A Change in the Wind?

3 interesting cases add a new twist to Condemnation

By Karen Frostrom

In 2001, the California court of appeal issued the unfortunate decision known as Redevelopment Agency of City of Chula Vista v. Rados Bros., 95 Cal.App.4th 309 (2001), wherein it held that a public agency could condemn private property for conveyance to another private party for private profit even if the private party had no plans to develop the property in the near future or, indeed, any specific development plans for the property. Specifically, the acquiring party’s intentions were this vague:

At the hearing, a BFG representative explained it had not finalized its master plan for the expanded campus because some development was dependent on public improvements, including the extension of H Street. However, BFG envisioned using the Rados property for office or research and development facilities. The Relocation Agreement allots four years for BFG's relocation, and requires it within six years to commit to using the Rados property for industrial or office space.

Id. at 319. In 2009, a decision issued that creates a potential conflict with the Rados decision.

In City of Stockton v. Marina Towers LLC, 171 Cal.App.4th 92 (2009), the City condemned a property, stating the necessity as:

City had been “preparing” this site for development and described the subject property as within a “catalyst site” for North Shore revitalization.

Id. at 101. During the condemnation litigation, the City indeed developed the property into a public parking lot and a ballpark and further obtained entitlements. Id. at 103. As such, when the trial on the right to take occurred, the City could demonstrate that it was actually using the property for a public purpose.

The Marina Towers court reasoned that because a resolution of necessity is “clothed with a strong presumption of finality,” a municipality must “conclusively establish” public interest and necessity for the project. Id. at 105. In closing, the court concluded that the City had failed, in obtaining its resolution of necessity, to sufficiently identify the reason for the need of the property. Id. at 108. The court gave examples of language it would consider to be specific enough to pass muster: “an elementary school and grounds or right of way for a freeway or open space to be maintained in its natural condition.” Id. at 110. This language is far more specific than was the language ratified in the Rados decision, bringing into question whether the Rados decision is ripe for invalidation.

The "Emergency Exception"

On November 18, 2010, a small article began to appear in the local news. A gardener working in a yard in Escondido had been injured in some undisclosed way in a vaguely described explosion. An investigation quietly began but quickly grew to include local and federal officials and experts when the sheer volume of explosive materials on the property became apparent. The news went nationwide when the Sheriff announced that the government planned to burn the house to the ground. The house was destroyed on December 9, 2010, twenty one days after the initial discovery. The tenant who had been living the home lost personal property. The owner lost the property improvements. What legal rights do they have to recover what they lost? The answer is unclear. The principle at issue is that long-standing holding that the government may, in its legitimate exercise of its police power, destroy private property without invoking inverse condemnation.

The most dramatic applications of the “emergency exception” were decided during times of war. An oil terminal destroyed in Manila immediately prior to the Japanese invasion of the Philippines did not entitle the owner to compensation because under the emergency situation, the enemy was deprived of a valuable logistic weapon. United States v. Caltex, 344 U.S. 149 (1952). Bridges destroyed during the United States Civil War to prevent the advance of the enemy did not entitle owners to compensation. United States v. Pacific Railroad, 120 U.S. 227 (1887). The emergencies in these cases involved defense of sovereign land and the citizenry.

A property owner was not entitled to compensation when and “armed and dangerous” man entered a liquor store and refused to come out, resulting in the use of tear gas and damage to windows and ceiling panels because law enforcement officers needed to act quickly to protect public safety. Customer Co. v. City of Sacramento, 10 Cal.4th 368, 385 (1995).

When, during a massive flood, the government cuts a levee that results in ten feet of flooding on a property in order to prevent greater damage, the property owner is not entitled to damages because the government is exercising its police power to address an emergency. Thousand Trails, Inc. v. California Reclamation District No. 17, 124 Cal.App.4th 450 (2004). The Thousand Trails court provided the standard for consideration in “emergency” situations: “The taking or damaging of private property [must be] prompted by so great a necessity as to be justified without proper compensation to the owner.” Id. at 463 (emphasis in original). This holding, however, need be carefully compared to the holding in the strikingly similar Odello Bros. v. County of Monterey, 63 Cal.App.4th 778 (1998).

In Odello, the County had recognized the existence of a flood hazard in the valley at issue and had specifically planned for modification of the levee system related thereto but had chosen not to go forward with the plan for monetary reasons. Ten years later, the anticipated flooding occurred and the County, on an emergency basis, broke through a levee, destroying the owners’ artichoke farm. The court found in favor of the owners’ inverse condemnation claim, holding that the County’s exercise of its emergency police power “cannot extend beyond the necessities of the case and be made a cloak to destroy constitutional rights as to the inviolateness of private property.” Id. at 789. A “true emergency,” the court held, must be something that could not fairly be characterized as a choice rather than a gut reaction in the moment. Id. at 790. The County, the court held here, had created its own emergency by maintaining what it knew to be inadequate public improvements. The property owner should be compensated for the harm it suffered as a result of the County’s choice.

