So’s your old lady!

Recently likened to a three-ring circus, the dispute between the federal General Services Administration (“GSA”), the East Bay Regional Parks District, and the City of Alameda over the 3.89-acre parcel known as Neptune Point now shows signs of becoming more like a schoolyard brawl.  This time, it’s the feds who are primed to throw the knockout punch.

You know the basics:  The Parks District wanted the land to expand Crown Beach State Park.  Instead, the feds agreed to sell it to a developer, Tim Lewis Communities, which plans to build luxury homes on the site.  The City conveniently re-zoned the parcel to allow residential development.

The Parks District sued the City in state court to block the re-zoning.  Then, it delivered what seemed like a fight-ending blow:

  • The federal government owned the land, but the State of California owned the street – McKay Avenue – that provides access and utilities to the parcel.  The State had given the GSA an easement – i.e., the right to use — the street for these purposes.  Without it, the parcel is worthless to a developer.
  • The GSA assured its buyer that this easement would, as the real estate lawyers say, “run with the land.”  Not so, said the State.  When you sell the land, the easement ends.  And we don’t intend to give a new one to Tim Lewis.  See if they still want to buy the parcel now!  If they don’t, you have our number.

This punch put GSA on the pavement.  But the feds got up, brushed themselves off, and now have announced they are ready with their own roundhouse right:

  • GSA intends to file a suit against the State in federal court to “condemn” McKay Avenue – yes, that’s right, the street itself – using its power of eminent domain.  If the suit succeeds, GSA, not the State, will own McKay Avenue.
  • Once the GSA owns McKay Avenue, it will “modernize” and “upgrade” the street, which it says is in terrible shape after years of neglect under State ownership.
  • And, oh, by the way, GSA will also grant an easement to Tim Lewis to use the street for access and utilities for its residential development.  Get ready for the McMansions after all!

GSA hasn’t yet filed the suit.  But we can’t help but imagine that, when it does, GSA will send a young child to the State offices to wave a copy in front of the Park District officials’ noses and chant, “Na na na na nah.”

As the foregoing description of events shows, there is something comedic about this whole chain of events – and we haven’t even mentioned the featured role being played by our own City Manager John Russo, who has denounced the venality of the Park District with the fervor he usually reserves for praising the selflessness of the police and fire unions.

The Merry-Go-Round, however, is a serious journal of civic affairs.  And, all kidding aside, the eminent domain suit threatened by the federal government does strike us as the sort of governmental overreach we are vigilant to detect – and, to, well, condemn.  So permit us to offer a short course in the Takings Clause of the Fifth Amendment.

In an eminent domain action, the government condemns property owned by one party and either keeps title itself or transfers it to another party.  Such seizures are constitutionally permissible under the Takings Clause only if (1) the taking is done for a “public use” and (2) the government pays “just compensation” to the property owner.

Much to the chagrin of Justice Clarence Thomas, the phrase “public use” has been interpreted to mean something other than “use by the public.”  Under the current regime set forth by the Supreme Court in Kelo v. City of New London, the basic rules are:

  1. The government may not take property owned by one party for the “sole purpose” of transferring it to another party; but
  2. The government may take property owned by one party and transfer it to another party in order to serve a “public purpose”; and
  3. If such a “public purpose” exists, the taking will not be invalidated simply because the transfer also benefits a private party; but
  4. The government may not take property under the “mere pretext” of a “public purpose” when its “actual purpose” was to “bestow a private benefit.”

Got that?  The issue then becomes:  What’s a “public purpose”?  The list is a long one, but it now includes what the courts refer to as “economic development.” Thus, the Supreme Court held that it was constitutionally permissible for the government to condemn property and transfer a piece of it to a developer in furtherance of a redevelopment plan for a “blighted” area.  Most recently, the Supreme Court extended the “public purpose” doctrine to permit the government to condemn property that would be transferred to a developer as part of an “integrated development plan” – think what the City of Alameda has in mind for Alameda Point and you’ll get the idea — for a non-blighted area.

So now, with this background, let’s put on our judicial robes and look at the putative case of The United States of America v. State of California.

The starting place is the release issued by GSA on August 30 setting forth its “reasons” for condemning McKay Avenue.  Once the federal government gets title to the land, GSA says, McKay Avenue will be “modernized and new infrastructure installed.”  In addition, federal ownership will “allow proper management of an antiquated and out-of-compliance storm drainage system;” “comply with regulatory standards for operating sanitary sewer systems which, in the case of the AFC [Alameda Federal Center], is an aging and substandard infrastructure,” and “permit installation of appropriate security improvements for the AFC.”

Condemning land for use as a street is a classic example of a legitimate “public purpose” for a taking.  But, remember, the land at issue already is being used as a street.  The GSA intends to continue to use it for the same purpose – just make the street better.  But permitting the government to condemn property so that it can “upgrade” it doesn’t seem like a “public benefit” sufficient to justify a taking. As Justice Sandra Day O’Connor put it in her dissent in Kelo,

For who among us can say she already makes the most productive or attractive possible use of her property? The specter of condemnation hangs over all property. Nothing is to prevent the State from replacing any Motel 6 with a Ritz-Carlton, any home with a shopping mall, or any farm with a factory.

