January 24, 2008Land Use and Environmental Committee Manufactured Housing Committee Property Management Committee Legislative CommitteeThe following is for study only and has NOT been approved by the Land Use and Environmental, Property Management, Legislative or Executive Committees, or the Board of Directors.Issue: What positionshould C.A.R. take on the June 2008 Ballot for the California Property Owners and Farmland Protection Act (Jarvis Initiative); a proposal that, amongst other things, would amend the California Constitution to bar state and local governments from condemning or damaging private property for private uses, and prohibit rent control and similar measures.What position should C.A.R. take on the June 2008 Ballot for the Homeowners and Private Property Protection Act (League of Cities Initiative); aproposal that, amongst other things, would amend the California Constitution to bar state and local governments from condemning or damaging certain owner-occupied single-family homes for transfer to another private person or business.Action: Required, if C.A.R. wishes to take positions on the June 2008 ballot propositions.Options: C.A.R. Ballot Position Options:Since the two initiatives are competing, C.A.R. could not be “FOR” both initiatives, as one would need to prevail. The following options are available:1. FOR one but not both measures. “For”: This position means the ballot measure is consistent with C.A.R. policy and its passage would be beneficial to the real estate industry2. AGAINST one or both measures. “Against”: This position means the ballot measure conflicts with C.A.R. policy and its passagecould have a harmful effect on the real estate industry.3. NEUTRAL on one or both measures. “Neutral”: This position means the ballot measure may be real estate related, but C.A.R. has chosen not to take a position.4.NOT REAL ESTATE RELATED on one or both measures.“Not real estate related”: This position means the ballot measure may be significant, but is deemed to not be related to property or real estate transactions.Status/Summary: As drafted by the Howard Jarvis Taxpayers Association, California Farm Bureau Federation and the California Alliance to Protect Private Property Rights, the Jarvis Initiative would: - Prohibit stateand local governments from condemning or damaging private property for private uses; - Prohibit rent control and similar measures; - Define “just compensation”; - Require an award of attorneys’ fees and costs if a property owner obtains a judgment for more than the amount offered by the government; and - Require governments to offer theoriginal owner of the condemned property the right to repurchase property at the price paid upon condemnation, if the property is put to substantially different use.As drafted by the California League of Cities, California State Association of Counties and the California Redevelopment Association, the League of Cities Initiative would limit a public agency’s authority to use eminent domain to acquire owner-occupied single-family homes for the purpose of transferring the property to another private person or business unless one (or more) of the following conditions apply: - The home owner has occupied the house for less than a year. - The property will be used for a public work or improvement. - Government is protecting public health and safety.Background:
Under current California law, public entities can take private property outright or take actions that have the effect of reducing the value of property, to build roads, parks, and other public facilities; promote economic development and the construction of affordable housing; and/or carry out other public policies. Takings of some or all of the property or its value may occur through regulation or an eminent domain condemnation. In California, private property can be taken by eminent domain and transferred to another private entity for economic development purposes only under redevelopment law, and cities are restricted to taking only land located in “blighted” areas.Eminent domain for economic purposes may only be utilized after negotiations between the local agency and the private property owner fail, or to condemnhazardous and dilapidated structures located in economically weak areas. Currently, redevelopment agencies are required to hold public hearings on the action, to pay the owner fair market value and, for businesses, to give the occupant all relocation benefits and allowances entitled by law. The period for acquiring property through eminent domain within a redevelopment district may not exceed 12 years after the establishment of the district, unless additional findings of blight are made.According to the Institute for Local Government, redevelopment agencies in California are empowered to use eminent domain in approximately 50% of redevelopment programs. However, reports indicate that over the past five years, eminent domainwas only used in less than 3% of all redevelopment agency property acquisitions in California. For example, only three single-family, owner-occupied homes in California were acquired for redevelopment through formal eminent domain proceedings in 2005. Ofcourse, the looming threat of eminent domain may change the bargaining position of property owners in a “voluntary” sale.In the wake of Kelo v. City of New London, better known as the Kelo decision, several pieces of legislationwere introduced in California and at the federal level to further limit or restrict the use of eminent domain and bring more accountability to the process. Upon a recommendation of the Land Use & Environmental Committee in Septemberof 2005, C.A.R. formed an Eminent Domain Task Force to develop policy in response to pending state and federal legislation.With the understanding that California redevelopment and eminent domain laws are some of the most restrictive in the country and substantially different than the issues in the Kelo decision, the Task Force determined that four key areas should be explored during their deliberation: housing; redevelopment; eminent domain; and private property rights. The full report of the Task Force is available at http://www.car.org/index.php?id=MzYxNjU=. In relevant part, the Task Force concluded that C.A.R. should support:- Prohibiting the taking ofsingle-family property by eminent domain for any use other than for public use. - Tightening the definition of “blight” used by redevelopment agencies proposing to create or expand redevelopment project areas. - Making redevelopment agencies generally more responsive and equitable vis a vis owners in the redevelopment