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FeedMasters of your Domain
“IT CAN’T HAPPEN HERE.” That’s the mantra of many elected officials and redevelopment agencies—not only in San Diego, but around the state—following the now notorious Kelo v. City of New London decision by the U.S. Supreme Court last year. The controversial ruling allowed the city of New London, Connecticut, to condemn private homes, under the power of eminent domain, and transfer the property to a private developer.
These officials and real estate developers claim the “hysteria” that erupted in the wake of the Kelo decision is a tempest in a teapot ignited by vocal property rights advocates who stand in the way of economic growth. California’s small-business owners and homeowners, redevelopment proponents say, are protected by a state redevelopment statute that requires property to be within a redevelopment project area before it can be declared blighted and condemned under the power of eminent domain—a two-step process—which was not the case in Connecticut. The U.S. Constitution does not restrict government bodies from taking private property for public use, but under the Fifth Amendment, property may not be taken “without just compensation.”
“The hysteria over Kelo in California is exactly that,” says Eli Sanchez, a senior project manager for the Centre City Development Corporation (CCDC), an arm of the Redevelopment Agency of the city of San Diego. “There was no sea change in California law.”
State Senator Christine Kehoe (D–San Diego) echoes his remarks. “What we have heard over and over again from the attorney general’s office and redevelopment lawyers and private-sector folks is that the Kelo decision could not happen under California state law. We hope that’s the case.”
Property rights advocates, however, contend that such statements are misleading at best. They say the halfhearted reforms proposed last year by state legislators pay only lip service to the issue without addressing its fundamental problems. One need only look around San Diego County, they say, for specific examples of eminent domain abuse.
Last summer, eminent domain surfaced as a “hammer” to pressure Alsco, a laundry service with 160 employees that primarily caters to hotels and restaurants, to hasten its move out of the Little Italy neighborhood to make way for a mixed-use development of specialty retail businesses and condominiums. This came on the heels of the Gran Havana Cigar & Coffee Lounge court case, which resulted in a $7.7 million judgment against CCDC after the agency condemned the cigar store and transferred the property to a hotel developer. Under its agreement with CCDC, the developer must pay this judgment.
In Grantville at the east end of Mission Valley, the prospect of turning one of San Diego’s historical neighborhoods into a redevelopment project area—carrying with it the power of eminent domain—prompted the county of San Diego to sue the city of San Diego last July.
In Chula Vista, the Rados brothers ultimately lost an eminent domain battle, which resulted in the Redevelopment Agency of Chula Vista taking a 3.2-acre parcel and transferring it to B.F. Goodrich for use as a parking lot. At trial, the Rados brothers argued that the city lacked a public use and had no need for the taking. The court agreed, but an appeals court overturned the lower court’s ruling in 2002, foreshadowing the Kelo decision.
THESE ARE JUST A FEW EXAMPLES from the hundreds of cases pending or decided in recent years in California alone. The problem, property rights advocates say, is the definition of blight is so vague and unrestricted, governments and their redevelopment agencies have unwarranted authority over property owners—especially small-business owners, who are more likely to be involved in eminent domain actions than homeowners.
From 1998 through 2002, there were 223 condemnations in California to benefit private parties, according to the 2003 report “Public Power, Private Gain: A Five-Year, State-by- State Report Examining the Abuse of Eminent Domain.” The study was conducted by the Institute for Justice, the Arlington, Virginia, law firm that represented Susette Kelo and her neighbors in the Supreme Court case.
A major flaw in state law, according to Timothy Sandefur of the Pacific Legal Foundation in Sacramento, is that a blight designation can sit on the books for years without expiring, regardless of improvements to the neighborhood. In the Rados brothers’ case, it was nearly 30 years.
“Essentially, it’s like a time bomb waiting to go off,” says Sandefur, who testified at last year’s state Senate hearings. “This blight designation statute is not a protection for California homeowners or small-business owners, because just about anything can be declared blighted.”
In fact, a property does not itself have to be blighted to be declared blighted. It merely needs to be within a redevelopment project area that’s been designated as blighted. Such was the case with the Gran Havana cigar store, which, when condemned, was a successful business. As is the Alsco laundry, although Alsco’s situation has the added dimension of no longer conforming with the area’s revised zoning, which now bans industrial use.
