The Supreme Court's decision in Kelo v. City of New London set off shock waves among property owners. In Kelo, the Court upheld the City's taking of Ms. Kelo's well maintained home City so that a Fortune 100 corporation could build a new office complex. In response, legislation has been passed across the country that makes it more difficult for private property to be taken by eminent domain for private, not public, use.
On January 1, 2007, several new laws went into effect in California which will impede a redevelopment agency from taking private property for development for a private use. Under Health & Safety Code 33031, a city or county can declare urban property to be "blighted" as the first step in the process of eminent domain. The primary purpose of such a taking is the generation of increased property tax revenues through redevelopment. But what if a parcel of property in the project area is already improved with a building that is in fine condition and is being put to a productive private or public use. Why should a government agency be able to force the sale of that property so it can be transferred to a private developer for a private use (for example, the development of a new shopping center)?
These questions have been addressed in part by Health & Safety Code 33320.1(b)(2). That code section prohibits the inclusion of nonblighted parcels in a redevelopment project area for the purpose of obtaining property tax revenue without "substantial justification." In other words, the taking of private property by a city for private use is no longer justifiable on the basis that the city will generate more property tax revenue after the shopping mall opens for business.
So let's say a city wants to take a medical clinic to be part of a parking lot or retail store for a new shopping mall. If the medical clinic is not blighted, there must be a substantial justification for its taking. Increased property tax revenues for the city is no longer a relevant factor, and it is unlikely that a court will find substantial justification from the opportunity for shoppers to purchase a pair of designer jeans or a caffe latte in a new mall.
