Land Institute forum debate pros, cons of eminent domain

With narrow U.S. Supreme Court and lower court rulings landing on opposite sides of the private property rights issue, the status of eminent domain remains unclear.

The virtues and perils of eminent domain and the future of land assembly were debated Tuesday during a session of the Urban Land Institute District Council at the University Club.

The issue is a timely one for two reasons. First, it comes slightly a year after a June 2005 U.S. Supreme Court decision (Kelo v. City of New London, Conn.) that narrowly upheld the right of a public entity to take private property to foster economic development. Second, the debate unfolds as Proposition 90 is being readied for the November ballot.

The Kelo case involved owners of 15 parcels. It was led by Susette Kelo who had a home where New London planned to develop a huge mixed-use project with retail and other uses, and a $300 million facility for the Pfizer Corp. (NYSE: PFE).

The court held that even though the homes of Kelo and other property owners weren't blighted, the area was; thus, it ruled in the city's favor, allowing the taking.

Meanwhile, under California's Proposition 90 (known as the Anderson initiative for sponsor Anita S. Anderson), private property could not be taken for private use. It might be seized for a public use, but only if the use is expressly stated and if the property owner is "justly" compensated. However, the most important provision is that the measure states eminent domain could be used only if another government agency already owns and occupies the land.

Unlike what happened in the Kelo case, Proposition 90 also would determine blight on a parcel-by-parcel basis.

Jeff Stoke, a partner with Procopio Cory Hargreaves & Savitch LLP who moderated the program, said the Anderson initiative would end the use of eminent domain for redevelopment purposes.

David Allsbrook, Centre City Development Corp. manager of contracting and public works, agreed and said although eminent domain power is rarely used, it proved an essential tool 20 years to foster the development of Horton Plaza and more recently Petco Park and the rest of the Ballpark District.

"Petco Park has been a huge success. It created jobs, housing and helped redevelop the whole area," Allsbrook said.

He added that though 56 eminent domain actions were filed before Petco Park was built, all but six were settled before trial.

"About 95 percent of the work was done without eminent domain," Allsbrook said.

The improvements generated not only a revitalized area, but also cleaner sites that might not have been detoxified without the eminent domain power.

"We removed over 75,000 tons of contaminated material and over 100 underground storage tanks," Allsbrook added.

Like Allsbrook, John Shirey of the California Redevelopment Association said Proposition 90 is a terrible idea.

"Proposition 90 is not just about eminent domain. It is a taxpayer trap," Shirey said, adding that governmental entities and consequentially taxpayers would end up paying millions of dollars more for properties due to compensation clauses in the initiative.

Shirey claims that this could be just the beginning. For example, he said there are more than 1,800 court challenges in Oregon with the potential for some $3.7 billion in claims as a result of similar eminent domain legislation in that state.

"And Oregon has only about 10 percent of California's population," Shirey says.

If the proposition and the U.S. Supreme Court case weren't enough, additional rulings in the lower courts further muddy the waters.

One of these is an Ohio case of the City of Norwood v. Horney et al. That ruling, which was just decided at the appellate court level on July 26, said "in the absence of a public benefit, the fact than an appropriation of property will provide an economic benefit to the community does not satisfy the public use requirement... ."

While no one knows what will happen if and when this case is appealed to the U.S. Supreme Court, if Kelo becomes the guiding principal, the ruling in the Ohio appellate court would be overturned.

Finally, there are some 80 pieces of legislation in the state Legislature that, at least in some way, have a bearing on eminent domain. One of these is AB 1162 (SB 53 is the Senate version), which is being carried by Assemblyman Gene Mullin, D-San Mateo, and State Sen. Christine Kehoe, D-San Diego. Under this legislation, there would be a moratorium on the taking of owner-occupied residential property for public use until Jan. 1, 2008.

The bill sets a 10-year limit (if a plan was adopted after Jan. 1) or a July 1, 2009, deadline (if a plan was adopted before Jan. 1) for the commencement of eminent domain proceedings within a project area.

Kehoe has numerous other bills that relate to this topic. Under SB 1206, the inclusion of non-blighted parcels in a redevelopment project area for the purpose of obtaining property tax revenue from the area without substantial justification would be prohibited.

Procopio's Stoke said that no matter what happens at the ballot box in November and in the Legislature, officials will continue to debate the eminent domain issue for years to come.

"The smartest minds in the country are split over this," he said, "so the issue isn't going away."