Eminent domain is one of those things property owners hear about but seldom experience.* While few owners will ever be approached by the government to give up property, eminent domain is ultimately an issue that impacts all residents, as it affects property taxes, economic growth and the notion of security in one’s property.
Land may be acquired through the power of eminent domain only if it is to be used for a project which:
- serves public interest;
- is planned in a manner that is compatible with the:
- greatest public good; and
- least private injury; and
- needs the land in order for the project to be completed. [Calif. Code of Civil Procedure 1240.030]
There are some improvements which are greatly needed to improve a city’s quality of life. Sidewalks, widened lanes, schools and fire stations are all improvements that might require the use of eminent domain. Further, the criteria to determine whether eminent domain is needed to complete these projects sound simple enough. But abuses of eminent domain power are rampant, and need to be fixed.
One such case which balances the need to improve alongside the real damage caused by the threat of eminent domain is occurring right now in San Gabriel Valley.
*Editor’s note — first tuesday experienced eminent domain as a tenant in 2011.
Case study: Eminent domain in the San Gabriel Valley
In 1998, the San Gabriel Valley Council of Governments created the Alameda Corridor East Construction Authority (ACE). The purpose of ACE was to address the problems caused by the intersections of heavy freight train traffic with car traffic. The ACE corridor carries freight from 16% of all goods arriving to the U.S. by ship, carrying these goods from the ports of Los Angeles to destinations throughout the U.S.
ACE’s goals are primarily to increase safety and reduce traffic at these railroad crossings. It will do this by eliminating and upgrading many of the old railroad crossings, including converting old grade-level crossings to underpasses to:
- reduce emissions by cars stopped waiting for trains to pass;
- eliminate traffic congestion at these crossings;
- improve nearby property values by eliminating nearby train crossings and likewise eliminating the need for loud train horns;
- improve train reliability by reducing the number of crossings; and
- sustain economic growth in the region and throughout the U.S. by improving the route’s reliability.
But to make these improvements, ACE needs a little something from property owners located within the ACE project: their land.
Since the first project started construction in 2007, ACE has seen the completion of nine construction sites across San Gabriel Valley. These include former railroad crossings in Pomona, the City of Industry, Diamond Bar and El Monte.
ACE is in the middle of construction on six more projects and is still in the design process for four additional projects.
One of these projects in the design phase is the Montebello Project, which would construct an underpass and make other improvements on Montebello Boulevard. It has been stuck in the design phase for over a decade.
The holdup has been due to disagreements between the Montebello City Council, ACE officials and local property owners. For example, at one point in the negotiation process the City Council demanded ACE pay for improvements that would have cost $360 million, an unfeasible amount for the organization. Years of negotiation brought the cost of the improvements down to $160 million.
During these years of dispute, property owners and commercial tenants along the stretch of road to be affected have been in limbo. Unsure when their properties will be seized or if they will be sold to the city at all, these owners have been unable to make long-term plans for securing tenants, making their own property improvements or even selling.
This is hard on the unlucky property owners in the path of the improvement project. But it’s difficult to say the misfortune of a few property owners is worth trading in the many benefits of the improvement project.
Is there a better way to both complete the project in a timely manner and cause less damage to property owners?
Limit eminent domain proceedings
First things first: eminent domain isn’t going anywhere. It’s a right granted to the government under the Fifth Amendment, which promises just compensation for government-seized property which has been taken for the public benefit.
But when it comes to how eminent domain plays out at the local level, states have the power to make their own protocol.
One way California can improve how it uses eminent domain is to put a limit on how long eminent domain proceedings may last, from the initial mapping and testing to the final negotiations to transfer property.
In California, when governments use eminent domain to seize residential property and make improvements, their schedule needs to allow the current resident at least 90 days written notice before the improvements are scheduled to begin. [Calif. Government Code §7267.3]
But there is no limit to the length of time eminent domain proceedings may take place before a final decision is reached. Kind of like a prisoner’s right to speedy trial, property owners also deserve the right to an efficient conclusion of eminent domain proceedings.
Narrow definitions of blight
Another way California can place more restrictions on how eminent domain is used (or abused) is to limit its use for blighted areas.
Blight is typically used to describe buildings and residences which are unattractive and unsafe. These types of properties are often vacant, falling apart and uninhabitable.
But that’s just how most people think of blight.
In reality, if the local government can prove blight, it may use eminent domain to seize the property. [Calif. Health & Safety Code §33037]
The local government may then hand off the land to private developers, who will build expensive condos or other property — whose owners will then go on to pay much higher tax rates to the city. So, (to the government’s benefit) the legal definition of blight is very broad, and in fact many decent, livable homes are considered blighted and are open to eminent domain action.
For example, a neighborhood may qualify as blighted if its physical development has been held back by the buildings’ irregular shapes and inadequate sizes given current market conditions. [Calif. H & S Code §33031(a)(4)]
By this standard, the Winchester Mystery House might be torn down any day now to be replaced by rows of condo buildings.
But in all seriousness, numerous cases exist here in California and across the U.S. where property owners have been forced out of their “blighted” homes to make way for more expensive properties. These are abuses of eminent domain.
Sometimes, residents fight against these abuses and win.
In one such case fought in 2000, the City of Diamond Bar’s City Council identified a lack of funding needed for city services. It attempted to classify an area of the city as blighted in order to seize the homes and replace them with more expensive homes which would command higher tax rates. However, the residents took the case to court and the Superior Court of Los Angeles County found the area was not blighted, despite its meeting some of the criteria set out in the legal code.
The court’s reasoning: “The [Community Redevelopment Law] is not simply a vehicle for cash-strapped municipalities to finance community improvements. If the showing made in the case were sufficient to rise to the level of blight, it is the rare locality in California that is not afflicted with that condition.” [Beach-Corchesne v. City of Diamond Bar (2000) 80 CA4th 391]
It all comes back to money
Why do cities use eminent domain to tear down livable and useable property, forcing long-time residents out of their homes?
The root of the problem is a lack of money. Residents in these areas pay extremely low taxes, first because of their homes’ below-average market values, and second because of Proposition (Prop) 13, which limits tax increases to just 1% per year plus a small inflation factor.
Prop 13 has been identified as enemy number one when it comes to California’s lack of public services and subpar public schools. Local governments’ biggest revenue stream comes from property taxes, and when these are limited, governments need to find other ways to increase their revenue. Enter eminent domain.
Even the disagreements between ACE and the Montebello City Council can be traced back to a lack of money — the original proposal rejected by ACE was for a much more expensive project. If Montebello had the funds needed to make the additional improvements they asked ACE to cover themselves, the disagreement may have been settled much sooner, alleviating the stress on property owners.
Real estate professionals — What are your thoughts on eminent domain? Is the system broken, and if it is, how would you fix it? Share your thoughts in the comments below.