Monthly Archives: March 2012

Guess What? Those “Green” Municipal Land-Use Regulations Have no Effect on Climate Change brings us the dispatch that those touted municipal regulation imposed to reduce “Greenhouse emissions” aren’t working. Nate Berg, The Climate Plans Aren’t Helping Reduce Greenhouse Gas Emissions, March 8, 2012, click here.

“[A]s it turns out, climate plans aren’t really doing all that much to bring greenhouse gas emissions down. A new study in the Journal of Urban Economics looked at the climate plans and greenhouse gas emission reductions of cities in California to find that there doesn’t seem to be any causal connection between greenhouse gas reductions and climate action plans.”

For the abstract of the Journal of Urban Economics article, click here.

Lowball Watch – Louisiana

We are informed that the Louisiana District Court has just entered judgment in a case of taking of 10.12 acres (Orleans Levee District v. New Orleans Michoud Industrial Park, No. 2008-13114, judgment entered March 13, 20012). The numbers are as follows: condemnor’s deposit – $175,000; award for the part taken – $414,979; severance damages – $723,137, for a total compensation of $1,138,114. Plus interest which is yet to be calculated, and attorneys fees which are yet to be awarded. So far, that comes to 6.5 times the condemnor’s deposit. Stay tuned for the balance.

The Missing Part of the California Story: Housing

It isn’t every day that the lefty Los Angeles Times editorial page sings in harmony with its conservative Wall Street Journal counterpart. On March 13th, both these journalistic biggies ran op-ed pieces on the decline of California. See Bradley Schiller, California, a Bad Bet For Business, L.A. Times, March 13, 2012, at p. A11, and Michael J. Boskin and John F Cogan, California’s Greek Tragedy, Wall Street Jour., March 13, 2012, at p. A13.

Both opinion pieces round up the usual suspects: High taxes, a fiscally irrational legislature, an oppressive regulatory climate, unaffordable government social programs, a business-hostile, time and money-consuming bureaucracy, overreaching public employee unions, cultural and linguistic tensions (California is now 37% Hispanic and 13% Asian — which adds up to one-half of the state’s population), etc., etc. There is merit to being concerned about all these factors but something big is missing from this picture. Housing cost.

As we have had occasion to observe in our occasional posts, California housing costs are way higher than those in other states, whereas the median California income ($42,578), is a mere $2633 higher than the national average ($39,945), which doesn’t begin to take care of the additional cost of local housing. And by using the phrase “cost of housing” we don’t mean to evoke flossy images of Beverly Hills or Rancho Palos Verdes. Go to Google, and type in “homes for sale in Burbank” and see what you get. Why Burbank? Because it’s an ordinary suburban community in the East San Fernando Valley, we live there, and we know first hand that it is an old, middle to lower-middle class community whose housing stock largely consists of decades-old, small, two bedroom houses well below 2000 square feet — 1500 or less is usually more like it. Then check out what is for sale and for how much, and you’ll get the message. And don’t cheat by looking at the cluster of more recently built million-dollar homes way up in the hills above Burbank, although if you do, that will only make our point in spades; who the hell would want to pay over a million bucks to live in the boondocks of Burbank?

On top of that, the latest dispatches indicate that with fewer people buying homes and more people losing homes by foreclosure, what you get is pressure on the rental market. See Alejandro Lazo, Rising Rents May Signal a Recovery, L.A. Times, March 13, 2012, at p. B1. That headline tries to put a positive spin on things but it does not represent current reality. A friend moved out here from the Southeast recently (where he lived in a four-bedroom home in one of the best suburbs of Charlotte), and we have been watching his travails in trying to find a place to live, only to discover that around here $400,000+ gets you a home with all the charm and grandeur of a chicken coop, in a downscale neighborhood, and that it takes about two grand per month to rent a conveniently located, if downscale two-bedroom apartment. This isn’t good folks.

All of which, put together, explains why Californians, particularly gringos, are leaving the state in high numbers that would be even higher if it were possible for them to sell their homes in the slow California market, without losing their shirts.

Afterthought. And why are California homes overpriced even now? How did they get to price levels so high that they remain unaffordable even after the “bubble” popped? Read Chapter 6 of Professor William A. Fischel’s 1995 book REGULATORY TAKINGS: LAW, ECONOMICS AND POLITICS (Harvard U. Press), which tells the story of  California’s excessive land-use regulatory climate and its impact on housing prices, and of the California courts that never hesitate to uphold extreme land-use regulations, no matter what. As the nation’s erstwhile dean of the land-use bar, the late Richard Babcock of Chicago once put it: “In California, the courts have elevated government arrogance to an art form.”



