Eminent Domain Report

The City of Placentia has a large redevelopment area, and ambitious plans to redevelop an industrial neighborhood in south Placentia.  But the City has responded to the outrage over eminent domain and, in particular, eminent domain for redevelopment purposes.  The City apparently has no power to condemn property for private redevelopment. 

Yet, this lack of authority has not stopped some property owners in the redevelopment area from complaining that the "threat" of eminent domain has decimated their property's value.  According to a February 17 Orange County Register article by Adam Townsend, "Businessman: City plans could scare land buyers," at least one owner complained to the City Council on Tuesday that "stymied redevelopment plans and past mentions of eminent domain by city officials have decimated the industrial real estate market in south Placentia." 

Mayor Joe Aguirre responded:

"I just want to make clear that I was at the forefront of opposing eminent domain for [re]development." Aguirre said. "This city does not have that power, and we're not attempting to get that power."

The City believes that the hope of future redevelopment (presumably accomplished without the use of eminent domain) actually enhances the value of properties in the redevelopment area, and that the downturn in the real estate market -- not any "threat" of eminent domain -- is to blame for any problems owners are facing. 

Which side is right?  Probably both.  On the one hand, the public is in such fear of eminent domain these days that the mere mention of redevelopment plans and a redevelopment area is likely to evoke images of Mrs. Kelo's quaint pink house being run over by a bulldozer.  This could impact at least some market participants, regardless of whether that ever happened (it didn't; the house is now a historic building) or whether there is any real risk of it happening in Placentia (apparently, there isn't).

On the other hand, if the area truly does suffer from blight, the hope that it may someday be redeveloped to a better use may well have a positive impact on other market participants. 

In the meantime, getting beyond the current economic crisis and seeing real estate prices rising should help, regardless of which of the two competing forces one believes is really at play.