Gideon’s Trumpet

News reaches us from Washington, via a percipient witness to today’s U.S. Supreme Court oral argument in the Sackett case (having to do with the issue of when may a property owner seek judicial review of an EPA enforcement order) that things are looking up.

All the Justices who spoke out appeared to be sympathetic to the Sacketts’ position, although Justice Kennedy was not very active and Justice Thomas, as is his wont, was silent.

The Sacketts present a very sympathetic case. They are not developers. They tried to build a home for themselves on a small, evidently dry lot (less than an acre) and did some filling on a small part of it.  Then they got hit with an EPA order requiring them to restore the property (expensive!) back to its asserted “wetland” status and risk incurring a $3000 per day penalty before they could obtain judicial review of the overreaching EPA order.

Naturally, today’s New York Times comes down editorially on the side of the oppressive government. But if the oral argument was indicative of what’s on the Justices’ minds, the Times got it wrong.

So stay tuned but don’t count your chickens until after they hatch.

Follow up. The January 9, 2012, post on www.inversecondemnation.com contains a link to the transcript of the Sackett oral argument, in case you want all the details first hand..

There is news of an interesting case from South Dakota, concerning the problems that can ensue when a government entity insures itself against liability for inverse condemnation. To us, that has always been an interesting topic because in a classic uncompensated taking case, the inverse condemnor is not only required to pay just compemnsation, but also, at least in physical taking cases it also acquires title to and possession of the subject property, or an easement over it. So in a case like that what’s the government entity’s insurable loss? Except for transactional costs, it is ordered by a court to exchange one of its assets (money) for another asset (land at the latter’s judicially determined fair market value). So where is the net loss to the government for which the insuror should have to pay? Wouldn’t payment in a case like that amount to a double-dip by the inverse condemnor?

But that is not what happened in South Dakota. The liabiliy of Aurora County arose from an earlier zoning decision that limited use of the plaintiff’s dairy farm, causing it to go out of business. So the farmers sued and won a large inverse condemnation judgment. But the South Dakota Supreme Court ordered that the case be retried, and it was, resulting in County liability again.

The County thought that this judgment was covered by its insurance, but it turned out that according to the insurance company it did not because the County failed to give timely notice of the pendency or imminence of the farmers’ claim, and thus, argued the insurance company, it never would have insured against an already existing or known claim when it issued the policy to the County.

The County contended that it did give notice but even by its lighs the notice was vague and did not make clear that insurance coverage was sought (for 10 preceding years) against actual, not just potential claims, involving the subject property. Besides, the County Auditor had written to the insurance company that the County was not aware of any incidents that may result in a loss under this coverage.

The jury sided with the insurance company, and found that the County had misrepresented or concealed material facts and that, had the insurance company known about, it would not have issued the insurance policy, at least not in the form it did. You can find the story in Anna Jauhola, Aurora County on Hook for Damages in Lawsuit, The Daily Republic, January 7, 2012, go to http://www.mitchellrepublic.com/event/article/id/60871/group/homepage/

In the meantime, the farmers’ claim, or at least the amount of compensation due them, has been on hold awaiting the disposition of the dispute between the County and its insurance company, so we take it that interest is accruing. And given that the farmers’ claim was for $5 million, this one could easily turn out to be a biggie. Stay tuned.

Professor Richard Epstein, formerly of Chicago U and now at NYU, has a piece in today’s Wall Street Journal, in which he expresses the hope that the Supreme Court will grant certiorari in a rent control case from New York. We wish him luck but we are not holding our breath. SCOTUS had an opportunity to deal with this wretched subject in the Pennell and Yee cases, which were up there on the merits, but eventually chickened out. More recently, it had a chance in the Guggenheim case in which the 9th Circuit de facto overruled the Supreme Court, but certiorari was denied.

So while we wish bon chance to the petitioner, and offer our support (which these days carries the weight of a fly turd) to Professor Epstein’s view on this point of law, we are pessimistic about that one. In our admittedly curmudgeonly view, the chances of cert being granted in a rent control case are about the same as the chances of your faithfu servant flying to New York to visit Professor Epstein, by flapping his arms.

