By Harrison Sheppard
SACRAMENTO — Taxpayer groups are battling elected officials over the government’s right to seize property in a campaign that could impact thousands of homes and businesses in California.
Each side is pushing a measure for the June ballot that would reform eminent domain, — which allows local governments to seize privately owned homes and businesses and turn them over to developers for shopping malls and office parks.
The fight will come as demands from a growing population and a shortage of land in dense urban areas such as Los Angeles put increased pressure on governments to exert their legal authority to seize private property — whether it is for public purposes such as building new schools and roads, or private purposes such as new retail stores in depressed inner cities.
In a state where local governments are restricted from raising property taxes by Proposition 13, building the tax base through redevelopment has become an increasingly attractive option.
“I think the local and state chambers will fight this tooth and nail,” said Barbara O’Connor, director of the Institute for the Study of Politics and the Media at Sacramento State. “… This is one way that they can mine inner-city areas, which are often cheaper to develop, and have large developments where they couldn’t otherwise acquire property.”
The proposed ballot measures focus only on that private development aspect of eminent domain.
The ballot measures are a reaction to a ruling issued three years ago by the U.S. Supreme Court, which confirmed the government’s right to seize private property and hand it over to private developers for “public use.” Critics say that decision opened the floodgates for a rash of property seizures nationwide.
National property rights groups say California has one of the worst records in the country protecting private property rights.
The Castle Coalition, a property rights group, ranked California in the bottom 20 percent, with a D- grade, in a state-by-state report card on eminent domain reform.
“California is one of the most notorious eminent domain abusers in the country,” said Jeff Rowes, an attorney with the Arlington, Va.-based Institute for Justice, a nonprofit group which sponsors the coalition.
“There are massive cases of abuse. The two places you find eminent domain abuse are scenic areas and the intersection of major transportation conduits. California has lots of interstates and lots of scenery. It has traditionally been a big abuser.”
And because the areas that are most often targeted for redevelopment are those experiencing blight and economic hardships, “eminent domain abuse falls overwhelmingly on the poor and minorities, and California has lots of those,” he said.
However, what groups like the coalition call “abuse” are instead seen by government agencies and developers as necessary tools that provide for the economic rebirth of depressed areas. In such cases, they say, some individuals will have to sacrifice for the greater good.
For example, the loss of a pawnshop or a convenience store in favor of a mall or condo tower that increases the economic activity in a neighborhood — and boosts city tax revenue — is usually worth overriding the concerns about property rights, they say.
In Los Angeles, simply the threat of eminent domain has been used to acquire properties in the redevelopment of Hollywood, the building of the Staples Center and retail projects in South Los Angeles.
Those who owned the properties that were taken often felt abused by the city, and many fought in court to obtain better prices than the city offered — but in the end, many city officials would argue a greater public good was achieved.
“You have the ability to go into areas that are terribly downtrodden with high poverty and high crime and assemble enough property to make a block deal happen,” said Bruce Ackerman, vice chairman of the Los Angeles city Community Redevelopment Agency and chairman of the California Association for Local Economic Development. “I’ve always seen it as a very positive tool.”
However, most agencies prefer to negotiate a voluntary deal with the property owner, Ackerman said, making eminent domain a “tool of last resort.”
The Castle Coalition claims that the number of eminent domain cases for the benefit of private redevelopment has skyrocketed since the Supreme Court decision in June 2005.
From 1998 to 2002, the group tracked 10,282 properties nationwide threatened or taken by eminent domain for the benefit of private parties. However, the year after the court decision in June 2005, the group tracked 5,783 properties which were threatened or taken. On an annual basis, that’s almost three times as many properties at risk after the decision.
In California, the group tracked 858 properties in the five years before the court decision; after the decision, 346 properties were at risk or about double the annual rate.
California authorities say state law was clear long before the 2005 decision. Local redevelopment agencies have always had the power to seize private property for private development, but only if they were able first to designate an area as blighted.
There is often a strong economic incentive to do so. A city redevelopment agency can declare an area as blighted and then use eminent domain to redevelop it. Through a tool known as “tax-increment financing,” the city can then keep the additional tax revenue generated by the higher property values the project creates, rather than turning over that revenue to the county.
The extra funds are supposed to be used in the project area for public improvements. But the process often generates friction with counties that resent the loss of tax revenue and suspect the cities of abusing the tool, using it in areas where the private sector may have chosen to develop anyway without public subsidies. Los Angeles County and the city of Los Angeles have a long history of legal battles over the issue of redevelopment revenue.
California voters in June will have the ability to restrict the government’s power in some of those cases. They are being offered a choice between two competing ballot measures to redraw the rules under which local governments can seize private property.
One measure, sponsored by the League of California Cities, would prohibit government from seizing residential property and giving it to a private developer for commercial purposes.
The second measure, sponsored by the Howard Jarvis Taxpayers Association, takes a much broader approach.
First, it would prevent the seizure of both homes and businesses. It would also essentially end rent control in California. This would be achieved through vacancy decontrol — rent limits would remain in place for current tenants, but once an apartment is vacated, it could no longer be controlled.
In addition, it would restrict the ability to seize private property for water projects. It would also grant new compensations to owners when their property is taken, such as offering them first right of repurchase if the government abandons the proposed project.
An earlier effort to pass strong eminent domain controls, Proposition 90, was rejected by California voters in 2006 by a 52-47 margin. That campaign attracted nearly $19 million in spending, and some experts think this year’s effort could exceed that level.
Backers of the league measure said they purposely tailored their effort to protect homeowners and believe the Jarvis measure is too broad and includes items which have little to do with eminent domain, such as rent control.
In fact, they are calling the Jarvis plan a rent control measure, not an eminent domain measure.
“From our perspective, this measure is an attack on tenants and affordable housing and an assault on the environment,” said Tom Adams, president of the California League of Conservation Voters.
Jon Coupal, president of the Jarvis association, said he believes the league’s competing measure was placed on the ballot to “obfuscate” the issue in the minds of voters. With two similar competing measures on the ballot, they may vote against both simply out of confusion.
The Jarvis measure was ultimately designed to give the strongest protections to property owners, including landlords, he said.
“The initiative first and foremost reflects the policy that government should not take property away from one private interest to give to another,” Coupal said. “We do not impact the ability of government to take property for public use — the traditional roads and highways and schools and dams.”
And according to the Jarvis association, imposing rent controls is just another form of the government taking away value from property. “These rent regulations are as close to a physical taking as you can possibly get,” Coupal said.
Experts say the number of special interest groups that are affected by the two measures is likely to escalate public attention and campaign fundraising. Among the groups directly affected by the measure are landlords, property owners, developers, environmentalists, tenants and local governments.
Tim Hodson, executive director of the Center for California Studies at California State University Sacramento, said these two measures are expected to draw greater attention because of the relatively thin ballot in June. There are no statewide or presidential races on the ballot, and so far, there appear to be few other ballot measures.
“I would anticipate that there will be no lack of funds spent on these measures,” Hodson said.
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