Gifts of Public Funds? Oh, Give us a Break, Rick

Evidently one of our blogging colleagues, Mr. Rick E. Rayl, who runs the Nossaman blog on eminent domain in California (see the blogroll on the right margin of this page), must have spare time on his hands because he has been worrying  — oy, how he worries — about settlement of eminent domain cases, that are above the value figures in the condemnor’s appraisal. He worries about his friends’ concerns that this may be in the nature of illegal gifts of public funds, forbidden by the state constitution in California and elsewhere. See his blogs When (If Ever) Does a Payment Become an Illegal Gift of Public Funds, Oct. 19, 2010, and FollowUp on Pombo Decision, Nov. 2, 2010.

Mr. Rayl is a serious gent, so we don’t think he is putting us on, but just in case, this topic may be worth a few words.

Every study of this subject, starting with congressional hearings in the 1960s (that led to enactment of the Uniform Relocation Assstance Act), to the famous Nassau County (New York) study published in the Columbia Law Review, as well as studies and press exposes in California, Georgia, Minnesota, and Utah, have shown time and again that on the whole, condemors’ offers are too low, and on occasion below the condemnor’s own appraisal reports. Condemnees who reject condemnors’ offers and go to trial overwhelmingly recover more than the offer or the condemnors’ evidence — whether the case is tried before a judge or a jury.

The proof of the pudding lies in the fact that property owners’ lawyers in eminent domain cases usually work on contigent fees, the important feature being that the contingency is calculated NOT on the entire recovery, as is the practice in tort cases, but only on the overage — on the increased amount that the owner eventually recovers over and above the condemnor’s offer or evidence. So it follows that either (a) condemnors’ offers and evidence tend to be on the low side and can usually be refuted in court, or (b) condemnees’ lawyers are silver-tongued magicians who can reduce jurors’ and judges’ mind to putty with their soul-stirring rhetoric without evidentiary support. Well folks, having been one of those condemnees’ lawyers for some 40 years we can assure you that alternative (b) just ain’t so, even if we wish fervently that it were.

If condemnors’ offers were generous, condemnees’ lawyers couldn’t make a living trying eminent domain cases and would have to chase ambulances. But they don’t. All eminent domain lawyers known to us — and we know a lot of them — are doing right well and appear to be prosperous.

The fact is that on the whole, condemnors’ offers and deposits run on the low side, sometimes in humongous amounts — the local champion being the 2000 case of CalTrans v. Southern California Edison Co., where the state deposited $250,000 into court, but the verdict was $49,500,000. That’s right, forty-nine-and-a-half million, with the Court of Appeal affirming, and the California Supreme Court expressly declining to review the valuation aspect of the case. If you want to see some more cases like that, check out 40 Loyola L.A. Law Rev. at pp. 1146-1148.

But if Mr. Rayl wants to worry about gifts of public funds, we dig it. Here is something for him to sink his teeth into. What about those scandalous “land write-downs” whereby a redevelopment agency acquires private property at fair market value that may run into millions, and then turns around and gives it (or sells it for $1 — same thing) to a redeveloper so he can make a profit that is supposed to generate the “public benefit” that is the rationale of redevelopment takings? How about that? Is that a gift of public funds? Is it such a gift where the redeveloper gets the money but the redevelopment project goes bust with nothing to show for it? Shouldn’t the tapayers get their money back? Like in the Kelo case where the plan called for giving the redeveloper possession and use of a 91-acre waterfront parcel, for $1 per year. Nice deal if you can get it, isn’t it?

That seems to us to be one hell of a lot more of a gift of public funds than a settlement of a condemnation case in which the condemnor realistically assesses the prospects of litigational victory vs. defeat, and concludes that prudence dictates the conclusion that the public may be better off settling for more than its lowball appraisal, thereby saving itself the cost of an increased award (with interest), the costs of litigation and the risk of having to pay the condemnees’ statutory attorneys’ fees and other litigation expenses, as in that Pombo case that we wrote about on October 31, 2010 (Lowball Watch – California)  Or how about refraining from blowing Kings’ ransoms on “public projects” that never get off the ground, like that “Intercontinetal” $100 million municipal airport in Palmdale, that after decades of trying had to be shut down because no airline could operate from it?

So in the end we agree with Mr. Rayl: public money should not be squandered on filling the pockets of private parties. Perhaps we can start with shutting down most redevelopment projects that are a prime offender.

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