Lowball Watch – Kansas

A recent opinion of the Kansas Supreme Court, Miller v. FW Commercial Properies, No. 105,006 (dealing mostly with who is a party in interest in an eminent domain action, and his entitlement to attorneys fees) also reports that the condemnor’s offer was $7,000, the award of “appraisers” was $18,000, and the eventual settlement was $25,000, or over three times the original offer.

For a discussion of the attorneys’ fees controversy and a link to the opinion, check out the blog of our colleague Robert Thomas at March 12, 2012.

Misconduct of Government Counsel: It All Depends on Whose Ox Is Getting Gored

My morning newspaper has brought the dispatch that various U.S. Senators have their knickers in a twist, deploring the government lawyer misconduct in the trial of Senator Ted Stevens of Alaska, who was convicted based on improper evidence, and whose conviction was later vacated because of that misconduct. Evidently, what six eager-beaver federal prosecutors did was to withhold from Stevens’ defense what the L.A. Times describes as “less-incriminating statements from witnesses and other evidence.” As a result, the federal trial court vacated Stevens’ conviction and dismissed the case. In the investigation of this caper that followed, a special prosecutor found “systematic concealment of evidence but recommended against criminal charges against those responsible.” Richard A. Serrano, Senators Want Stevens Prosecutors Punished, L.A. Times, March 9, 2012, at p. A11.

Doing justice and making sure that trials are conducted in an ethically upright way is great stuff, and a subject close to our heart, so all this high-level foofaraw raises the question in our mind as to why lesser folks (like our former clients, for instance) were not the subject of a similar display of a moral high dudgeon, when they were victimized by government lawyers tampering with evidence in eminent domain trials. Some of our readers may not know this, but it so happens that your faithful servant, at one point in his checkered career, had to deal with several such cases.

Back in the old days, it was common that condemning agencies would strip the reports of their appraisers of parts which they did not wish to disclose in response to discovery orders, and then spring them as a surprise in trial. Don’t take our word for it. The then Los Angeles City Attorney, Roger Arnebergh wrote a law journal article in which he noted that the practice of condemnors exchanging only “bare bones” appraisal reports in response to discovery orders, and saving the complete reports for trial, was common (though in fairness to Arnebergh, his office was not guilty of that practice).

Our first such case was Regents v. Morris, 266 Cal.App.2d 616 (1968), where the court took a dim view ofcondemnor’s counsel and appraiser tampering with the discovery process, and reversed the judgment. And so the precedent had been established, and we thought that Morris put an end to the appraisal report stripping game. Not quite. In Nestle v. Santa Monica, 6 Cal.3d 920 (1972) the Supreme Court faced the same problem, but unlike Morris, it affirmed the misconduct-tainted judgment. Why? Because the ambushed condemnees’ counsel did not try to “unring t he bell” by performing the useless ceremony (after the condemnor’s surprise was sprung) of asking the trial court for a recess, or made a motion to strike, or a motion in limine.

In People v. Sunshine Canyon, 2d Civ. No. 36371 (1972) (unpublished), the same scenario of appraisal report tampering was before the court. The condemnee’s counsel who tried that case happended to be the same one who tried Morris and Nestle, and by now he had learned his lesson the hard way. So he complied meticulously with Nestle’s procedural recipe  for objecting etc. It did no good. The Court of Appeal simply held that the misconduct was not prejudicial.

With this ambiguous track record, condemnors’ lawyers were not ready to give up their underhanded practice of appraisal report stripping. They tried it again and again, but in time California courts rose to the occasion and interdicted it.

There were also eminent domain cases in which condemnor’s counsel engaged in gross impropriety of launching a baseless personal attack on faultless condemnees.  In Garden Grove School Dist. v. Hendler, 63 Cal.2d 141 (1965), condemnor’s counsel launched a vicious personal attack on the condemnee, his lawyers and his appraisers, calling them “pirates,” falsely accusing them of “speculating” in eminent domain lawsuits, and appealing overtly to the jury’s self-interest as taxpayers. The trial court saw nothing wrong with that. The court of appeal did; it called condemnor’s counsel a “buffoon,” but found — what else? — that the misconduct of government counsel was not prejudicial. Though we eventually prevailed in the California Supreme Court (and on retrial) I always found it incomprehensible how a case like that, involving undeniable, gross misconduct of counsel, had to go to the Supreme Court, why it wasn’t dealt with summarily by the lower courts?