Or, to offer an analogy closer to home, under this “upgrade” rationale, what prevents the federal government from condemning Alameda City Hall and turning it over to Ron Cowan for his new Harbor Bay Club?

In fact, the “upgrade” rationale for condemning McKay Avenue is so flimsy one is forced to wonder why the GSA doesn’t just admit that the real purpose for the condemnation is to enable it to give Tim Lewis the easement it needs to make its housing development fly (and thereby to get the $3.075 million the developer has agreed to pay for the Neptune Point parcel).  The answer is that such candor won’t help, and would probably hurt, the feds’ case.

For one thing, even if condemning McKay Avenue and giving an easement to Tim Lewis would facilitate housing construction, the GSA can’t avail itself of the “economic development” rationale.  The Supreme Court has approved takings in the context of a comprehensive development, or redevelopment, plan.  For example, in Kelo, the majority emphasized that the government was not engaging in a one-to-one transfer of property but rather embarking upon a “program of economic rejuvenation.”  But Tim Lewis hasn’t proposed any such grand scheme for Neptune Point; all it wants to do is build 48 luxury homes.  Nor would it be persuasive for GSA to try to justify its taking based on the inclusion of the Neptune Point parcel in the Housing Element adopted last year.  As we have previously pointed out, including that parcel wasn’t necessary to satisfy state law.  In any event, it’s not the role of the federal government to promote the housing policy of the City of Alameda.

It gets worse.  In his concurring opinion in Kelo, Justice Anthony Kennedy, who now occupies the “swing seat” on the Court, picked up on the “mere pretext” language in the majority opinion.  Under the Takings Clause, he wrote, the courts

should strike down a taking that, by a clear showing, is intended to favor a particular private party, with only incidental or pretextual public benefits, just as a court . . . must strike down a government classification that is clearly intended to injure a particular class of private parties, with only incidental or pretextual public justifications.

Justice Kennedy urged that a court “confronted with a plausible accusation of impermissible favoritism to private parties” should treat the objection seriously and review the record carefully.

There is, of course, as yet no “record” to review in the McKay Avenue case, other than the unsworn mud slung by the parties to the dispute.  But one suspects that, in opposition to GSA’s eminent domain suit, the State might be able to make the case that the feds’ action is “intended to favor” Tim Lewis and that the purported benefits cited by GSA in its latest release are only “incidental or pretextual.”

Consider the issue this way: Suppose GSA had never entered into a contract to sell the parcel to Tim Lewis.  Would the feds have condemned McKay Avenue in order to “modernize” the street and “install new infrastructure” in it?  Somehow one doubts it.  And if they wouldn’t have done so, the primary – if not the exclusive — purpose for condemning the property would seem to be to benefit the developer, not the public, especially since the advantages for the public are so attenuated and those for the developer so clear.  According to Justice Kennedy, that is a taking the courts should strike down.

Finally, let’s not confuse benefits to the government with benefits to the community.  It may be true that the feds will gain financially if they are allowed to salvage their deal for Neptune Point by condemning McKay Avenue and giving an easement to Tim Lewis, since the developer has agreed to pay more than the Park District was willing (or able) to spend.  But is this a public benefit?  Even in these days of sequester, it would seem hard to argue that the federal government is so strapped for cash that bringing an extra couple million bucks into the federal coffers somehow advances the public welfare sufficiently to justify a taking.

So take that, GSA.  Court is adjourned.  Now get outta here.

Disclosure:  The author’s wife, Jane Cosgriff Sullwold, is an advocate for Alameda parks and a Friend of Crown Beach.

Sources:

Kelo v. City of New London, 545 U.S. 469 (2005)

2013-08-30 GSA release

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
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6 Responses to So’s your old lady!

  1. Boxscore says:

    Greedy, Shameless, Arrogant – GSA !

  2. Marie says:

    Measure A and the like be damned also. Who cares about the people who live here?
    Greedy, shameless, and arrogant are the public masters of the island.

  3. 2wheelsmith says:

    Entertaining recap of the brawl among our government agencies!

    Not so entertaining eminent domain suit. If the U.S. government succeeds in condemning McKay Avenune, which belongs to the State, for private use, that would be a major leap toward allowing cities and counties to condemn any property that they promise will eventually pay more taxes.

  4. Allison says:

    GSA, back down! Get out of the private development business and nurse your bruised ego while you can. Friends of Crown Beach will not give up this fight! For more info go to friendsofcrownbeach.com or find us on Facebook. Thank you Robert for such an eloquent stating of the facts and possibilities.

  5. MM says:

    Thank you! GSA is so corrupt. There needs to be an investigation. Michael Moore?

  6. Wanda says:

    Speaking of corruption… I don’t understand why our very own City Council has been so willing to give away Alameda. There must be a reason they all sought out election to represent the citizens of Alameda. They are foxes in charge of the chicken coop.

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