Monthly Archives: May 2012

The Tab for the “Occupy L.A.” Free Lunch

Remember the “Occupy L.A.” caper? Of course you do. That was our own la-la land equivalent of “occupy Wall Street.” Ring a bell now? That was the caper wherein the L.A. “occupiers” took over the city hall lawn (which they eventually destroyed), but were welcomed by local politicos with open arms.

“Protesters were welcomed warmly by city law makers when they launched their demonstration last September as part of a nationwide protest against economic inequality.”

“The [city] council passed a resolution in support of the group’s ‘peaceful and vibrant exercise in First Amendment rights’ and then-Council President Eric Garcetti told protesters: ‘Stay as long as you need, we’re here to support you.'”

So we are reminded by the Los Angeles Times — Kate Linthicum, Taxpayers’ Bill for Occupy L.A. Protest Rises to $4.7 Million, L.A. Times, May 12, 2012, which also brings the dispatch that the increase in cost comes to $2 million over an earlier estimate given by the city only last February.

So we can’t help wondering: where is Garcetti and his compadres now when the time comes to pay the tab for the political “free lunch” they so generously dispensed (out of city funds, natch) to the “occupiers”? As far as we can tell, they are nowhere to be seen, and as sure as God made little green apples, they are not likely to contribute a penny out of their own pockets toward footing the bill for their generosity.

Bottom line: for this, they got money. For paying full indemnity for the demonstrable economic harm they inflict on people whose resources they plunder in connection with city land acquisitions, they don’t got money. After all, as the California Supreme Courtt once put it, if people are paid for all economic losses inflicted on them by eminent domain takings, we’ll just have to declare “an embargo” oon public works. Oh dear.

In the meantime the city of L.A. is facing a $238 million budget deficit and there is a not-insignificant chance that it will eventually go insolvent. Welcome to la-la land.

Meanwhile, Back in Half Moon Bay, . . .

Possibly, you may recall the Half Moon Bay fiasco of a while back. To read our story about that case, click here. Half Moon Bay is a posh little town in Northern California that got itself into trouble (by having a $36 million judgment entered against itself) when it flooded a local property and then had the chutzpa to assert that the aforementioned property thus became a protected “wetland” that could neither be drained, nor filled, nor built upon. Long story short, the city outsmarted itself when it transferred the ensuing inverse condemnation action by the property’s owner from state to federal court, and then argued after a week-long trial — no, we are not making this up — that the case should have been tried in state court all along. The federal judge was not amused, and he entered a $36 million judgment against the city which lucked out because it was able to settle the case for half that amount – $18 million.

Now word reaches us (reported by Mark Noack, City Seeks Payback for Beachwood Loss, Half Moon Bay Review of May 10, 2012 — click here), that the city, in another display of chutzpa, is trying to recoup some of its payments under that settlement, by making a claim against its former insurance company in spite of the fact that the insurance policy in question excludes coverage for inverse condemnation, and it expired 20 years ago. Good luck with that, although this is California, folks, where insurance companies are not exactly coddled by the courts, although things are better for them than they used to be.

We’ll try to keep an eye on this caper, and will let you know how it all turns out.

Eminent Domain-Related Violence in China

The Los Angeles Times reports that a Zhaotang woman set off a suicide bomb, killing herself and two “low level  community officials” who came to her home to sign an agreement concerning the compulsory acquisition of her home. Barbara Demick, Distraught Homeowner Kills 2 in China Bombing, L.A. Times, May 11, 2012, at p. A8 — click here.

There are two items in that story that warrant notice. First, with specific regard to these events, they precipitated “a surprising degree of support on China’s social media.” Which sends a message that messing with people’s turf can be hazardous to your health, and that when a taking of private property is truly necessary, it should be accompanied by procedural safeguards and a modicum of sensitivity to the feelings of the displaced condemnees. Second, in tems of hard news that rarely make it into print over here, it turns out that tucked away at the end of this news story is the dispatch that “Demolition cases in China often devolve into violent face-offs between residents and local officials. Self-immolations are common.”