For a link to Prof Epstein’s piece, click here http://online.wsj.com/article/SB10001424052970204464404577118912082926658.html

As if all the calamities that have befallen the proposed California high speed rail weren’t enough, here comes another one. The California High-Speed Rail Peer Review Group delivered its report yesterday, concluding that the proposed railroad from San Diego to San Francisco is deeply flawed and not financially feasible. It recommended that the State Legislature not appropriate any money to it, not even the initial $2.7 billion in bonds to match $3.5 billion in federal money. For the whole megilla, read Ralph Vartabedian and Dan Weikel, Review Urges Delay in Borrowing Billions for Bullet Train, L.A. Times, January 4, 2012 — click here http://www.latimes.com/news/local/la-me-bullet-train-report-20120104,0,3258448.story.

The bottom line of the report is that apart from the piddly few billion allocated thus far to the initial leg of the $98.5 billion railroad (between Bakersfield and Fresno — down the middle of Central Valley where few likely passengers live, and as most Californians believe, is the middle of nowhere) is unlikely to be followed by additional construction due to lack of funds. The review group supports a high-speed rail line, but feels that starting the project in the middle of Central Valley “maximizes the risk to the state.”

So the line-up against going ahead with the high-speed rail as presently envisioned now includes the State Auditor, the State Inspector General, the Legislative Analyst, The UC Berkeley Institute of Transportation Studies, and the Transportation Committee of the U.S. House of Representatives. But our Governor and his friends in the labor unions are all for it.

So stay tuned and see what happens — we can’t wait, though we fear it will be a long wait.

As a follow-up to the discussion of abolition of redevelopment in California, don’t miss a piece by Bill Fulton and  Josh Stephens, Redevelopment Will Be Back — But At What Price? in the California Planning & Development Report of December 29, 2011 - click here: http://www.cp-dr.com/node/3081

It’s an interesting review/forecast of what redevelopment groupies are planning to do (and in Fulton’s opinion are going to do) to get the despised California redevelopment process to rise Lazaruslike from the dead. It’s a good way to gain an insight into the thinking of the political-redevelopment complex that for decades has been looting the public treasury in California for private gain, wasting king’s ransoms in public funds in the process of making inept and at times corrupt deals that often failed to produce the promised redevelopment and at times produced nothing at all in spite of spending gazillions of public dollars, and leaving behind a bonded redevelopment indebtednes running into the high tens of billions of dollars.

What we find fascinating about Fulton’s position is that his discussion fails to address the use and misuse of eminent domain by redevelopment agencies, the waste and misuse of public funds, and — even as he speculates about the nature of the deal to be made to resurrect redevelopment — how to produce safeguards that would protect the rights of individuals who are victimized by the process and prevent a repetition of the looting of public funds for private gain that characterized the old redevelopment system. All these guys seem to care about is money, and the hell with the moral and civic values that were routinely trampled in the old redevelopment process.

Check it out for yourself.

It didn’t take a rocket scientist — though at the risk of appearing immodest, your faithful servant notes for the record that he is one — to predict that in the wake of the California Supreme Court’s decision upholding the legislation abolishing redevelopment agencies, redevelopment types, confronted as they are with the prospect of having their paws removed from the public cookie jar, would scream bloody murder. Sure enough, they are doing just that. Don’t miss today’s Los Angeles Times article by Anthony York, California Cities Seek Restoration of Some Redevelopment Spending, L.A. Times, January 1, 2012 — click on http://www.latimes.com/news/local/la-me-redevelopment-20120101,0,5207472,print.story.

From this dispatch we learn that the screaming has begun and the city folks who over the years grew accustomed to speding mucho dinero on all sorts of stupid or frivolous stuff under the banner of redevelopment, as noted in a Los Angeles Times expose last year, are aghast at having to pay for their own municipal goodies. “A Times investigation in 2010 found that dozens of cities spent hundreds of millions of dollars earmarked for affordable housing without building a single unit.” To say nothing of “corruption, questionable spending and poor accountablity.” We wrote about some of that stuff too. But we weren’t aware until today of what appears to be the two all-time championship capers of the redevelopment folks. The Times reminds us that “State Controller John Chiang last spring found that Coronado in San Diego County had multimillion-dollar oceanfront homes in its “blighted” redevelopment area. In Palm Desert, officials allocated $16.7 million to clean up blight at a luxury public golf course listed as a ‘best place to play’ by Golf Digest magazine.” Have any of you folks ever been to Coronado? No? In that case let us inform you that in the olden days, when the San Diego area was synonymous with the U.S. Navy, Coronado was sometimes referred to as “Admirals’ Row.”

