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"Eminent Domain Reform Arrives in California Ahead of Election Day"

California Real Estate Journal
By: Bradford B. Kuhn, John C. Murphy

Gov. Arnold Schwarzenegger and the state Legislature have boarded the eminent domain reform bus. On Sept. 29, the governor signed no fewer than five eminent domain reform bills. These new laws will affect all condemnation cases, not just those involving redevelopment. Regardless of how Proposition 90 fares in November, eminent domain reform has arrived.

When these bills take effect Jan. 1, 2007, agencies will have to pay up to $5,000 for owners to get independent appraisals, undergo hearings on applications for orders of immediate possession, and include a statement of the specific anticipated public use in all resolutions of necessity.

Among eminent domain lawyers, these five bills have earned a nickname: "Prop. 90-lite." Proposition 90, the Anderson Initiative, which will appear on the Nov. 7 statewide ballot, would amend the state Constitution to eliminate all use of eminent domain to promote economic development. If passed, Proposition 90 could prevent any redevelopment agency from condemning anything. Like the Legislature's five new laws, Proposition 90 reflects public outrage over the U.S. Supreme Court's Kelo v. City of New London opinion. Proponents of Proposition 90 claim it will "protect our homes" from eminent domain.

The problem is that Proposition 90 also contains some provisions that have little or nothing to do with protecting anyone's home. The proposition will rewrite dramatically some of the valuation rules used in all eminent domain cases, regardless of whether economic development is involved. Moreover, Proposition 90 could change the laws of regulatory takings dramatically. It will give landowners a cause of action whenever any local government makes a land-use planning decision that substantially affects property values. Proposition 90 generally is viewed by opponents as an extreme and dramatic departure from existing law.

By contrast, these five bills seem innocuous to many practitioners. In the words of Timothy Sandefur, an attorney with Pacific Legal Foundation, the bills qualify as "mealy mouthed."

The Bills

Senate Bill 1650, written by Sen. Christine Kehoe, D-San Diego, affects an agency's ability to change the use of property acquired by eminent domain. Under existing law, a governing agency is required to adopt a resolution of necessity before acquiring property through eminent domain. The resolution must provide a statement of the public use for which the property is taken. SB1650 prohibits the public entity from using the property for a public use other than the public use stated in the resolution, unless a new resolution is passed.

The bill also requires a public entity to sell property back to the original owner if, within 10 years after adoption of the resolution, the property is not used for its stated public use and a new resolution is not passed.

Finally, the bill requires an agency to offer the owner of the property a one-year leaseback agreement at fair market rent for the owner's continued use unless the agency states that its use of the property is scheduled to begin within two years of its acquisition.

Senate Bill 1210, written by Sen. Tom Torlakson, D-Antioch, concerns appraisal fees and pre-judgment possession by government agencies. Under existing law, a condemning government agency is required to have the property appraised by an expert before depositing with the state Treasury the amount of probable compensation. SB1210 requires the agency to offer to pay an owner the reasonable costs, not to exceed $5,000, of an independent appraisal of the property to be purchased under threat of eminent domain.

Also, a public entity was previously allowed to make an ex-parte application to take possession of property before judgment and was denied pre-judgment possession only if the harm to the land owner was substantial. This new legislation permits an agency to obtain pre-judgment possession of property only after the owner has been given notice and an opportunity for a hearing to oppose the taking, even if the hardship is not substantial. If the land owner opposes the government's pre-judgment possession of the property, the government is not entitled to pre-judgment possession unless it shows an overriding need for possession that will cause substantial hardship to the government if pre-judgment possession is denied, and such hardship outweighs any hardship on the land owner that would be caused by granting pre-judgment possession.

Senate Bill 1206, also written by Kehoe, bears on the statutory definition of "blight" and the amount of state oversight in redevelopment. Under existing redevelopment law, local officials may condemn land for economic development purposes only in "blighted areas." SB1206 narrows the definition by characterizing blighted areas as those that constitute a "serious physical and economic burden on the community that cannot reasonably be expected to be reversed or alleviated by private enterprise or governmental action, or both, without redevelopment." The legislation also prohibits the inclusion of nonblighted parcels in a redevelopment project area for the purpose of obtaining property tax revenue from the area without substantial justification for their inclusion.

Redevelopment plans would be required to become more detailed, providing specific, quantifiable evidence that documents the physical and economic conditions in the project area and how the redevelopment plan will improve the conditions. SB1206 also increases the duties of public officials by requiring them to provide redevelopment property valuation reports to the state Department of Finance. The redevelopment agencies also must notify the state Department of Housing and Community Development and the Department of Finance of any redevelopment hearings and provide them with a report on the plan approval or amendment.

Challenging the validity of legislative redevelopment agency actions also has been made easier. SB1206 allows a civil action to start within 90 days from the date of a decision by the redevelopment agency.

Senate Bill 53, also written by Kehoe, focuses on procedural aspects of redevelopment. Redevelopment agencies were previously permitted to extend the time limit for starting eminent domain proceedings to acquire property within the project area by amending the redevelopment plan. This new legislation requires the agency to find, based on substantial evidence, that significant blight remains in the project area and cannot be eliminated without the use of eminent domain before amending a redevelopment plan to extend the time limit.

Senate Bill 1809, written by Sen. Michael Machado, D-Linden, also tightens procedural requirements on redevelopment. Under existing law, after a redevelopment plan is adopted or amended, a redevelopment agency is required to file with the county recorder a description of any land within the redevelopment project area. This new legislation requires the filing to occur within 60 days of the adoption or amendment as opposed to the previous requirement of "as promptly as practicable." It also prohibits an agency from starting an eminent domain action under a redevelopment plan until the filing is recorded.

The Legislature's attempt at eminent domain reform, these five new bills, offers a sharp contrast to Proposition 90. The comparison speaks volumes about the differences between how voter initiatives work, on the one hand, and the way the Legislature works, on the other. The Legislature's five new laws enact some gradual, incremental change. They clearly reflect some attempts at compromise and consensus. Proposition 90, by contrast, proposes changes in eminent domain that are abrupt and dramatic. Its proponents admit that it strongly reflects their ideological hostility toward government. Also, although the five new bills are narrowly focused on eminent domain and redevelopment law, Proposition 90 is not so modest. Both proponents and opponents admit that Proposition 90 would change drastically not only eminent domain but also the law of zoning, land-use planning and regulatory takings, as well. If Proposition 90 passes, it will make much of the Legislature's five new laws irrelevant.

Which approach will prevail? We all will find out on Nov. 7.

Bradford B. Kuhn is an associate in the eminent domain practice group.

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