the landowners but said they were offered fair market value as determined by a state-certified appraiser.

Although the regional housing market has collapsed, land values remain steady, she said.

Robert Gunn, who has lived on Stoddard Road since 1963, said the district has offered to buy the front 20 feet of his property to widen Stoddard and compensate him for relocating utility poles onto his lot. He wouldn’t give specifics on the district’s offer or his counteroffer.

“We’re not being unreasonable,” Gunn said. “We think it’s reasonable what we offered to them.”

A public hearing on the issue will take place at the Modesto City Schools Board of Education meeting at 6 p.m. Monday in the Staff Development Center, 425 Locust St. in Modesto.

The Modesto Bee: http://www.modbee.com

Keeping the city on hold: The Fresno Bee, 2/10/08

Downtown Fresno property owners have a hard time selling while they wait for a developer’s plans.

By Jeff St. John

Randy Miller and Robert Toman have a dream — a downtown Fresno brewpub within baseball-throwing distance of Chukchansi Park.

And Miller’s wife, Nancy, has the perfect location — a former furniture store at 762 Broadway that has been in Nancy’s family since her grandparents bought it in the 1920s.

But Broadway Ale Works — the business the Millers and Tomans hoped to open in the 3,500-square-foot brick building with the well-known Francisco Vargas “Welcome to Fresno” mural painted on the outside wall — is now on hold.

That’s because the building lies within the six-block area the Fresno Redevelopment Agency intends to buy and lease to Forest City Enterprises, a massive Cleveland-based development company. The project is among 40 properties in the area that face an uncertain future.

Forest City has a $232 million plan to build 700 new homes, as well as stores and commercial buildings, in that six-block zone — the first phase of the long-range “South Stadium” redevelopment project that eventually would transform 85 acres of Fresno south of the Chukchansi Park baseball stadium.

“Would that be good for downtown? Certainly,” Randy Miller said. “Would it be good for us? Absolutely. But taking our building away? That’s not so happy.”

The Redevelopment Agency, which would buy land in the zone and lease it to Forest City for redevelopment, could use its power of eminent domain to acquire properties whether or not the owners want to sell.

The procedure is similar one used by Forest City in cities across the country, such as Oakland.

Redevelopment Agency officials and Fresno City Council members, who approved Forest City’s plan last year, see eminent domain as a last resort. Better, they say, would be for property owners who want to stay there to renovate their buildings up to the development’s standards and remain.

And the project’s future is far from assured. First, Forest City must complete a yearlong environmental review, and the City Council must decide if it can come up with the public financing Forest City says it needs to do the job — as much as $100 million, according to Forest City’s initial estimates.

All that uncertainty has property owners concerned. Some, like the Millers and Tomans, question the wisdom of their investing time and money in a business that may be forced to move in a few years.

“I don’t want to pay $100,000 for a brew system and then learn I have to move it because they’re taking over,” Toman said. “I’d like to save our on-hand capital until we’re sure we won’t be taken over by eminent domain.” While he and Miller haven’t given up on their plan, they’re moving forward “cautiously,” Toman said.

Other property owners in the area say they can’t sell or lease their buildings, because nobody wants to move into a building that may be torn down to make way for Forest City’s redevelopment.

“They have held us hostage,” said Octavia Diener, owner of the former Densmore Engines building on the corner of Fulton and Mono streets. Diener had hoped to rent out the 20,000-square-foot building after she closed the engine remanufacturing business in 2004.

But, she said, whenever someone looks into renting the building, “They go to the city, and the first thing the city tells them is, ‘That’s under this redevelopment plan.’

“Are you going to lease a building where, at any time, the city can come in and take the property? Or are you going to go somewhere else, where you don’t have that cloud of eminent domain hanging over your property?”

Diener said she isn’t against downtown redevelopment. She just wishes the city would buy the properties it wants to redevelop now, rather than waiting.

Roadblocks to sales

Unfortunately, city and Redevelopment Agency officials say, that isn’t possible until the environmental review is done and the matter of public financing is resolved.

“I think it’s a great project that’s going to make a lot of difference” for Fresno’s downtown, said Matt Myers, the Redevelopment Agency’s manager for the Forest City project.