process.The Task Force went on to adopt policy generally favoring “property owner friendly” redevelopment practices designed to more adequately address the owners’ due process, logistical, administrative and compensation concerns in the redevelopment process.Furthermore, in 2006, Proposition 90 was introduced inresponse to the Kelo case. This proposition provided a prohibition on the use of eminent domain, unless the property is owned and occupied by a governmental agency, and barred state and local governments from condemning or damaging private property to promote other private projects. It would have: redefined what constitutes “just compensation” as the amount necessary to place the owner in the same position as though the property had not been taken; redefined “damage” to include any government action that results in a substantial economic loss to the property (i.e. down zoning, height restrictions, environmental regulations, affordable housing covenants, etc.); required the implementing agency to make a compensatory payment for these damages.The 2006 C.A.R. Board of Directors adopted an “Oppose” position on Proposition 90 because it would have effectively eliminated redevelopment in California.Jarvis Initiative Discussion: The Jarvis Initiative imposes an outright prohibition on the use of eminent domain to take any private property, including homes, businesses and farms. Even when allowed, it can occur only after just compensation has been paid. The focus ofthe initiative is expressed in the explicit statement that “private property may not be taken or damaged for private use.” Four exceptions are provided to this prohibition: - Actions to reduce public nuisancesor criminal activity; - Actions related to a voluntary agreement between a public agency and a property owner to develop or rehabilitate affordable housing; - Public utility rateregulations; and - Actions taken by the Governor during a state of emergency.“Public use” is defined as “public facilities, transportation and utilities” in the classic schools, roads, and sewers sense. The definition also includes the more ambiguous concept of “leasing limited space for private uses incidental to the stated public use”. Proponents of the initiative give the example of needing this clarification to allow for retail vending within a public facility such as a cafeteria in a convention center.There are three parts to the definition of “private uses” prohibited in the Jarvis Initiative. These include: 1. Transfers of ownership or property rights to a different private person or entity. 2. Transfers of ownership or property rights to public entities for a use that is substantially similar to thatmade by the private owner. This particular provision has been argued by the Association of California Water Agencies (ACWA) as being so ambiguous it may block acquisition of land for water storage and other projects. In a legal opinion prepared for ACWA, it is argued that this measure would “prohibit the use of eminent domain to construct or expand projects for the storage and delivery of water for irrigation, domestic, commercial and industrial purposes”. Contrarily, the Institute for Justice, which litigated the Kelo case before the U.S. Supreme Court, opined that “water projects such as drainage ditches, sewers, reservoirs, dams, drinking water and irrigation have long been accepted as public uses and that will not change under the Jarvis Initiative”. 3. Regulation of privately owned real property or associated property rights in order to transfer an economic benefit to private persons at the expense of the property owner. This provision has been interpreted as having two major effects. - Prohibiting governments form enacting new rent control ordinances and enforcing existing rent control ordinances, and - Constraining government’s authority to implement land use planning policies such ascertain inclusionary housing ordinances, environmental protections (such as stream setbacks) and urban growth limits.“Just compensation” is defined in this measure as the fair market value for property, or property rights, that are “taken”. The measure also requires compensation for business loss, relocation and business reestablishment, and for attorneys fees should the courts award the property owner a judgment for more than the public agency offered, or rule that the agency’s actions violate the provisions of this measure.Once the property has been acquired by eminent domain, the Jarvis Initiative requires that if the property is put to a use different from the public use it was taken for, the public agency must offer to sell the property to the original property owner at the price the agency paid for the property, adjusted for the fair market value of changes to the property after it was acquired.In comparison to Proposition 90 (2006), this measure is less “hard hitting” in its application in that it does not require compensation for owners whose property lost value because of changes in government regulations, such as growth restrictions. This provision was seen as troublesome as it was expected to result in excessive litigation and the bankrupting of local governments.Supporting Arguments Proponents of this measure seek to protect all private property from being taken or damaged for any use other than commonly acknowledged public uses, such as public schools, roads and utilities.An attractive aspect of this measure is that it prohibits future implementation of rent control, so as units are vacated, rent control cannot be implemented for future tenants. The measure also prohibits future land use restrictions. Both rent control and land use restrictions are considered in this initiative to be takings at the expense of the property owner.Some apartment interests caution that voter rejection of this measure will prompt rent control advocates to seek amendments to, or a repeal of, the Costa-Hawkins Act and could launch expansions of local rent control measures.Opposing Arguments Opponents of the Jarvis Initiative contend that it eviscerates local laws that protect the public’s health and safety, environment, and land use planning. Furthermore, they argue that the new definitions provided in this measure will leadto thousands of frivolous lawsuits that could operate to both oppose development (by blocking approval of new residential or commercial projects), or support unplanned development (by preventing reasonable conditions placed on developments such as densityrestrictions).The opposition asserts that the implied restrictions on land use regulations will undermine the authority of local