Then there was City of Los Angeles v. Decker, 18 Cal.3d 860 (1977), where condemnor’s counsel lied to the jury by arguing that there was no local demand for parking, so the owner’s contention that parking was the property’s highest and best use was meritless, when in fact there was a shortage of parking in the area, and the city’s own environmental impact report took note of that. Again, neither the trial court, nor the court of appeals saw anything wrong with the condemnor’s conduct, and it took the Supreme Court to step in and restore a modicum of ethical behavior on the part of government counsel.

Which brings us to the bottom line of this post. With all these instances of goverment counsel misconduct, was anyone discipolined? Don’t be silly. Of course not. In fact, the government lawyer who “starred” in the Morris case was later appointed to the bench. So if we take note of the still ongoing Senator Stevens brouhaha, and compare it with these war stories, it would appear that misconduct of government counsel is treated as a serious transgression only when its victim is a credentialled member of the establishment.

Sigmund Freud Said That Sometimes a Cigar Is Only a Cigar, But Is California’s Proposed High Speed Railroad Only a Railroad?

We have been keeping track of the misadventures of the proposed California “bullet train” high speed railroad, that if and when built, is planned to run from San Diego to San Francisco, but which, according to its planners is getting started by blowing a few billion dollars building its first segment in the Central Valley (aka the middle of nowhere) between Bakersfield and Fresno. All along, viewing it as a transportation/engineering issue, we wrote about its problems, but it turns out that we may have been barking up the wrong tree. If today’s Los Angeles Times is to be believed, what’s afoot is a stealth attempt at doing some disguised social engineering. At first, we had trouble believeing it, but hey, why would the Times lie about something like that? See the front-page story  by Ralph Vartabedian and Dan Weikel, A Collision of Visions on Bullet Train, L.A.Times, March 8, 2012 – click here.

It turns out that the high speed rail promoters’ plans “are also a means to alter the state’s social, residential and economic fabric.” According to these folks, “[t]he fast trains connecting Los Angeles and San Francisco would create new communities of high-density apartments and small homes around stations, reducing the suburbanization of California, . . .That new lifestyle would mean fewer cars and less gasoline consumption, lowering California’s contribution to global warming.”. . .”The rail system would reduce the economic and transportation isolation of the Central Valley, which would grow by 10 million or even 20 million people, according to Gov. Jerry Brown.”

Others disagree and “regard the ambitious project as a classic government overreach that will require taxpayer subsidies. But they also see something more sinister: an agenda to push people into European or Asian models of dense cities, tight apartments and reliance on state-provided transportation.”

So the proponents of this brave, new model of living, are assuming — optimistically, as Governor Brown concedes — that California will grow to 60 million people from the present 37.5 million, “with most of the growth [of some 10 million] in the agricultural heartland.”

We could go on wending our way through the various arguments pro and con, but it seems to us that California historian Kevin Starr hit the bull’s eye when he asked: “What are all of these 10 million additional people going to be doing for a living in the Central Valley?” What indeed? When California was absorbing lots of new residents they were attracted by employment opportunities in the  the aerospace industry (among others) and comparatively cheap housing  available to ordinary people on friendly terms. But what would attract them today, especially to the Central Valley? Besides, Californians, particularly those of the gringo persuation, are leaving California in droves. We don’t know any Californians, and can’t visualize many, who would pull up stakes and move from the higly developed Los Angeles-Orange County-Vetura County area (where, as Wille Sutton used to say, the money is) to, say, Fresno, because if they do, it’ll be only a two-hour hop on the “bullet train” to San Francisco.

We’ll just have to wait and see. We are pessimistic because we remember Jerry Brown’s last gubernatorial reign, when he cut back on freeway construction in order to worsen traffic and thereby motivate people to use public transportation. Except that there was no available public transportation equal to the task, and so he gave us gridlock instead.

Stay tuned.

“We’re From the Government, And We Are Here to Help You” — Urban Division

A dispatch from Forbes (The Stagnant City: How Urban Politics Are Stalling Growth and Pushing Rents Up,, March 5, 2012 – click here ) reports a recent study by George Mason University Professor David Schleicher,  indicating that urban zoning policies are disfavoring small developers and preventing construction of sufficient apartments where they are wanted, causimng rents to rise. For a Forbes interview with Prof. Schleicher, click on the link above.

High Speed Rail (Cont’d.)

We quote from an article in today’s L.A. Times:

“The California High Speed Rail Authority wants to use $2.7 billion of the bond
money and $3.3 billion in federal grants to build a 130-mile section of track in
the Central Valley. The entire first phase of the system between San Francisco
and Anaheim will cost an estimated $98.5 billion. The cost of the full system,
extending to San Diego and Sacramento, has not been calculated.

“With the state short about $86 billion to finish the initial phase, . . .”

