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Eminent domain: Hostile takeover or mutually beneficial agreement?

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Eminent domain is often painted as a swift and sometimes hostile takeover of private property by the government for public or private redevelopment.

It's the battle of David and Goliath, but Goliath usually wins.

Yet eminent domain -- the power to take private property -- is actually a long journey of negotiations, public hearings and conditions required by the California Community Redevelopment Law.

Sometimes, private property owners welcome the negotiations and are willing to sell. Others are not.

San Diego redevelopment

The Redevelopment Agency of the city of San Diego manages 17 project areas, covering more than 10,000 acres. It was created in 1958 by the City Council, which serves as its legislative body, to alleviate conditions of blight in older, urban areas.

The agency stated that it has asserted its authority to acquire property, but it rarely has condemned property to achieve its redevelopment goals.

For example, Smart Corner, a mixed-use development bordered by 11th Avenue, Park Boulevard, C Street and Broadway, is part of the Centre City Redevelopment Plan. The Redevelopment Agency worked with the property owners to acquire the parcels of land where a convenience store, a barber college, a thrift store, the Family Bargain Center, an automotive paint shop and a used car facility were operating.

A rendering of Smart Corner, a mixed-use development bordered by 11th Avenue, Park Boulevard, C Street and Broadway. The Redevelopment Agency worked with the property owners to acquire the parcels of land for Smart Corner.

The agency and the property owners reached an agreement about the acquisition of all five parcels without a trial.

When construction is completed in April 2007, Smart Corner will consist of two structures on the 60,000-square-foot block: a 301-unit, 19-story residential tower and a five-story, 93,000-square-foot office building, which will include 25,000 square feet of ground-floor retail. A four-level parking garage will be built under the structures, and San Diego Trolley's College Station will run between the two buildings.

"There are benefits to the property owner," said Don Mullen, the chief of policy for District 2, about eminent domain. "Some people look at it as being taken advantage of, but you're given incentives."

Property owners are required to receive fair market value for their property as determined by appraisal, and they are allowed 36 months to reinvest the money they received from the sale, Mullen said.

If the property owners have an ongoing business, they must be compensated for relocation, and if the business cannot be relocated, the owner will be paid good will, Mullen added.

The agency also asserted its authority to redevelop other land in the downtown area. For example, Borders book store, the ballpark area, the Sixth and K Parkade in East Village and CityWalk condominiums were built after the agency acquired the parcels.

The new structures replaced a variety of businesses and other parcels of private property. In all cases, the Redevelopment Agency reached an agreement with the parties about compensation without a trial.

Similarly, some properties in City Heights were acquired through eminent domain for public and private redevelopment.

City Heights Urban Village stands on eight blocks of the formerly blighted area of University Avenue, 43rd Street, Chamoune Avenue and Landis Street. The area now includes a community library and park, an elementary school, a police station, a community gymnasium, a continuing education facility, a commercial center with a supermarket, a bank and restaurants, as well as town homes and an office center.

Eliminating blight

Under California Community Redevelopment Law, the underlying justification for eminent domain is eliminating blight, which is defined in part as a serious physical and economic burden, in a predominately urbanized area, that cannot reasonably be alleviated without redevelopment.

Examples of conditions that cause blight range from "Buildings in which it is unsafe or unhealthy for persons to live or work," to "A lack of necessary commercial facilities that are normally found in neighborhoods, including grocery stores, drug stores, and banks and other lending institutions," according to California law.

Achieving eminent domain

Before the Redevelopment Agency can acquire the property, however, it must follow specific procedures outlined in the California Community Redevelopment Law.

"It's very transparent," said David Allsbrook, Centre City Development Corp.'s (CCDC) manager of contracting and public works, about eminent domain. "It's subject to public scrutiny before it even gets considered by the Redevelopment Agency."

CCDC is the public, nonprofit corporation created by the city of San Diego to implement downtown redevelopment projects.

First, the Redevelopment Agency must hold a hearing and adopt a Resolution of Necessity; it must file a complaint with the Superior Court and serve the summons and complaint on the property owner; and it must apply for an Order of Prejudgment Possession and deposit the amount of its offer in the court.

The owner then has 30 days after being served to answer the complaint and to object. Within 90 days of being served, a trial will involve investigating the agency's request and reviewing the Order for Prejudgment Possession.

The Redevelopment Agency may take the property within that 90-day period, if the court orders the Prejudgment Possession.

The property owner and the agency could settle on a value of the property before going to trial. The property owner also has the option of becoming a part of the redeveloped area if the owner meets the requirements prescribed by the redevelopment plan.

An uphappy ending

In reality, however, eminent domain does not always end happily for private property owners.

Ahmad Mesdaq, owner of the former Gran Havana Cigar and Coffee Lounge in downtown, spent more than two years trying to keep the Redevelopment Agency from taking his business through eminent domain. The upscale lounge was located on 8,000 square feet on the corner of Fifth Avenue and J Street.

Soon after the business opened in March 2003, Mesdaq said he learned the site was marked for a proposed Marriott Renaissance Hotel.

After several hearings and a lawsuit, Gran Havana was condemned in June of this year.

Mesdaq said he feels deceived by the local politicians who once supported his business.

"This is all about corruption. Pure corruption," Mesdaq said.

Eminent domain should be used to eliminate blight and not to push out thriving businesses, he added.

"This is about what's right and what's wrong," Mesdaq said. "It shouldn't be about who has more money and who can do more campaign financing."

Allsbrook said the Redevelopment Agency found the property was blighted because that parcel and the surrounding property were underutilized.

Allsbrook also said Mesdaq knew before his business opened that the property was marked for redevelopment.

Mesdaq has not found a comparable property for relocation, yet.

Local awareness

The Gran Havana case, which has received media attention, has raised locals' awareness about the Redevelopment Agency's use of eminent domain.

For example, property owners in the North Bay Redevelopment Area, near the Sports Arena, are keeping a close watch on redevelopment proposals concerning some of the parcels bound by Hancock, Kurtz, Sherman and Riley streets.

Currently, the property includes light industrial, retail and residential buildings.

In February 2005, William Kenton, who owns KCON Inc., an engineering consulting firm at 3235 Hancock St., submitted a proposal to the Redevelopment Agency that considered redeveloping the land into 124 residential lower- to middle-class condominium units. However, Kenton does not own all of the land needed for the redevelopment.

The Redevelopment Agency sent neighboring property owners letters, asking for feedback about the new proposal.

Thus far, of the eight property owners, one has refused to sell, two have not been reached, and the others will probably negotiate an agreement to sell, Kenton said.

In the meantime, public meetings also have been scheduled to consider alternative plans for the area.

Five proposals will be presented and discussed in a public meeting in September led by the North Bay Redevelopment Project Area Committee (PAC), an advisory group comprised of local property owners, tenants and residents.

The proposed projects range from landscaping and façade improvements to live/work lofts with light industrial uses.

After that meeting, the PAC will make a recommendation to support none, one or several proposals, said Adam Wexler, a council representative for District 2. The Redevelopment Agency then will decide whether to pursue the project.

The entire process could take as long as three years, Wexler said.

Horton is a San Diego-based freelance writer.

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