And to show you how perverted are the values of the redeveloper folks, get this. Among the laments over the demise of redevelopment in California, we find another one from San Diego, where it is said that “the court decision ends any thought of using redevelopment funds to build a downtown football stadium for the San Diego Chargers to replace aging Qualcomm Stadium.” Think about. Professional football is a business in which the owners’ wealth is measured in the billions, and the players’ pay in the tens of millions, yet these are the people who plead for government subsidies at the expense of fically strapped schools, police and fire protection, and all the other essential municipal services. Sheesh!

We could go on like this, but all good things (bad things too — like redevelopment) must come to an end, so we conclude with the sage words of Governor Jerry Brown’s spokesman, Gil Duran, who is quoted as saying that the cities have brought doom upon themselves by suing the state, challenging the compromise agreement the Legislature struck during last spring’s budget negotiations. That deal, which would have allowed agencies to survive under a revenue-sharing agreement with the state was the one struck down in Thursday’s ruling. ” ‘The redevelopment people are screaming from the mountaintops and calling for a compromise,’ Duran said. ‘They had a compromise, but they rushed to court and they blew themselves up.’ ”

So it looks like a case of justice.

Still, since we need to retain our status as a curmudgeon, we fear that some sort of snaky deal will be worked out. After all, folks, this is California, a state that has elevated government profligacy to an art form. But if such a compromise comes to pass, here is our suggestion for salvaging something out of this civic, moral and fiscal disaster: how about making redevelopment agencies repay to the counties all the money they wasted on their profligate and corrupt projects, before they get another nickel?

An interesting decision comes to us from Chesterfield, Missouri. Local station KSDK reports the outcome of a local eminent ddomain case, as follows.

St. Louis County offered $238,000 for 15 acres of the owners’ land  that had been in the family for 100 years (that fact is significant in Missouri, and we will come back to it presently). The owners contended that fair market value was $1,300,000, and that is just what the jury awarded. In addition, the owners were awarded $150,000 in interest, and another $650,000 for what in Missouri is called “heritage value,” defined by local law as a 50% addition to the verdict in cases where the subject property has been owned by the same family for over 50 years — you could call it a sort of solatium payment that has to be made to people whose land has been in the family for a long time.

The bone of contention was the County’s unsuccessful argument that the subject property was in a flood plain, with wetlads and access issues. The jury evidently disagreed or discounted the couty’s argument.

The total award thus comes to almost nine times the county’s offer.

The story is Jeff Small, Chersterfield Family Gets $2 Million for Land Taken by Eminent Domain, KSDK.com, December 30, 2011 – click here http://www.ksdk.com/news/article/293842/3/Chesterfield-family-gets-2-million-for-land-taken-by-eminent-domain

If you stop and think about it, there isn’t all that much to say about the California Supreme Court’s endorsement of the Legislature’s abolition of redevelopment agencies in California, except maybe to ask rhetorically what took them so long?

Whatever the motivation behind urban redevelopment back in the olden days when it was promoted as slum clearance, in time it became an out-and-out racket. Don’t take our word for it. In the words of Zev Yaroslavsky, Los Angeles County Supervisor, and former member of the Los Angeles City Council, as reported by today’s Los Angeles Times:

The projects “had nothing to do with reversing blight, but everything to do with subsidizing private real estate ventures that otherwise made no economic sense,” Yaroslavsky said. Redevelopment over the years “evolved into a honey pot that was tapped to underwrite billions of dollars worth of commercial and other for-profit projects.” http://www.latimes.com/news/local/la-me-redevelopment-20111230,0,7617164.story