Rose v. City of Coalinga, 190 Cal.App.3dd 1627 (1987) provided clarification on what circumstances should actually qualify as an “emergency.” There, following an earthquake, the City announced plans to demolish a large swath of the downtown area due to earthquake damage. The property owners were prepared to prove that their property was not actually dangerous. The court found that two circumstances could prevent the situation from being deemed an emergency. First, the property was fenced to prevent public access and, second, 57 days elapsed from the time of the earthquake until the destruction of the property improvements. Id. at 636.

Where a government intentionally destroys private property, intending to claim the “emergency” doctrine, it is the government that bears the burden of proving the existence of the emergency “by a preponderance of the evidence.” Leppo v. City of Petaluma, 20 Cal.App.3d 711, 718 (1971). In ruling on the existence and the non-existence of an emergency, the court will consider whether the government made a choice that contributed to the emergency (Odello), demonstrated by delay that a true emergency did not exist (Rose), and/or had other protective and reasonable options in its quiver (Rose). It will then weigh the necessities of the case against the inviolatenessof private property and decide which side comes up wanting.

We can predict the balancing that would occur related to the Escondido “bomb house” burning. No immediate action was necessary – this is the strongest argument in favor of compensation. On the other hand, the County did not contribute to the creationof the emergency because it did not place the explosives in the building or take any action in furtherance of the danger. The matter would therefore likely turn on the nature of the options available to the County and the relative safety of those options. Was the burning truly necessary? Only a careful study of the facts will provide the right answer to this question.

No more redevelopment agencies?

In January 2011, Governor Brown unveiled his budget proposal, announcing that the proposal included elimination of all of the redevelopment agencies in California. He immediately came under siege as mayors and public interest groups traveled to Sacramento to seek a change in his position. The Governor responded to those concerns in his State of the State address, indicating that he understands that tough choices will have to be made and that he intends to prioritize education and safety services over redevelopment.

The Legislative Analysts’ Office reviewed and commented on the proposal, finding that there was no reliable evidence that the agencies are actually benefitting the economy of the state. The LAO also determined that the Governor’s proposal would increase transparency of government by centralizing expenditure of tax revenues. http://www.lao.ca.gov/handouts/state_admin/2011/Redevelopment_1_19_11.pdf.

To further address those concerns, the Senate Oversight Committee set a hearing for February 9, 2011. The briefing paper prepared for the meeting outlines the issues in play. That briefing presented four questions for consideration: (1) What did the Governor propose for redevelopment agencies? (2) What questions should legislators ask before acting on that proposal? (3) What are the consequences of eliminating redevelopment agencies? (4) What are the feasible alternatives? The paper estimates that redevelopment tax increment funding diverts funding from other sources in the amounts of:

$3.2 billion from schools
$1.2 billion from counties
$671 million from cities
$519 million from special districts

As to the schools, the paper explains, the redevelopment funding does not directly impact their operations because there is a mechanism in place so that the State General Fund backfills missing funds to the schools. This explains how the State intends for the elimination of tax increment to aid in balancing the state budget.

A potential hurdle to the Governor’s proposal has been identified as Proposition 22. Passed in 2009, the Proposition’s purpose was stated as:

The purpose of this measure is to conclusively and completely prohibit state politicians in Sacramento from seizing, diverting, shifting, borrowing, transferring, suspending, or otherwise taking or interfering with revenues that are dedicated to funding services provided by local government or funds dedicated to transportation improvement projects and services.

In the opinion of the author, Proposition 22 would not prohibit the Governor’s proposal because its effect – preventing the triggering of the General Fund obligation to backfill into school revenues – should not be viewed as a diversion of local funds. The local funds would continue to be applied locally – only they would be spent on education instead of on redevelopment.

Another potential hurdle to the proposal is the argument that redevelopment is needed to combat blight. The paper addresses that issue directly in the following way. When redevelopment agencies were originally established (decades ago), the legislature contemplated them as temporary agencies that would be formed to address the problem, address it, and disband. Having succeeded in lobbying for language providing for extensions of time, these agencies have become institutional. The first agency was formed in 1948 and is still collecting tax increment revenue. If true blight existed in 1948, which blight has not been eradicated since that time, the unwritten conclusion is that it must not be very harmful to the community. We have seen the results of this here in San Diego. When the redevelopment laws were first enacted, concern was being expressed about shantytown conditions without indoor plumbing, electricity or heating. Now the laws have been used to build a baseball stadium. Given the illegitimate removal of the tax increment cap (addressed in a previous article in this column), if San Diego’s agency remains in place, the next blight to be addressed is the “need” for a new football stadium.

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