communities and voters who approve local land use measures that determine how a community decides to grow.An express prohibition on the use of eminent domain for other than public uses will prevent local governments and redevelopment agencies from utilizing eminent domain to obtain properties for infill retail, housing and mixed-use projects.There is also the suggestion that the passage of any anti-eminent domain measure may ultimately impede housing and mixed use developers since some developers benefit from the governments’ use of eminent domain to meet certain criteria for final subdivision map approval, including the installation or construction of offsite improvements, such as street work or storm drains on land not owned by either the private developer, the city or county. Reportedly, some local governments use eminent domain to assist developers in obtaining the necessary title to meet conditions of approval or to assemble sites for infill development.League of Cities Initiative Discussion: Earlier this year, The League of Cities introduced ACA 8(De La Torre) Eminent Domain, which ultimately failed passage. This measure would have, in pertinent part, prohibited state and local governments from using eminent domain on an owner-occupied residence for a private use, but only if the property has been the principal residence of the owner for at least one year. C.A.R. had an “oppose unless amended” position on ACA 8 asking that the one-year residency provision be removed arguing that all owner-occupied single-family residences deserve protection from eminent domain, regardless of owner’s tenure. The author of the bill maintained that the one year provision would remain to avoid owners of investment properties from stalling redevelopment by moving into their rentalunits to prevent or delay an eminent domain taking, based upon residency.The League of Cities and others have re-introduced the provisions of ACA 8 (De La Torre) into the League of Cities Initiative. The proponents of this measure intend to provide protection to residences that have been owner-occupied for at least one year. This provision does not apply in two cases: 1. For the purpose of protecting public health and safety; preventing serious, repeated criminal activity; responding to an emergency; or remedying environmental contamination that poses a threat to public health and safety; 2. For the purpose of acquiring private property for a “public work or improvement”, which includes, public services such as education, police, fire protection, parks, recreation, emergency medical, public health, libraries, flood protection, streets or highways, public transit, railroad, airports and seaports; utility, commoncarrier or other similar projects such as energy-related, communication-related, water-related and wastewater-related facilities or infrastructure; projects identified by a State or local government for recovery from natural disasters; and private uses incidental to, or necessary for, the Public work or improvement.The California League of Cities argues that the provision allowing “private uses incidental to, or necessary for, the Public work or improvement” is supported by existing case law in which, for example, retail vending is part of a public facility, such as a cafeteria in a convention center.A “poison pill” provision was written into the League of Cities Initiative such that should both it and anyother competing measure(s) pass, and the League of Cities Initiative receives a greater number of affirmative votes, then its provisions will nullify all provisions of the other measure(s).Supporting Arguments This measure will afford certain owner-occupied single-family homes additional protections from being taken or damaged for any use other than “public” uses.Proponents argue that local land use rules must be preserved, and that should this measure prevail with a greater vote count than the Jarvis Initiative, the “poison pill” provision will protect voters from losing their ability to enact local land use and/or planning decisions.Opposing Arguments Opponents of the League of Cities Initiative argue that it will provide only illusory protection against the abuse of eminent domain for private commercial development. They argue that small business owners, farmers and renters would stillremain vulnerable to eminent domain.It has been argued that the distinction between property types is arbitrary and that allowing for separate protections provides a template for anti-business interests to justify splitting the property taxroll and unfairly distinguishing between homeowners and others.It has also been argued that this proposition was introduced simply to confuse voters, encouraging them to reject both initiatives and thereby preserving the status quo.Opponents argue that this initiative does nothing. According to the Legislative Analyst’s Office (LAO), “under current law and practice, government seldom uses eminent domain to acquire single-family homes. Even when it does so, the acquisition is sometimes for a purpose that is exempt under the measure (such as construction of a road, school, or other public improvement).” Therefore, the LAO has determined that the language in this measure is not likely to significantly alter currentgovernment land acquisition practices.” In addition, the exemptions provide a loophole that allows for the taking of private property if it is incidental to a public project.What If Both Measures Pass? The League of Cities Initiative includes a “poison pill” provision that would nullify any competing propositions that would amend Article I, Section 19 of the California constitution, if it passes with more votes. At this time, the Jarvis Initiative is the only other ballot measure seeking to amend this section of the constitution. Therefore, should both measures pass and the League of Cities Initiative receive more affirmative votes, then the provisions of the Jarvis Initiative would be nullified.According to existing California election laws, if two competing measures prevail, the courts will try to rationalize the two. Inconsistent provisions are enforced based upon which passed with the most votes, while issues areas that do not overlap willall be enforced. The “poison pill” in the League of Cities Initiative was inserted to ensure the defeat of all provisions of the Jarvis Initiative, even if post-election legal examination of the initiatives does not find overlap. Please notethat the implementation of the Jarvis Initiative would, in practice and interpretation, largely trump the provisions of the League of Cities Initiative.