PURPOSE

The purpose of this report is to introduce an Ordinance to satisfy the requirements of State Legislation Senate Bill 53 regarding the Burbank Redevelopment Agency�s Eminent Domain Program.

BACKGROUND

On September 29, 2006, Senate Bill 53 (SB 53) was signed into California law.  This new measure requires the legislative body (City Council) of every city and county with a redevelopment agency to adopt an ordinance by July 1, 2007 that describes their program to acquire real property by eminent domain.

The ability for the Agency to use eminent domain can only occur after a public hearing where the Agency Board (City Council) must vote to approve the proposed action on a 4/5 vote, and the compensation received by property owners will ultimately, if carried out, be decided by the Superior Court. In short, there are mechanisms in place to protect property owners� rights.

Current and Pending Legislation

Senate Bill 53 was approved shortly before California voters considered Proposition 90, a constitutional amendment that would have restricted the use of eminent domain in conjunction with most redevelopment projects, as well as greatly impact other state and local public projects.  (This Proposition also redefined �damage� to include many types of regulatory takings that result in economic loss to private property, including many zoning practices, environmental regulations and affordable housing covenants and would have required compensation for these losses.)  This Proposition was rejected by California voters on November 6, 2006.

There is a current Assembly Constitutional Amendment (ACA 8), called the Eminent Domain Reform Act of 2007/2008, that has been introduced to restrict redevelopment agencies� ability to use eminent domain in certain situations. Namely, redevelopment agencies would no longer be able to use eminent domain to purchase owner-occupied homes that would be then transferred to a private party. Also, agencies would no longer be able to use eminent domain for the purchase and transfer of a small business (defined as a business with 25 or fewer employees), except as part of a comprehensive plan to eliminate blight and only after the small business owner is first given the opportunity to participate in the revitalization plan.

The Constitutional Amendment also allows a home or small business to repurchase the property, if the government does not use the property for a public use. A companion statutory measure Assembly Bill 877 (to be amended), also outlines the compensation to be received by small businesses should they decide not to participate in the revitalization plan.  If approved by the legislature, the constitutional amendment is anticipated to be placed on the ballot for California voters to consider in 2008.

The already approved SB 53 requires any Redevelopment Agency with eminent domain authority to adopt an eminent domain program by July 1, 2007 reflecting the Redevelopment Plan of each Project Area. If at a later date, the City Council wishes to amend the current Eminent Domain Program outlined in each Redevelopment Plan, it would require an amendment to the redevelopment plan for the corresponding project area. This process normally takes approximately nine to twelve months. Currently, redevelopment agencies� have the authority to utilize eminent domain within 12 years of the adoption of, or an amendment to, the redevelopment plan for each redevelopment project area, if identified in the plan

A second Senate Bill (SB 1809) was also passed on September 29, 2006.  SB1809 requires all redevelopment agencies with existing redevelopment plans that authorize the use of eminent domain to record a revised Statement of Institution of Redevelopment Proceedings no later than December 31, 2007.  This Statement is recorded onto every property within each project area. Per the legislation, the revised Statement of Institution must contain a heading in boldface type that the property is in a redevelopment project area, and it must contain a general description of the provisions of the existing redevelopment plan relating to the use of eminent domain and a description on the limitations on the use of eminent domain including time limits. Staff will be processing said statements via the County during the next six months.

Historical Use of Eminent Domain

Except during the 1980�s with the development of the Town Center mall, the Burbank Redevelopment Agency has used its authority to use eminent domain quite rarely.  In the last ten years, the Agency has used some level of this authority in only two cases.  In 1999, the Agency utilized eminent domain to acquire a property for the development of the Burbank Entertainment Village (AMC 16 Theatres) project.  In this case, the Agency was in the process of assembling the first phase of the project when a business tenant purchased their landlord�s property, while the Agency was attempting to purchase the property at the same time. The Agency ultimately negotiated a purchase price with the business tenant.

In a second case in 2001, the Agency began the process to initiate the use of eminent domain on a property for the development of the Senior Artist Colony affordable senior housing project.  In that case, the Agency set a public hearing date for the Agency to consider making the findings that the use of eminent domain is necessary.  However, the Agency and the property owner ultimately settled on acquisition terms before the hearing was conducted.

