The U.S. Supreme Court’s controversial decision backing the use of eminent domain for economic development purposes is creating a backlash in California that could have significant ramifications for redevelopment. A state constitutional amendment to limit the use of eminent domain has been introduced in Sacramento with both Republicans and conservative Democrats as co-authors. Meanwhile, local redevelopment agencies are having to defend their practices from questioning by governing board members and the public.

The proposed state constitutional amendment would prohibit the use of eminent domain for “private use.” The measure would require that property taken via eminent domain must remain in public ownership or be provided for utilities. If approved by state voters, the measure would end redevelopment agencies’ common practice of taking property via eminent domain — or at least under the threat of eminent domain — and then providing the property to a private entity for commercial, industrial or residential development.

Supporters of the proposal hope to have hearings at the state Capitol this month, and to get the measure placed on the ballot either this November or in June 2006.
The Supreme Court’s decision in Kelo v. City of New London “opened a new era when the rich and powerful can use government to seize the property of ordinary citizens for private gain,” state Sen. Tom McClintock (R-Thousand Oaks) said while introducing a proposed constitutional amendment. “It [the government] may now literally take the house of a person it doesn’t like and give it to a person that it does like.”

California Redevelopment Association Executive Director John Shirey countered that the news media has “grossly misinterpreted” the Kelo ruling.

“There is a belief out there that if a developer wants your house, he can knock on your door one day and take it away from you,” Shirey said. “The truth is the Kelo decision did not change California law. The truth is that California law has many protections for property owners.”

State lawmakers and their staffs drafted the measure with assistance from property rights advocates at the Pacific Legal Foundation (PLF). Tim Sandefur, a PLF attorney, said his organization received inquiries from both conservative and liberal lawmakers after the Supreme Court issued its decision in late June. He characterized Kelo as part of “a fundamental drift away from the purpose of government.”

The proposed legislation does not attempt to define “public use.” Instead, the key provision is this: “Property taken by eminent domain shall be owned and occupied by the condemnor or may be leased only to entities that are regulated by the Public Utilities Commission.”

“We don’t put any limits there,” said John Stoos, chief consultant to McClintock. “Theoretically, if a city wanted to buy a hotel and run a hotel, it could. We would think that’s bad policy and would oppose it.”

In Kelo, the court ruled 5-4 that the City of New London, Connecticut, could take private property from nine homeowners so that the property would be available for a large, mixed-use development (see CP&DR Economic Development, July 2005). Under the Fifth Amendment, the government may take private property for public use as long as the government provides just compensation. Justice John Paul Stevens wrote that there was “no basis for exempting economic development” from the broad definition of “public use.”

The reaction was immediate and negative. Public opinion polls showed widespread opposition to the ruling. Lawmakers in at least half a dozen states proposed measures to limit use of eminent domain. In Washington, lawmakers in both houses of Congress introduced bills that would withhold federal funds from states or local governments that use eminent domain for private development.

While in agreement with the Kelo decision, redevelopment supporters in California said the ruling would have little immediate effect because state law already limits the use of eminent domain for private development to instances in which the property being taken is blighted.

But backers of SCA 15 and ACA 22 (La Malfa), identical measures seeking to restrict eminent domain, believe California’s current protections for property owners are inadequate. They point out that “blight” was loosely defined for many years, leading to redevelopment projects in wealthy communities and on undeveloped land. Stoos pointed as an example to Rancho Mirage, a wealthy retirement and resort town whose two redevelopment project areas cover nearly the entire desert city.

“We don’t think we stop the good part of redevelopment,” Stoos said. “We’re not against renewing urban areas or doing redevelopment.” The measure’s backers believe that private developers should buy property on the free market, Stoos said.

Four Democrats have signed on as supporters of SCA 15 and ACA 22, including Sen. Dean Florez (D-Shafter), who joined McClintock at a press conference introducing SCA 15. The proposed constitutional amendments need two-thirds approval by the Legislature to qualify for the ballot. If the Legislature does not approve either ACA 22 or SCA 15, an initiative is likely. Both sides appear to agree upon one thing: If a measure qualifies for the ballot, voters will probably approve it because of the emotional nature of the issues.

