By Terri Hardy

A push for the renovation of K Street has turned ugly, pitting the city against Moe Mohanna, the owner of several blighted downtown properties.

If the city were to use its biggest stick and try to forcibly take Mohanna’s land, it could set up an unintended result: turning Mohanna into the poster child for a ballot initiative looking to crack down on the use of eminent domain.

Mohanna’s legal fight with the city, according to sponsors of the statewide ballot initiative, would certainly be prime fodder for their campaign.

“Moe Mohanna’s case won’t just be a local issue then, it will be a statewide issue,” said Jon Coupal, president of the Howard Jarvis Taxpayers Organization, one of the initiative’s sponsors.

Already, Coupal said, Mohanna has contacted him about his legal wrangling with the city.

The city is suing Mohanna and his development team to force them to go through with an agreed-upon land swap with another developer. The deal was devised to allow the revitalization of two of K Street’s worst stretches — the 700 and 800 blocks.

A court ruling this week put the success of the city’s suit in question when a judge found Sacramento wasn’t likely to prevail at trial. Superior Court Judge Loren McMaster found that a fire and demolition of buildings in the 800 block lowered its value, making it an unfair trade for Mohanna and his team.

City officials have said consolidation of the land is crucial to the redevelopment plan. To speed the process, the city has spent at least $24 million to buy portions of the blocks and to relocate merchants.

The property exchange would allow Mohanna and his development team to revitalize the 800 block of K Street. And it would mean a development team fronted by Joe Zeiden, owner of the Z Gallerie furniture retail chain, could revamp the historic buildings on the 700 block of K Street and install retailers in them.

John Dangberg, assistant city manager for economic development, said city officials had yet to determine the implications of McMaster’s ruling. He said he believed the lawsuit, still in its early stages, would continue.

Dangberg said he believed the city could continue with the suit and pursue eminent domain at the same time. Any decision to go through with eminent domain would be a public process, with a final vote made by the City Council.

“Eminent domain is a tool of last resort, but that said, our goal is to get K Street developed,” Dangberg said. “We are prepared to recommend to the council that we use every tool available to get us to that end.”

City Councilman Ray Tretheway, whose district includes K Street, said the council has yet to be briefed. However, he said he thinks the city should continue with the lawsuit, even if it takes a year or more to come to trial.

“I think we should stay the course,” Tretheway said.

Myron Moskovitz, the attorney representing Mohanna’s development team, said his clients are preparing to fend off an eminent domain push.

“That’s the word we get back from the city,” Moskovitz said. “They haven’t formally begun the procedure, but they’re absolutely considering it.”

For years, some properties in the 700 and 800 blocks of K Street have been allowed to fall into disrepair, even collapse. At the beginning of 2005, the city took a get-tough policy saying if property owners in those blocks didn’t submit workable redevelopment plans, the city would take the land through eminent domain.

The city then awarded Mohanna and his team the right to develop the 800 block and Zeiden the opportunity to redo the 700 block.

The city has been forced to use eminent domain to take possession of crime-ridden properties it could not obtain through other means, said Lisa Bates, director of housing and development for the Sacramento Housing and Redevelopment Agency.

The Franklin Villa housing area in south Sacramento was turned into affordable housing owned by a nonprofit agency. Washington Market, a liquor store in Oak Park, was seized through eminent domain and torn down. The store had been a magnet for drug crimes, robberies and prostitution, police said.

Dangberg said the city would lose a vital tool if local governments lost the right to use eminent domain for economic development.

In response to the Howard Jarvis eminent domain initiative, the Assembly Constitutional Amendment 8 has been proposed. Both are still gathering signatures to qualify for the June 8 statewide ballot.

ACA 8, like the Howard Jarvis measure, would prohibit the state or local government from taking land from a homeowner if it is to be transferred to a private party. But ACA 8 would not prohibit taking property from small business owners. Instead, it would require the owner first be given a chance to participate in a revitalization plan.

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