You can find a more detailed discusion of our views  in Gideon Kanner, “Fairness and Equity,” or Judicial Bait-and-Switch? It’s Time to Reform the Law of “Just” Compensation, 4 Albany Gov’t L. Rev. 38 (2011) — we commend to our readers’ attention the part at pp. 67-73, subtitled Has Redevelopment Been Worth It? We particularly urge our readers to peruse the part at pp. 69-71, which enumerates the factors that inspired urban populations to move to the suburbs . The fundamental, insoluble problem with post-WW II urban blight, and with the redevelopment undertaken in order to cure it, has been the fact that even as in the aftermath of the wretched Supreme Court opinion in Berman v. Parker, an army of bulldozers started rumbling through American cities, tearing down low and moderately-priced housing, displacing hundreds of thousands of innocent people annually under conditions of undercompensation, Americans were moving out of cities en masse. They left behind worse urban conditions than the ones that were used as the basis for redevelopment. If you need to be convinced take a look at the online pictures of today’s Detroit. Of course, redevelopment was not the sole cause of this migration; government policy encouraging and subsidizing suburban living was a bigger factor.  But however motivated, the results became obvious. In older American cities, entire blocks were reduced to uninhabited rubble and there is no arguing with that. Redevelopment didn’t make a dent in the problem. Take a look at Detroit, Cleveland, Buffalo, Gary, Camden, Bridgeport, Flint, Newark and even Philadelphia, Pittsburgh, Kansas City, St. Louis and Oklahoma City, and you’ll get an idea of the enormity of this problem. This process intensified as urban conditions grew worse and law enforcement (particularly in the 1970s) less effective. Urban freeways contributed by taking out large areas in cities, and replacing urban dwellings with rights-of-way,  interchanges and parking lots. Add to that urban riots that began in the 1960s, and the impact of forced student bussing, and what you have is a set of irresistible motives for the middle class — the urban backbone — to move out of cities to the suburbs.  Between 1950 and 1968, 2.38 million housing untits were destroyed by redevelopment. By the mid-1960s, some 111,000 families and 17,800 businesses were destroyed by eminent domain annually. As amply documented by Bureau of Census statistics, and  in recent writings of Joel Kotkin, this urban out-migration process continues until this day, with only a small trickle of empty nesters and trendy yuppies moving the other way. People find living in the suburbs more pleasant and economically more attractive (even today) so they vote with their feet to get away from blighted cities.

So as the 20th century wore on, the bulldozer model of  urban redevelopment became not only an ineffective but also a hopelessly misguided process that often did more harm than good. Jane Jacobs who harshly criticized it in her book THE DEATH AND LIFE OF AMERICAN CITIES, is now widely acknowledged to have been right.

Also, Lord Acton got it right – power corrupts. So with the enormous and de facto unreviewable power casually conferred by the courts on redevelopment agencies, it didn’t take long for the process to become corrupted — instead of clearing slums, it became a device for wresting wanted urban land with development potential from its rightful owners, and reconveying it to municipally favored redevelopers under cover of the assertion that some of the fruits of their financial success would trickle down to the community, and thus the process could be judicially stuffed into the rubric of “public purpose” that according to Justice Stevens’ Kelo opinion was a “more accurate” meaning, no less, of the ”public use” specified in the Constitution. For a wonderful, albeit unintended, illustration of this point read Professor George Lefcoe’s article, Finding the Blight That’s Right for California Redevelopment Law, 52 Hastings L. J. 991, in which he, a gung-ho supporter of redevelopment, candidly confessed that by the term “blight that’s right” (an expression first coined by Bernard Frieden and Lynn Sagalyn in their book DOWNTOWN, INC. – HOW AMERICA REBUILDS CITIES) redevelopers mean, not blighted urban land — they won’t touch it with a ten-foot pole. What they want is an area that is sufficiently downscale to pass muster before condemnor-minded judges as “blighted,” yet sufficiently upscale to be of interest to would be redevelopers whose projects, after all, depend on the presence of people who are able to patronize their newly built shopping malls, car dealerships and office buildings. The urban poor don’t qualify, so land in areas populated by them is of no interest, and genuine slums go without redevelopment. The headline of a New York Times story tells it all: Andrew Jacobs, A City Revived but With Buildings Falling Right and Left, N.Y. Times, Aug. 20, 2000, at p. A14, reporting that in Philadelphia, in spite of redevelopment activity downtown, old rotten buildings have been literally falling down in less favored parts of the city.