Truth to tell, we stopped reading at this point. This thing is just plain loony tunes because California is broke. To read the L.A. Times article in its entirety (Ralph Vartabedian and Dan Weikel, Borowing Cost for Bullet Train Revised Upward, L.A. Times, March 7, 2012), click here.

Oh yes. We learn from this article that an effort has begun to put the “Bullet Train” project back on the ballot, to give Californians the opportunity to cancel it, being as current incomplete cost estimates are running over ten times the $9 billion sold to the voters in the 2008 election as the cost of this project.

Is the Highway Trust Fund Really In Trouble? Looks That Way.

From the Bloomber News Service (With Gas Tacx on Empty U.S. Must Find New Way to Tax Roads, February 26, 2012), click here — we quote:

“. . . [T]he Highway Trust Fund, which gets the bulk of its revenue from a federal excise tax on gasoline of 18.4 cents per gallon, is nearly bankrupt. Because the tax isn’t adjusted for inflation, and has been pegged at the same rate since 1993, it has covered less and less of U.S. transportation spending. The Congressional Budget Office says the trust fund could be insolvent as soon as October.”

Interest Rates — Robin Hood and the Fed In Action

Interest rates are of interest to eminent domain lawyers because the constitution requires that when payment of  just compensation for the taking of property is delayed, interest “at a proper rate” has to be paid as well, to provide compensation for the delay in payment (and in theory to discourage condemnors from delaying payment). Why “in theory”? Because out here in la-la land our law is shamelessly biased against property owners and in favor of condemnors. Whereas in all other cases the interest rate is 10%, in eminent domain it runs around 1 to 2%. And that isn’t all. In those situations where a deposit turns out to be higher than the ultimate award, and the owner has to pay some of it back to the condemnor, then the interest rate is 10%. Our courts see nothing wrong with that, and never mind the constitutional mandate about denying people equal protection of the laws.  No, we are not making this up.  See Inglewood Redevelopment Agency v.  Aklilu, 153 Cal.App.4th 1095, 1120-1121 (2007).

And speaking of interest rates, in the cacophony of politicized voices that dominate today’s press, there are a few voices of reason, and one of them is Gretchen Morgenson, a business reporter at the New York Times. She first caught our eye back in 2004, when she accurately predicted the coming “Housing Bust” — see Gretchen Morgenson, Housing Bust: It Won’t Be Pretty, N.Y.Times, Jul. 25, 2004, at Sec. 3, p. 1. Since then she has continued to be an astute critic of the foibles and misdeeds of the financial system.

Ms. Morgenson does it again in her column in today’s N.Y. Times (click here), on prevailing interest rates and the Fed’s effort to keep them down for the banks at the expense of ordinary people. The Fed lets banks have money at almost 0% supposedly to encourage them to make loans and thus stimulate the economy, but they don’t make loans necessary to a healthy business climate. Instead they prefer to take 0% money from the Fed and invest it in government bonds that pay 3 to 4%, thus collecting risk-free interest on Uncle Sam’s money. This acts out the old joke that a bank is an institution that will lend money to anyone who can prove to it that he doesn’t need it. The Fed thus wages economic war on the middle class, and shamelessly victimizes savers of limited means who for lack of realistic alternatives are forced to resort to savings accounts and CDs for their modest savings, where they receive peanuts by way of interest. Around here, those financial institutions that advertise for deposits, offer less than one percent. Which means that if you take inflation and taxes into account, you suffer a net loss when you put your money in a bank.

What Ms. Morgenson brings to our attention is that the Fed isn’t playing straight with the American people. Its spokeswoman (who has refused an invitation to an interview) justifies this outrageous situation by citing obsolete statistics from before the recession in an effort to justify what is going on. We are not into conspiracy theories — we prefer the bon mot of former California Court of Appeal Justice Don Gates who is said to have observed that he is wary of accusations of bad faith when the conduct in question is explainable by simple stupidity. Except that here stupidity does not explain things. The Fed folks certainly aren’t stupid. So why do they say stupid things like that and expect them to be believed? Our hunch is that whatever their true motivation, they think that we, the public, are so stupid that we can be fed whatever convenient nonsense pops into their minds by way of justification of the unjustifiable. “The Fed has been following this plan for more than three years now,” concludes Ms. Morgenson. “Yes, we are seeing some improvements here and there. But the transfer of wealth from savers’ pockets has been immense. And with the price of gasoline and other goods going up, the vise is tightening.”

In the meantime, the Fed is for all practical purposes facilitating the theft of your money for the benefit of banks, and is acting out the role of a reverse Robin Hood (Hood Robin?) who takes from the middle class and gives to the very rich.