And it isn’t just self-immolations. “In May 2011, a disgruntled farmer in the southeastern city of Fuzhou detonated three homemade bombs near a local government office, killing two people and injuring six.”

It’s a tribute to the law abiding nature of American property owners that these things don’t happen here. But we worry about that when we reflect on incidents of violence triggered by eminent domain takings elsewhere.

Another Stadium Disaster — San Jose

The other day we noted Steve Greenhut’s piece on the disaster that failed plans for a professional athletic team stadium brought to Sacramento — click here. Now, the Wall Street Journal reports a similar tale of municipal woe from San Jose whose redevelopment agency paid some $25 million for land it planned to transfer to the As to entice them to move from Oakland. (Justin Scheck, San Jose Strategy to Lure A’s Hits Snag, Wall Street Journal, May 9, 2012). But major projects are risky business, and it all went kablooey when the California legislature abolished redevelopment in that state in the middle of it all.

In an effort to deal with that problem, the San Jose Redevelopment Agency transferred the subject land to “a city run entity, still intending for the As to acquire it.” Nice try. It turns out that the State Controller has something to say about that, and has issued a demand that the city (and other local governments that received land from redevelopment agencies last year) return such land to “successor agencies” the legislature created to dispose of redevelopment agency holdings.

In the meantime, the subject property for which the city redevelopment agency paid $25 million is worth only $6.9 million, assuming it could be rezoned for high-rise or other commercial uses. The city is resisting the State Controller’s demand for a clawback, and it looks like it will take years of wrangling — and litigation, after all it’s California — to work it all out.

In the meantime, the taxpayers are out $25 million, to say nothing of the forgone property tax revenues that the subject property would have produced had it remained in private hands.

Your tax money at work.

Do Property Appraisals Have “External Validity”?

We recently came across an article in the new York Times, entitled  Accuracy of Appraisals Is Spotty, Study Says, (N.Y. Times, May 9, 2012) — click here. With a title like that, we are sure you get the idea what the message of this article is. But this one is of particular interest because it compares appraisals of properties with the prices they fetched when actually sold.

The reported study indicates that of the 2076 properties examined, 64 percent were appraised at values that exceeded the sale price, while 35.5 percent were appraised at less than the sales prices.

This won’t come as too much of a surprise to the readers of this blog, particularly of its “Lowball Watch” feature. We have to keep in mind that appraising is not a science and that an appraisal is an opinion — no more, and no less.

CAVEAT: This article deals largely with appraisals for loan purposes, not eminent domain where the underlying assumptions tend to be different. For one thing, in these transactions the owner does not have his property btaken from him, and the constitutionally required “just compensation” must reflect the property’s highest value. Since the owner is denied the opportunity to take his time and find a buyer willing to pay top dollar, the law provides him with it. Second, the parties to negotiation in an eminent domain case cannot just walk away from the deal when displeased with the other party’s position. So the information conveyed in this article must be used with caution when sought to be applied to eminent domain.

Still, here is an illustration of the fact that Justice Frankfurter overstated things when in Kimball Laundry Co. v. United States, 338 U.S. 1, 4-5 (1945), he asserted that value in exchange is possessed of “external validity,” whatever that means.

Bottom line: while fair market value (i.e., value in exchange) is one reasonable measure of “just compensation,” it ignores incidental losses suffered by condemnees when they are forcibly evicted from their homes and businesses. It is in the end an opinion — an opinion of an informed person, but still an opinion. Or, as Justice Frankfurter also conceded in Kimball Laundy, market value is “only. . .a guess, as well informed as possible as to what the equivalent of the [subject property] would probably have been had a voluntary exchange taken place.” Or, if you prefer the wit of the New Hampshire Supreme Court, “the search for fair market value is not an easy one, and is akin to ‘a snipe hunt carried on at midnight on a moonless landscape’.” 590 Realty Co., Ltd. v. City of Keene , 444 A.2d 535, 536 (N.H. 1982).

Lowball Watch – Minnesota

Chicagotribune.com reports a settlement of an eminent domain case in St. Paul. Frederick Melo, St. Paul Deli Gets $1 Million Settlement Over Easement Dispute, Chicago Tribune, May 9, 2012. Click here.  The property was a deli/convenience store/gas station. The taking was for a road improvement.

