5.14.08 - Taking Control
- The Recorder / Law.com

It is a true sign of the post-Kelo times when the League of California Cities and the California Redevelopment Association (CRA) are sponsoring an initiative to curb the government's eminent domain powers. The league and CRA are sponsoring Proposition 99 - the Homeowners and Private Property Protection Act - in order to prevent the more drastic reforms of Proposition 98 from becoming law. Prop 98 is known as the California Property Owners and Farmland Protection Act and is sponsored by, among others, the Howard Jarvis Taxpayers Association and the California Farm Bureau Federation.

So there you have it - two competing measures presented by public initiative, both seeking to amend the state Constitution to provide eminent domain reform, but in very different ways. If you're already confused, you are joining the majority of California voters going to the polls on June 3. This article seeks to explain the major differences and key elements of Props 98 and 99 and how the two propositions may impact the practice of California eminent domain law.

Gov. Arnold Schwarzenegger has split from the California Republican Party and came out against Prop 98 for two primary reasons. First, under some interpretations, Prop 98 threatens the government's power to exercise eminent domain for water projects by defining a "private use" to include the consumption of natural resources by a public agency. Second, it is intended to abolish rent control by defining "taken" to include a government-imposed limitation on "the price a private owner may charge another person to purchase, occupy or use his or her property."

Because of these two issues, Prop 99 supporters have dubbed Prop 98 the "Hidden Agendas Initiative." In addition to the rent control and water projects restrictions, Prop 98 would (1) prohibit eminent domain for redevelopment, (2) provide protections for business owners, (3) provide for recovery of litigation expenses any time a jury renders a judgment greater than the governments offer, (4) require prompt release of the money deposited by the agency as just compensation, but preserve the owner's right-to-take challenges, and (5) require the government to offer to sell the property back to the owner if the use for which the property was taken changes from a public use to a private use or even to a different public use.

Prop 98's restrictions would cripple redevelopment agencies by undermining their ability to condemn blighted business and enter into development agreements with new developers for the purpose of increasing tax revenues for local jurisdictions. City attorneys, county counsel and other agency and special counsel would no longer be able to use eminent domain for redevelopment and would be restricted in their ability to implement other public projects. Rent-control regimes throughout the state would slowly term out, creating unaffordable living situations throughout the state. Mass litigation will likely ensue if Prop 98 passes, raising, among other issues, conflicts with federal constitutional protections; confusion over Prop 98's definitions; the interplay with the California Redevelopment Act, which allows for condemnations of private property for redevelopment; and conflicts with local, state and federal affordable housing legislation and regulations. If Prop 98 withstood post-election scrutiny, it would result in expensive and complex battles over the right-to-take and confusion with regard to just compensation.

Rather than restricting all eminent domain for redevelopment, Prop 99 only prohibits the condemnation of owner-occupied residences for redevelopment, but places no limits on public works or improvement projects.

Prop 99 goes right to the heart of the public outcry over the Kelo decision, which many believed increased the vulnerability of the private home to be condemned and be given to a private developer. There are no business protections in Prop 99, nor does it include any of the other overt and, arguably, covert, restrictions Prop 98 would impose. Prop 99 would not materially affect redevelopment projects in California, except to the extent redevelopment was planned in largely residential areas, which usually isn't the case.

With Prop 99, there would be some additional challenges where a residence was located within a redevelopment zone, but nothing would preclude the voluntary sale of the home to the agency. As a practical matter, the agencies (or the redevelopers) could offer more money for the residential properties since there will be money saved from not having to litigate the eminent domain actions. Legal challenges to Prop 99 are less likely since the constitutional amendment is less severe and more straightforward. However, if both Prop 99 and Prop 98 were to pass, we can expect a drawn-out legal fight between the two initiatives precipitated by a "poison pill" provision. The authors of Prop 99 were concerned about the possibility that voter confusion could lead to both propositions passing. So, Prop 99 includes a provision that if both propositions receive enough affirmative votes, then Prop 99 - if it receives more affirmative votes than Prop 98 - would prevail and Prop 98 would be null and void.

If Prop 98 does not pass, there will still be a clamoring for additional eminent domain reform and we are likely to see further efforts to change eminent domain and redevelopment law in California. These efforts could come from a public initiative or even from the state Legislature. Eminent domain reform is a highly partisan issue, and several bills have stalled in committee.

Kelo was just Chapter 1 in the story of redevelopment and eminent domain reform. We are now into the middle of the story with year after year of public initiatives and legislative gridlock over what reforms are necessary and how to implement them. Eminent domain practitioners, agency staff, developers and business owners must be prepared to react quickly to a changing legal landscape. The floodgates on eminent domain reform are officially open and now we must wait to see what the rising tide leaves behind.

Ethan Friedman is a senior litigation associate in Miller Starr Regalia's Walnut Creek office and specializes in eminent domain consulting and litigation. Friedman represents both property owners and public agencies. He may be reached at 925-935-9400 or ekf@msrlegal.com. For more information on Miller Starr Regalia, please visit www.msrlegal.com.