Alerts and Updates
California Part of National Backlash Against Supreme Court's Eminent Domain Decision
May 25, 2006
On June 23, 2005, the U.S. Supreme Court decided Kelo v. City of New London, Connecticut, 125 S.Ct. 2655 (2005). The Kelo decision has brought the somewhat obscure concept of eminent domain into the spotlight of public debate and has caused a strong reaction from property rights advocates throughout the country. In no state has the backlash against Kelo been more pronounced than in California. However, despite existing law that requires a specific finding of blight before the state can exercise its eminent domain power, thus muting the effect of Kelo in California, legislators and lobbyists alike have introduced several ballot initiatives and legislation to restrict the state's ability to exercise its right of eminent domain.
The Kelo decision affirmed three controversial concepts central to the eminent domain debate. First, the Court affirmed its long-standing interpretation of the Fifth Amendment takings requirement. Consistent with its prior rulings on the issue, the Court held that the "public use" restriction on a state's use of eminent domain required only a showing that the taking would serve a broader "public purpose." The Court's interpretation of "public use" to mean "public purpose" establishes a low threshold for states to meet when exercising the eminent domain power.
Second, the Court held that the promotion of economic development served a legitimate "public purpose" and that the transfer of property from one private owner to another private owner was sometimes necessary, and permissible, to realize that public purpose.
Finally, the Court held that a finding of "blight" was not required for condemnation and that a determination that the certain area was "sufficiently distressed to justify a program of economic rejuvenation ..." was sufficient for a state's exercise of eminent domain.
California Ballot Initiatives
The first and only eminent domain initiative that is expected to obtain the signatures necessary to qualify for the November ballot is the Protect Our Homes Act, sponsored by Americans for Limited Government and financially supported by the New York-based group Fund for Democracy.
One significant provision of this initiative would prohibit the government from using eminent domain to force the transfer of property from one private owner to another for the purpose of economic development or tax revenue enhancement, exactly the situation in Kelo. Any property taken by the government through eminent domain without the consent of the owner would have to remain in government hands or be dedicated for a public use regulated by the government.
Additionally, the initiative would require the government to compensate property owners for what are known as "regulatory takings," actions that reduce the value of property without forcing its sale. Since regulatory takings are commonly associated with regulations designed to protect the environment, this provision of the initiative is perceived as a threat to California's environmental laws because those laws often result in the devaluation of property without an actual "taking."
Finally, the initiative requires that any property taken for a proprietary government purpose shall be valued by the use to which the government intends to put the property, if that use results in a higher value for the land taken.
Although the Protect Our Homes Act addresses several issues implicated by Kelo, it is seen by many as going too far to restrict the state's right to exercise eminent domain.
California State Legislative Constitutional Amendments
Four California Constitutional Amendments are pending in the California Legislature, two introduced in the Assembly and two in the Senate.
A.C.A. 15 (Assembly Constitutional Amendment), introduced by Assemblymen Mullin and Nation, proposes an amendment to the California Constitution prohibiting a redevelopment agency from acquiring property through eminent domain unless it first makes a written finding that the property contains conditions of both physical and economic blight.
A.C.A. 22, introduced by Assemblyman Doug LaMalfa, proposes an amendment that states private property may be taken or damaged only for a stated public use and may not be taken or damaged without the consent of the owner for purposes of economic development, increasing tax revenue, or any other private use, nor for maintaining the present use by a different owner.
S.C.A. 15 (Senate Constitutional Amendment), introduced by Senator Tom McClintock, proposes that eminent domain may be used "only for a stated public use" and that "property taken by eminent domain shall be owned and occupied by the condemnor or may be leased only to entities that are regulated by the Public Utilities Commission." The amendment also provides that "if the property ceases to be used for stated public use, the former owner or a beneficiary ... would have the right to reacquire the property for the compensated amount or its fair market value, whichever is less, before the property may be sold or transferred."
S.C.A. 20, also proposed by Tom McClintock and similar to A.C.A. 22, proposes that private property may be taken or damaged only for a stated public use and not without the consent of the owner for purposes of economic development, increasing tax revenue, or any other private use, nor for maintaining the present use by a different owner.
Pending California State Legislation
Approximately seven bills are pending in the California Legislature addressing the state's right to exercise eminent domain.
CA A.B. 1162 (Assembly Bill) prohibits until a specified date a public entity from exercising eminent domain to acquire owner-occupied residential real property for private use.
CA A.B. 1990 prohibits a city, county, special district, school district, community development agency, or community development commission or joint powers agency from exercising the power of eminent domain to acquire any real property if ownership of the property will be transferred to a private party or private entity.
CA S.B. 1210 (Senate Bill) provides that public use does not include the taking of property in order to transfer it to a nongovernmental entity for purposes of economic development or increasing tax revenues, except as specifically provided under the Community Redevelopment Law.
CA S.B. 1206 relates to the establishment of redevelopment agencies in communities in order to address the effects of blight. The bill revises the conditions that characterize a blighted area and prohibits the inclusion of nonblighted parcels in a redevelopment project area for the purpose of obtaining property tax revenue from the area without substantial justification for their inclusion.
CA S.B. 1650 requires a public entity to adopt a new resolution of necessity and send related notices before the public entity may use the property, in whole or in part, for a public use other than the public use for which the public entity originally acquired the property.
CA S.B. 1809 requires a specified disclosure statement in connection with the transfer of residential private property that is located in a redevelopment project area regarding whether the property may be subject to eminent domain proceedings. It also requires notice to a prospective purchaser in the case of a transfer of any other real property, if that property is located within a redevelopment project area.
In California, the public has reacted to the Kelo ruling. The impact of the reaction remains undetermined at this time. Local officials, however, are on notice that the public favors restrictions on the government's ability to use eminent domain as a tool for community redevelopment.
For Further Information
If you have any questions about this Alert or would like more information, please contact George J. Kroculick or any of the attorneys in Duane Morris' Eminent Domain and Land Valuation Practice Group.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.