“We see this as a direct attack on redevelopment,” said the CRA’s Shirey. “With the misinformation in the public, this thing could easily gain legs and move forward.”

Shirey conceded that project areas exist that could not be created today under the 1993 redevelopment reforms. But, Shirey noted, eminent domain authority for redevelopment last only 12 years. The powers may be renewed, but today’s standards for determining blight apply, he said.

Redevelopment backers contend that their efforts to improve the lot of poor, blighted neighborhoods are a fundamental purpose of government. And they lamented the potential loss of eminent domain as a tool.

“To do significant redevelopment in built-out communities, you have to have the ability to acquire parcels,” said Jim Kennedy, executive director of the Contra Costa County Redevelopment Agency. One of the agency’s most successful projects is a transit-oriented development around the Pleasant Hill BART station: 2,300 housing units within a quarter mile of transit, plus 2 million square feet of commercial space (see CP&DR Places, May 1994). “None of that would have been do-able without eminent domain,” Kennedy said.

Although extensive development had been proposed around the BART station for years, nothing got built because infrastructure costs scared away private developers. The redevelopment project involved assembling about 250 parcels on 125 acres into 13 development sites. The redevelopment agency assembled 10 of the sites. The agency commenced eminent domain proceedings against about 40 holdout property owners. All but about 15 of those settled during negotiations. The final holdouts argued about price, not about land use, Kennedy said.

A more recent and more modest Contra Costa redevelopment project in North Richmond replaced a handful of dilapidated single-family houses and some broken-down, housing authority-owned units with 54 new housing units, a neighborhood retail center and a public health clinic. The redevelopment agency used eminent domain to acquire two of the parcels from property owners who were holding out for higher prices.

“It’s the prototype of an extremely blighted area,” Kennedy said of North Richmond. Without eminent domain to acquire property from the two holdout property owners, the project would not have been feasible, he said.

In Sacramento, Traci Michel, a senior project manager with the city’s redevelopment agency, recalled a project that brought the first new grocery store in decades to the impoverished Oak Park neighborhood. That project would not have gone forward without the city using eminent domain to deal with one reluctant property owner, she said.

“There are a lot of really great projects that needed the power of eminent domain — very successful projects that the community wants,” Michel said.

How far the state legislation will get is uncertain. Authors introduced the bills just before the Legislature went on summer break. Leaders of either house could procedurally stall the bills fairly easily, although it appears that there will be hearings this month. Supporters believe that big-box retailers, who often benefit from redevelopment practices, will fight hard to kill the legislation. The League of California Cities has already begun rallying opposition, arguing that the proposed restrictions would harm job creation and affordable housing construction.

The reaction to Kelo has not been limited to Sacramento and Washington. In San Diego County, Supervisors Bill Horn and Ron Roberts said Kelo “sets a dangerous precedent and goes beyond the accepted use of eminent domain for public benefit in the County of San Diego.” The Board of Supervisors voted unanimously to review all county eminent domain policies.

“I want to make sure that this can’t happen — that the government can’t take property for economic benefit,” Horn said. “I think the county needs to take a strong stance on the property rights issue.”

Los Angeles County supervisors are scheduled to consider eminent domain policy revisions this month. Supervisor Michael Antonovich denounced the use of eminent domain for economic development.

In Riverside, the City Council gave preliminary approval to a formal policy of not taking owner-occupied, single-family residences by eminent domain in a controversial new redevelopment project area.

Contacts:
John Stoos, office of state Sen. Tom McClintock, (916) 651-4019.
Tim Sandefur, Pacific Legal Foundation, (916) 718-8572.
John Shirey, California Redevelopment Agency, (916) 448-8760.
Jim Kennedy, Contra Costa Redevelopment Agency, (925) 335-7200.
Bill Horn, San Diego County supervisor, (619) 531-5555.