The San Diego Redevelopment Agency can use a state law to require the owner of property the agency took by eminent domain to pay for cleanup of soil contamination, a state court has ruled. A unanimous three-judge panel of the Fourth District Court of Appeal, Division One, ruled that the city could recover remediation costs under the Polanco Act (Health & Safety Code § 33459 et seq.). The property owner, the Salvation Army, argued that the city could not recover costs because it did not follow requirements of the federal Superfund law (the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or CERCLA). But the court ruled that the federal law did not prevent the city from recovering costs and that, in any event, the city did comply with the federal law. "Contrary to [Salvation] Army's suggestion, the Polanco Act does not limit a redevelopment agency's rights to those available under CERCLA," Presiding Justice Daniel Kremer wrote for the court. The city's attorney, Richard Opper of Foley & Lardner, called the decision a "shot in the arm" for the Polanco Act. "California law has been unclear in its guidance on the market value of condemned, contaminated land," Opper said. "Now, there is approval for using the Polanco Act in coordination with eminent domain." The property in question is in San Diego's East Village Redevelopment District, where the city is constructing a downtown baseball stadium (see CP&DR Places, January 2002). In 1998, the city identified the Salvation Army's parcel as one the city needed to acquire, so the city included it in a phase I environmental site assessment of the area. A consultant identified a possible underground storage tank on the Salvation Army parcel, so the city requested the Salvation Army submit a remediation plan within the Polanco Act's 60-day time limit. The Salvation Army did not respond to the request or to a 30-day extension. In 1999, the county Department of Environmental Health approved the city's master work plan for cleaning up the redevelopment project area. In February 2000, the city filed a lawsuit against the Salvation Army to acquire the property through eminent domain. The following month, the Salvation Army submitted an assessment and remediation work plan to the county. But the city took possession of the parcel, which the Salvation Army did not dispute, in May. After demolishing the structures, the city found evidence of lead-contaminated burn ash. The city prepared a property mitigation plan for review by the county and the Salvation Army, and then did the cleanup work, including excavation and disposal of the contaminated soil. In 2001, the city and the Salvation Army settled on $550,000 – less any amount recoverable under the Polanco Act — as the price for the property and any damages the property owner suffered. San Diego County Superior Court Judge Judith McConnell (since appointed to the Fourth District bench) later concluded that the Salvation Army did not respond to the city's request for submission of a remedial action plan before the statutory deadline. Judge McConnell awarded the city $172,000 in remediation costs, plus attorney's fees and mediation expenses. The Salvation Army appealed. It argued that the Polanco Act's inclusion of CERCLA's "scope and standard of liability for cost recovery" limited the city's recoverable costs to those allowed under CERCLA. The Army further argued that the city did not follow the federal Environmental Protection Agency's implementing regulations for CERCLA (known as the "national contingency plan") because the city did not assess the threat to human health or the environment before proceeding with cleanup. The Salvation Army also argued that the city's disposal of soil was compelled by state waste laws, not because the soil threatened human health and the environment. The appellate court rejected these arguments. Foremost, the court ruled that cost recovery under the Polanco Act is different than under CERCLA. "The Polanco Act involves cleanup of the release of hazardous substances in the context of a redevelopment project," Justice Kremer wrote for the court. "The Polanco Act was enacted to provide a redevelopment agency with the means to require responsible parties to bear the costs of mitigating contamination on property within that agency's redevelopment project area." The Polanco Act's reference to the national contingency plan is intended to provide the city's redevelopment agency "with a basis for evaluating a proposed remedial action plan submitted by a responsible party in response to the agency's 60-day notice," the court ruled. The state law "does not make compliance with any portion of the national contingency plan a precondition for the agency's recovery of costs under Health & Safety Code § 33459.4. Instead, a redevelopment agency's entitlement to cost recovery under the Polanco Act depends upon the redevelopment agency's implementation of a plan approved by the designated regulatory agency overseeing the redevelopment plan." In this case, the county Department of Environmental Health was the designated regulatory agency, and it approved the city's plan. Besides, the court continued, the city did comply with the federal regulations by conducting a remedial investigation and preparing a feasibility study. Meanwhile, the Salvation Army "remained silent" through the whole process, Kremer noted. The city satisfied the conditions necessary for cost recovery under the Polanco Act by submitting a notice to the Salvation Army asking for a remedial action plan. The Salvation Army, meanwhile, submitted a remedial action plan and removed the underground storage tank more than a year after the statutory deadline for responding to the city's notice, Kremer wrote. The court also rejected the Salvation Army's contention that the city was only complying with state waste disposal laws. "Agency's master work plan and its amended property mitigation plan were both designed to protect the health and safety of construction workers and to prepare the property for future use," the court held. Additionally, the court held that the Salvation Army was a "responsible party" subject to liability, even though the city's cleanup occurred after the city took possession of the property. The Salvation Army qualified as the "present owner" because it owned the property when the city filed the eminent domain lawsuit. And, as the present owner, the Salvation Army was liable even if it did not cause the contamination, the court ruled. The Case: Redevelopment Agency of San Diego v. Salvation Army, No. D038835, 02 C.D.O.S. 11137. Filed October 21, 2002. Ordered published November 14, 2002. The Lawyers: For the city: Richard G. Opper, Foley & Lardner, (619) 234-6655. For Salvation Army: H. Douglas Galt, Woolls & Peer, (213) 629-8792.