It should be noted that the City and the Housing Authority have also used eminent domain for two projects in the last ten years as well.  One case involved the acquisition of five properties in 2000 in preparation for conducting improvements that modified the �5-points� intersection at Victory Boulevard, Burbank Boulevard and Victory Place. The other case involved the acquisition by the Housing Authority of two dilapidated properties in 2004.  Those properties are now in various stages of rehabilitation as part of the affordable housing program in the Peyton-Grismer Focused Neighborhood.  Should the City Council, or the City Council acting as the Housing Authority, wish to develop future policies on the use of eminent domain (such as restricting the use of eminent domain on owner-occupied, single-family homes), staff can bring back such a policy statement for City Council consideration.

ANALYSIS

As noted above, the Redevelopment Agency has used eminent domain in only two cases in the last ten years and its ability to use eminent domain has expired in two of the four project areas.  There is currently no project where the Agency has any plan to use eminent domain and all of its rights to use it shall expire by 2011.  Nevertheless, there are times when property owners actually prefer that their property is purchased by the �threat� of eminent domain because of the favorable tax consequences. The Internal Revenue Service provides extended times for owners to roll over their capital gains known as 1031 exchanges, and the County provides the ability for owners to maintain their current property tax assessment at a new location.

SB 53 requires redevelopment plans adopted after January 1, 2007 to describe the agency�s program to acquire real property by eminent domain.  Such plans can prohibit certain types of eminent domain actions such as prohibiting the use of eminent domain on owner-occupied single-family homes. The Burbank Redevelopment Agency currently has no plans to create a new project area requiring the adoption of a redevelopment plan. SB 53 also requires redevelopment plans adopted prior to January 1, 2007 to adopt an ordinance by July 1, 2007 that describes the Agency�s program to acquire property by eminent domain.  The legislation did not define the term �program�, but since each of the Agency�s existing redevelopment plans already has policies placing restrictions on the use of eminent domain, the Agency�s program has been defined as those already existing restrictions.  Any modifications to those restrictions would require a redevelopment plan amendment, since the legislation did not provide authority to do otherwise. A plan amendment is an approximate nine to twelve month process.

PROPOSED ORDINANCE

The proposed ordinance that the City Council is being asked to consider mirrors the restrictions outlined in each of the Agency�s Project Area Redevelopment Plans. Those restrictions are summarized here by Project Area:

City Centre Project Area - The Agency may only acquire property using eminent domain from 12 years from the Adopting Ordinance approved in January 1999 (this was an amendment to an existing Redevelopment Plan). The Agency may not acquire any residentially occupied property in City Centre. The Agency shall not acquire property on which an existing building is to be continued on its present site and in its present form and use without the consent of the owner unless: the property requires rehabilitation; the site or lot on which the building is situated requires modification in size, shape or use; or, it is necessary to impose standards, restrictions, or controls of the Redevelopment Plan and the owner fails or refuses to participate in the Redevelopment Plan by executing an Owner Participation Agreement. Further restrictions involve acquiring interests in oil, gas or other mineral substances, or acquiring property owned by public bodies except if it becomes private property.

South San Fernando Project Area - The Agency�s authority to use eminent domain expires 12 years from Redevelopment Plan adoption, or 2009. Similar to City Centre, there are further limitations on acquiring buildings that will be used in their present form, but there are no specific restrictions on residentially occupied properties. 

Golden State Project Area - The Agency�s authority to use eminent domain has expired.

West Olive Project Area - The Agency�s authority to use eminent domain has expired.

CONCLUSION

So far, voters in the State have not recommended restrictions on local governments� ability to use eminent domain; however, that could change with the proposed Assembly Constitutional Amendment that is now in the State Legislature.

Staff recommends adopting the ordinance that reflects the restrictions set forth in the Redevelopment Plan for each Project Area. As the law changes, staff will provide future updates.

RECOMMENDATION

Staff recommends that the City Council adopt the proposed Ordinance approving the Eminent Domain Program for the Burbank Redevelopment Agency.

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