Eminent Domain Abuse: National City Shames California

from the Curmudgeon's desk: GA Anderson

The abuse of the Eminent Domain process by National City, California, brings shame to the state that boasts of its belief and support of the almost unlimited individual rights of its citizens. In a state that has some of the most liberal individual rights laws in the nation, National City seems to be saying - only for the rich.

In April, 2011, National City lost an eminent domain court case that caught the nation's attention, and was not only a public relations nightmare for the city, but also a black eye for a state that proclaims itself to be a state for the people.

The eminent Domain case that turned the spotlight on National City involved the Community Youth Athletic Center (CYAC), a community gym for at-risk kids, and National City's attempt to designate the property as blighted so that the city could use its eminent domain powers to acquire the property for a developer's luxury condominium project it had approved in 2005.

CYAC wasn't the only property slated to be seized for the condominium project, but they were the one that decided to stand up and fight the city's blatant misuse of the "blighted" property concept, and their documented plans to seize productive private properties from citizens and turn it over to land developers for their private for-profit use. Not exactly the "public use" requirement as stated in the Constitution.

In February 2005, National City's Community Development Commission (CDC) approved land developer Jim Beauchamp's plans to build a luxury condominium project on a land parcel that included the gym’s property. Later that same month the CDC sent the CYAC an official letter stating that it;

“will now receive a final offer to acquire your property by the developer.”

The letter then goes on to state that if the CYAC is “unable to come to terms with the developer on the sale of your property, under the approved Owner Participation Agreement, the developer may request that the CDC proceed directly with the acquisition of your property."

Shortly after receiving the CDC's letter, CYAC started receiving more letters from the deveolper's lawyers. The first of these, was sent on April 25, 2005, and gave the CYAC secen days to accept a final offer, that was well below the current market value for the property, or else the lawyers would ask the city for immediate condemnation. The letter concluded that;

“If I do not hear from you by May 2, 2005, I will assume that you are not interested in accepting Mr. Beauchamp’s offer and I will request, on behalf of the Beauchamp Family Trust, that the CDC proceed with appropriate steps under the law to acquire the Property."

Plainly stated, National City would use its power of eminent domain to take the property.

The CYAC did not accept the offer, and for the next two years the wheels of bureaucracy continued to grind slowly towards the end for the community center. In 2007 the Institute for Justice, [IJ], came to the aid of CYAC with the legal representation that the center needed, and the tenacity necessary to fight the long battle of resistance characteristic of cases involving the abuse of government powers.

Unable to challenge the constitutionality of the city's broad eminent domain power, IJ instead concentrated on challenging the legality of National City's eminent domain ordinance under the U.S. and California Constitutions, as well as state redevelopment law. The filed suit in July 2007 asserts that:

• By withholding vital reports and information from the public, National City violated their constitutional rights of due process because they would be unable to challenge the ordinance without it.
• National City's purpose for the ordinance was for generating more tax revenue, and economic development - not the constitutionally mandated. The enactment of the ordinance was challenged as being unconstitutional
• National City violated California's Community Redevelopment law by not fulfilling its mulitple requirements that the city provide actual evidence to support its findings that designated the blighted areas.

Jumping to what can only be termed a happy ending, and a victory for the rights of citizens over the powers of a corrupt or misguided government body, CYAC won its case. On April 21, 2011, California Superior Court Judge Steven R. Denton ruled in the CYAC's favor against National City. The Court also struck down National City's large 692-property eminent domain zone, citing failure to comply with California's Community Redevelopment Law's requirements for "blight" validation.

The Court also ruled that by failing to provide the CYAC with statutorily required information needed to challenge the ordinance, prior to an important public hearing, National City violated the Due Process clause of the U.S. Constitution. But this may not be the end of this ordeal for CYAC, and many other private property owners affected by National City's land developer deals. The city could could correct the issues and procedures struck down by the court, and continue on with the process of condemning private property for the benefit of private developers.

Although National City's actions were villainous and abusive, the real villains exposed by this case were California's Community Redevelopment Laws, [CRL], and the Community Development Commissions, [CDC], they spawned. Laws that were intended for the public good, instead turned into huge money-makers fueled by the power of government fiat.

It would only seem like common sense to understand that "blighted" would indicate dangerous run-down properties that were a "blight" on the community, and indeed that was the original intention - to deal with "slum areas that presented a clear danger to the public." But in truth California cities have used the "blighted" designation for any private properties that could be deemed as more productive for "other" uses, ie. major private development projects and mega-retail concerns. From 1968 to 1995 National City, which started with four "blighted" property zones, has officially designated over two-thirds of the private property in the city as blighted.

Their motivation, and that of California's other 395 CDC-type agencies, is easily demonstrated to be money and control. In 2005-2006, California's CDC agencies owned $12.9 billion worth of property and had $8.7 billion in revenues.

Here is what that means to a city's coffers and legal powers...

"Under California law, using a process known as Tax Increment Financing, when a local government declares an area “blighted,” the relevant CDC gets 100 percent of the property tax revenue from that blight zone that is over and above the “baseline” amount of property taxes for the area when it was first declared blighted. For example, if an area produced $100 million in property taxes when it was first declared blighted, but by reason of increases in assessed property values, a few years later it is now generating $250 million in property taxes. The county would still get the original baseline tax amount of $100 million, but the redevelopment agency would get the additional $150 million, even if the redevelopment agency had nothing to do with the increase in property values. California’s redevelopment agencies are now the recipients of most of the property taxes from the hundreds of blight zones across the state. In fiscal year 2005-2006, for example, the total assessed value of property in California’s blight zones was $537 billion. But by using Tax Increment Financing, the redevelopment agencies received all of the property taxes on $381 billion of this total. Statistically, California's redevelopment agencies rake about 10 percent of all property taxes collected in California. Whether that have any involvement with "blighted" area redevelopment, or not."

When a city, or its agencies can determine that "blighted" can mean whatever they want or need it to mean, and billions of tax dollars, and, government power as the payoff, it is easy to discern the real motivations behind their actions. Power and money.

The perverse financial incentives of California’s redevelopment laws mean that redevelopment agencies: (1) want their blight zones to be as large as possible; (2) want their blight zones to last as long as possible.

Cities, in this context, have perverse incentives of their own. They always want to replace low-tax land uses, such as single-family homes and small businesses, with tax-intensive uses, such as high-rise condominiums and big box stores.

California is not the only state with eminent domain abuse problems, but it is the largest, and in this case shown to be one of the most hypocritical.

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