But because the redevelopment project is still in the planning stages, “until the process is done, we can’t say which properties will or won’t be needed” to be torn down to make way for Forest City’s new homes, commercial buildings and parks.

City Council Member Larry Westerlund, who also is chairman of the Redevelopment Agency board, said the agency wants to work with property owners to help them renovate their buildings to the standards of the project and remain — if at all possible.

Forest City “has always expressed an interest in working with property owners, if there’s a way to do so and make a project that’s unique and authentic,” he said.

Meeting the higher building standards necessary to stay in the redevelopment zone turned out to be a headache for Jose Lorenzo, owner with his wife of J&E Restaurant Supply.

Lorenzo originally planned to spend about $470,000 to build a 13,000-square-foot warehouse at the corner of Van Ness Avenue and Monterey Street. But with the 20-foot setbacks, stucco exterior and other features the Redevelopment Agency demanded he include in the building’s design, he ended up spending about $600,000 for an 8,700-square-foot warehouse.

Lorenzo questioned whether the Forest City redevelopment would ever get built, given the public financing hurdles the city is likely to face.

“Especially when they’re talking about all these phases, all these years — I don’t think it’s going to happen,” he said. “At the same time, they hold businesses back.”

But not all the property owners in the area feel the same way. Myers said that several buildings in the area have changed hands since the redevelopment plans first took shape, showing that not everyone has been scared away from investing in the area.

John Ostlund, owner of Fresno’s Jeffrey/Scott Advertising and K-Jewel 99.3 FM, didn’t let the uncertainty stop him from buying two buildings in the six-block Phase 1 area a few years ago.

“When I bought them, I wasn’t thinking of eminent domain at all,” he said. “If I renovate them, I will do so to higher standards than are required, because I want to be there for the long term.”

Pros and cons of eminent domain

It’s certain that at least some buildings would have to be torn down to make way for Forest City’s vision for the area. But those property owners who may be asked to sell — or forced to sell through eminent domain — will be well compensated, Myers said.

In fact, the use of eminent domain powers comes with strict rules on paying fair market price and covering many costs for property owners, Myers said. In combination, those incentives usually boost the value of properties purchased through eminent domain about 20% over what they could fetch on the open market, he said.

Still, promises like that may not be worth the hassle for many potential downtown tenants, said Stewart Randall, senior vice president for Colliers Tingey International in Fresno.

“If somebody bought or leased one of these buildings, even though they would be compensated if eminent domain occurred, it’s still an enormous inconvenience for any small business,” he said.

Fresno Mayor Alan Autry said he also has grown more concerned about Forest City’s lack of progress over the years.

“The Forest City big bang may never happen,” he said. “Time is not an ally here. We’ve got to move forward with our downtown revitalization,” possibly by opening up some public subsidies to local developers, he said.

But as far as Pat Cody, owner of Wilson’s Motorcycles, is concerned, the clock on the South Stadium redevelopment has run out.

In December, Cody decided to move from the Broadway location he had been in for 18 years to a larger building on Foundry Park Avenue near Highway 99. While he had outgrown his Broadway location, Cody said the threat of losing it to eminent domain also forced his hand — and now he can’t find a buyer for it.

“I’ve been turned down by a Realtor who doesn’t even want to list the property because it’s a waste of their time,” he said. So now Cody wants the city to buy it from him, “so I can roll that money into the new project and move on.”

But Cody’s decision to leave the South Stadium area wasn’t something the Redevelopment Agency wanted, Myers said. In fact, he and other agency officials “did everything we could to encourage him to stay,” he said.

But now that Cody has moved, the agency has no authority to buy his land until the City Council approves a final project, Myers said.

Miller and Toman said they’ll build their brewpub someday — if not on Broadway, then somewhere else. But they said it would be nice to take part in a downtown renaissance, if it happens.

“It would be nice if they said, ‘We’re going to demolish you and move you,’ or, ‘You can stay here,’ ” Miller said. “Make up our minds for us.”

The Fresno Bee: http://www.fresnobee.com

COPYRIGHT © 2010 Arthur J. Hazarabedian, Esq.