The figures were as follows: the County’s original offer was $280,000, which was revised up to $465,000. The Commissioners awarded $867,000. Both sides appealed the Commissioners’ award but the jury trial did not take place because the case just settled for $1,000,000, which includes reimbursement of  attorneys’ and expert witnesses’ fees.

Justice in the Didden Case

You remember the Didden case? Of course you do. That was the wretched Port Chester, New York, controversy in which Didden was about to build a major drugstore when he was approached by a redeveloper who demanded either $800,000 or 50% of the action, or else the subject property would be taken by the local redevelopment agency. Didden refused, and the property was taken over his protests that this was extortionate.

Now, we get a dispatch from the New York Appellate Division, in the form of an opinion, In the Matter of Village of Port Chester, 2012 N.Y. App. Div. LEXIS 3420. The trial court had awarded $3,062,000, and the Village appealed, claiming error by way of the trial court’s finding that the subject property should be valued as one larger parcel. Though there were several partial owners, they were unified in the purpose and efforts to obtain proper entitlements for a new drugstore, and that made the subject property one parcel for valuation purposes. There was unity of use, and the owners of various interests had agreed to share equally in expenses, which satisfied the unity of title requirement.

Finally, justice was done — the bad guys got it in the chops. The Village’s appraiser had destroyed earlier versions of his appraisal reports, whereas USPAP requires that they be retained for use in cross-examination. For this the trial court imposed sanctions in the form of “accord[ing] an adverse inference with regard to the destruction of prior draft appraisals. . .” The opinion does not indicate how much difference that made in the monetary outcome, but it must have smarted because the Village appealed on that point but to no avail.

Follow up: Oops! We almost forgot. At trial, the Village contended that just compensation payable for this taking was $975,000, which makes the award over three times the Village contention, and qualifies this post for our  “Lowball Watch” category.

Good News – Bad News from Hawaii

Good news: our colleague  Robert Thomas reports on his blog, www.inversecondemnation.com that the Seminar Group is putting on a program on Eminent Domain and Land Use, in Honolulu. Bad news: the program is scheduled for May 12th, so if you want to make it, you better hustle to pack your gear and get plane reservations in time. Those folks have all sorts of interesting issues over there, and this looks like a good faculty.

Besides, how can you beat a trip to Hawaii? We have no personal interest in this one, but if you want our recommendation on where to stay, we suggest the Moana-Surfrider (our favorite), the Royal Hawaiian, or if business has been good, the Halekulani. All beachfront venues and all classy.  To get the details of the program, click here to see the brochure and to get a link to the faculty list.

Aloha!

Urban Farms? Yes, But Where Are the Urban Farmers?

A while back we noted the upsurge in the trendy notion of urban farms. The idea was that unused or abandoned urban land would be put to use for farming so the local folks would have a ready supply of fresh veggies that would enable them to get away from their icky fast food diet. That would improve their health and make inroads into the obesity epidemic among the urban poor. Though it sounded good, we had our doubts abot the success of this venture and it now appears that we were right.

The Atlanticcities.com blog (Nate Berg, One Thing Missing From the Urban Farm Movement: Farmers, April 24, 2012) reports that while small urban truck farms have sprouted in a number of places, getting people to tend to them after they are started, turns out to be a whole other problem. As any farmer will tell you, farming is hard work and it is time intensive. Those urban patches of land where the veggies grow, have to be tilled, weeded, fertilized and watered — and all that is inefficient and time-consuming, particuklarly when done on a small scale where modern farm machinery cannot be used. In the case of schools — a natural location for this sort of farming — things go well when the kids start out, but go to hell in a handbasket when vacation time rolls around  and the school farms go untended for several months during the summer vacation.

But you have to admire the genius of the free enterprize system. Some clever folks are starting businesses that for a fee will send gardeners over to tend to your urban farm while you work or are otherwise occupied.” One such outfit, in Los Angeles — where else? — is tending to some 150 urban farms while their owners are out doing other things.