Tag Archives: San Juan Capistrano

Understanding Private Eminent Domain

download (40)The contribution of private businesses to the community

In 2006, the Oakland Tribune reported that Burlingame’s auto row “provides 50 percent of the city’s sales tax revenue every year.”

In 2013, the Orange County Register reported: “More than a fourth of San Juan Capistrano’s sales-tax revenue came from local car dealerships in the 2010-11 fiscal year, which ended June 30… ” *

So when a dealership needed an abutting vacant lot to expand, was the city wrong in taking the lot and selling it to the private dealership?

The money to buy the property came from the dealership. The adjoining lot had been vacant for years and its taking enabled the city to increase its tax revenue without taxing its citizens and thereby offer more services to its citizens for free.

One could say, “Well, that was a vacant piece of property and not some grandma’s home.” But that is begging the question.

That employs the same logic as the old story about the guy offering the girl $1,000 to go to bed with him and her accepting, only to have the guy then say “Would you go to bed with me for $10?” and her responding “What do you think I am?”

What she is had been established with her acceptance of the $1,000 offer. After that, they were just dickering price.

If your answer to the taking above was “Yes,” then the philosophy of taking of private property for private business is O.K. The philosophy cannot be O.K. in the case of the vacant lot, but not O.K. in the case of the grandmother’s house.

The distinction lies in the application of the law, not in the law itself.

The Law

The landmark eminent domain case was Kelo v. New London 545 U.S. 469 (2005) 268 Conn. 1, 843 A. 2d 500. wherein the court held, in an 8-3 decision, that the general benefits a community enjoyed from economic growth qualified private redevelopment plans as a permissible “public use” under the “Takings Clause” of the Fifth Amendment. In its ruling, the court noted, in part:

“The City has carefully formulated an economic development plan that it believes will provide appreciable benefits to the community, including-but by no means limited to-new jobs and increased tax revenue. As with other exercises in urban planning and development,12 the City is endeavoring to coordinate a variety of commercial, residential, and recreational uses of land, with the hope that they will form a whole greater than the sum of its parts.

As mentioned above, the Supreme Court vote in Kelo was 8 to 3. Could any reasonable person really believe that the justices are bad people because of their positions?

Can the power of private eminent domain be abused?

Sure it can.

But is the answer to “abolish the law” or to “abolish the abusers?”

When Congress thought President Nixon violated the constitution, it did not move to abolish the constitution, instead it moved to remove the president.

Purpose of this Article

The purpose of this article is not to advocate that private takings are good or bad, or to write a legal treatise on the subject.

The purpose is to demonstrate that reasonable people can have different opinions and their choices are not always between “good” and “evil.”

Oliver Wendell Holmes, the renowned Supreme Court justice, had a standing bet with lawyers that no one could give him a law wherein he could not, in turn, provide an example of where that law, if applied, would have a bad result.

Holmes lived to be 93 and no one ever won that bet. With every law proposed to him, Holmes provided an example whereby application of the law would result in an injustice.

Summation

In summation, the question ought not to be whether the person or entity seeking enforcement of private eminent domain is good or evil.

The questions ought to be: (1) whether or not the taking serves the greater good; and (2) are the people answering the question unbiased and reasonable people?

In a December 7, 2009 “California Eminent Domain Law” Blog, A.J. Hazarabedian took the view that: “Taking property by eminent domain to benefit an auto dealership might create jobs and increase local tax revenues, but is one of those uses of eminent domain which should be examined carefully.

Is this truly a taking for public use, or is the City instead using eminent domain for private benefit and to benefit its own coffers? Eminent domain for the elimination of true blight may well be appropriate as a public use; eminent domain for the sole purposes of benefiting a private auto dealer and increasing local tax revenues is questionable.”

=======

*Note: The sales tax base with respect to car dealers, does not always have the same result in every state.

In places like Texas and Missouri, car dealerships do not pay sales tax to the cities where they are located, but rather where the buyer lives. In those cities, other business provide the brunt of the taxes.

In 2006, Thomas J. Erman, SIOR, Vice President, NAI DESCO reported, in AreaDevelopment.com: “A developer wants to build a 476,000-square-foot retail center that is estimated to produce $170 million in sales per year within the first five years. The project would require a car dealer to relocate from that site.”

John Pico, a retired attorney, is the managing partner of Advising Automobile Dealers LLC and Pico Publishing Company. He has served as a Court Appointed: “Consultant to Debtor” in bankruptcy cases; “Mediator” in automotive disputes; “Arbitrator / Appraiser” in partnership disputes; “Consultant to Receiver” in a check-kiting case; “Superior Court Mediator” in dealership / lender litigation

He has been recognized as an expert in both State and Federal Courts.

He has consulted on upside-down positions of over $50 Million, out of trust position of over $4 Million and bank overdrafts of $30 Million. Since 1972, Mr. Pico has completed over 1,000 automobile dealership transactions, including buy-sells, valuations, litigation, Chapter XI bankruptcies, and business plans for open points.