So redevelopment has been, if not a failure, then at least a process that exacted an intolerable price from American urban society. So as we conteplate the demise of redevelopment in California, the phrase “good riddance” comes to mind. From now on (assuming the new robber barons who have feasted on the misery of people displaced by their subsidized grandiose schemes, fail to get the California legislature to reverse itself) urban redevelopers won’t be able to ride on the backs of powerless urban populations; they will have to pay the true cost of doing business and of rebuilding cities. And Costco will have to pay the true cost of its big-box stores.  Oh, the horror of it!

Follow up: As you no doubt surmise, the outpouring of “serves-’em-right” and “the-end-of-the-world-is-upon-us” writings has begun. For a good collection (with links) check out inversecondemnation.com. Good stuff, that. Our favorite is a piece by former California Deputy Attorney General and our erstwhile intellectual adversary Richard Frank on legalplanet.wordpress.com (link included in the inversecondemnation.com post) who concludes his post with this gem of a line: “Political pundits and land use experts will debate the legacy of California redevelopment agencies, a conversation that will be both robust and useful. But it seems indisputable that the redevelopment community’s actions over the past six years have set a new standard for political tone-deafness and ineptitude.” Well said, Rick. But then, even overlooking the wisdom of Lord Acton, it is said that pride goes before the fall. But Frank forgot to mention that the track record of redevelopment agencies has also consistently set a new low for civic (and ordinary, garden variety) morality. At least the fictional Robin Hood had the flimsy excuse that he robbed the rich for the benefit of local villeins, though in reality he did nothing of the sort. But redevelopment agencies have consistently robbed the poor (and the taxpayers) for the benefit of the very rich to whom they reconveyed the land taken by them, at a discount or free of charge, calling it “land writedown.” So even if you are a lefty redistributionist type who rails against the government stuffing the pockerts of the rich, your civic and moral values should cause you to upchuck over that one.

The New York Times of today, runs a great story of environmental litigation, cum eminent domain with a soupcon of what looks suspiciously like intercorporate intrigue. See Campbell Robertson, Bitter Twist In Louisiana Family’s Long Drilling Fight, N.Y. Times, December 29, 2011.  Here is the short version.

Farmer A leases land to oil company B which then sets out to operate oil wells and pipelines on the subject property. All goes well for years — or so it seems — until one day the farmer learns that the oil company has contaminated the subject property so severely that he demands cleanup or lease termination. Litigation ensues, that has been pending for so long that 13 members of the lessor’s family (who are heirs to the title) have died awaiting the result.

But then, oil company C which has been operating quietly across the street for 60 years, steps up and proposes to condemn the subject property in order to, er, protect it. So what’s the problem? The problem is that the condemnor company C just happens to be a subsidiary of oil company B. Got it? Company C offers around a million bucks which the farmer thinks is grossly inadequate (the current lease payments are over $100,000 per year). So oil company C files an eminent domain action around Thanksgiving.

As far as we can tell, no hard evidence of collusion between the two oil company has been produced, but the litigation is still very young, so it remains to be seen how things unravel in the glare of litigation. But even at this stage, interesting issues of public use and necessity seem to be hovering around this controversy.  The owner is quoted by the Times as contending that the two companies are in collusion, which, if true, would raise interesting issues, such as whether improper motives of the condemnor can be a defense to the condemnation, or whether one should look only to the use to which the condemnor means to put the taken property, irrespective of its subjectiove motives. Then there is Justice Kennedy’s admonition in his concurring opinion in Kelo v. New London, that pretextual condemnations are a no-no. So if the Louisiana courts find that this is a collusive action, it would pretty much follow that it is a pretext to rescue company B from having to face the consequences of contaminating the subject property. We will look forward to learning how it all turns out.

We now have a real interest in this case because the N.Y. Times concludes this story by quoting your faithful servant. Can’t be all bad.