The instance raising the hackles of the county of San Diego is the city’s plan to redevelop the Grantville neighborhood. Last year, a 970-acre region was declared blighted. But the county, which stands to lose $200 million in property-tax revenue, filed suit to block the move.
“The area is not blighted; property values have risen significantly,” says Laurie Orange, senior deputy county counsel. She says the justification for redevelopment is traffic congestion on Mission Gorge and Friars roads and insufficient parking in the area.
“If traffic congestion and no parking is the measure of blight, then La Jolla is blighted,” Orange says. “There is a lot of private money available for redevelopment without the city becoming involved.” The city’s real motivation is more likely that it sees a way to increase revenue for its drained municipal coffers, she says.
District 3 Councilwoman Donna Frye, who cast the only vote against the Grantville redevelopment, concurs, although she notes any increase in tax revenue remains within the project area. “In fact, it would reduce revenue to the general fund,” Frye says.
Indeed, a 1998 study by the Public Policy Institute of California found that such tax-increment- financing projects potentially waste public money. The study concluded that cities actually spend roughly $2 for every dollar gained in growth.
Frye and property rights advocates contend any real financial benefit goes to private developers, not taxpayers, while handing elected officials projects to brag about during their next election cycle.
As a member of the city council’s Government Efficiency and Openness Committee, Frye is working with the city attorney’s office to restrict the use of eminent domain to actual public use and not just for perceived economic benefits. “The redevelopment process has become abusive,” she says. “There is no blight in that area that can’t be eliminated by simply enforcing existing codes.” A court hearing on the Grantville case is expected in February or March.
THIS GOES TO THE HEART of the Kelo case as well as government-backed redevelopment in California: whether economic development constitutes a “public use” rationale for declaring blight. Currently, the answer is yes.
Kehoe, Sanchez and others tout redevelopment as a way to restore economic luster to decaying neighborhoods, and say it provides public benefit through increased taxes and municipal revenue. They point to Horton Plaza, the Gaslamp Quarter, the new ballpark district, Little Italy and City Heights—neighborhoods transformed for the better.
What’s more, there are tax incentives and relocation assistance for businesses and homeowners who make way for redevelopment projects, says Eric Symons, business and community outreach manager of the city’s Redevelopment Agency. “It’s a boon for many people, and they like it in the long run,” Symons says.
While property rights advocates don’t dispute there are redevelopment success stories, they say there are just as many, if not more, examples of abuse. Nor do they dispute the need for eminent domain when it results in genuine public use, such as roads, libraries, schools, post offices and fire stations. The problem, they say, is that property is often taken not for public use but for the benefit of a private party, generally developers or large corporations—including Costco, Home Depot, Target and Wal-Mart—that have helped elect the very government officials charged with protecting the property rights of their constituents.
“Nothing is going to solve this problem short of a constitutional amendment that says when we say ‘public use,’ we really mean for public use, and you can’t take it for private use,” Sandefur says.
AS CHAIR OF THE STATE SENATE Local Government Committee, Kehoe conducted hearings on redevelopment reform last year, and plans to introduce new legislation this year that would tighten the definition of blight and increase property owners’ rights. “If there are gaps in California law, we want to close them,” she says. But embracing Senator Tom McClintock’s (R– Thousand Oaks) proposal that redevelopment be limited to public works projects, as Sandefur and Frye do, “is throwing the baby out with the bathwater,” Kehoe says.
Meanwhile, Alsco, which is headquartered in Salt Lake City, is attempting to get a fair price for its Grape Street property from CLB Partners, a Solana Beach developer that figures to build condominiums on that block. (Phone calls to CLB Partners requesting comment were not returned.) If an agreement is not reached, the CCDC could fall back on its power of eminent domain. But this leaves Alsco negotiating with the proverbial gun pointed at its head. One sticking point, apparently, is the multimillion- dollar cost of relocating its business.
“We’re trying to be a good citizen,” says Michael Scacco, general manager of Alsco’s San Diego operation. But because of the city’s crumbling sewer system and environmental restrictions, the company has had a difficult time finding an acceptable relocation site. “We are not shutting down,” Scacco says. “We service about 3,000 customers a week, and they depend on us.”
If Alsco cannot come to terms with CLB Partners, it could force an eminent domain showdown and, like Gran Havana, a court could end up deciding the outcome.
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