Court Knocks Out Eminent Domain

APRIL 28, 2011

By WAYNE LUSVARDI

Chalk up one knockout punch for the little guys who oppose eminent-domain abuse.

National City in San Diego County blew a $2 million hole in its General Fund budget due to a $7 million decline in sales taxes mainly as a result of declining auto and lumber sales.

To fix its structural budget deficit, it wanted to to create a sales tax incubator called a redevelopment project by demolishing 692 properties, that would also divert property taxes away from public schools to city hall.

A redevelopment project isn’t so much private commercial development that needs legal assistance with land assemblage as it is a Potemkin village for tax generation.  The term Potemkin village comes from Russian minister Grigori Potemkin who supposedly built impressive fake idyllic villages along a route Czar Catherine the Great was to travel in 1783.  In modern day language, we would say redevelopment is a Hollywood stage set for collecting taxes.

National City had tried unsuccessfully in 1976 to establish a redevelopment project by proposing to condemn the 103-acre Bonita Golf Course and Club but was overruled by the courts for inability to prove the property was “blighted.”

A budget deficit is nothing new to National City. According to a story in the Los Angeles Times, National City also had a $2 million budget deficit in 1993 as well as battling a high crime rate.

On April 22, 2011, National City’s attempt to establish a redevelopment agency was thwarted once again when a Superior Court judge ruled there was no substantial evidence that the properties brought before him for review — in particular a local youth boxing club — were blighted.

Redevelopment Dream

Some California cities are scrambling to set up redevelopment projects as a way to plug the state’s short-term $25 billion budget deficit and looming $75 billion pension fund shortfall before Gov. Jerry Brown eliminates redevelopment agencies.  What was proposed in National City was a mixed commercial/residential use development with a 24-story tower of luxury condominiums.

According to Trulia.com, National City has a median home price of around $200,000, after falling from about $450,000 in mid-2006.

Homes.com indicates there are 282 foreclosed homes listed for sale in National City, not including the shadow inventory of homes that are underwater in their mortgages after home prices fell $250,000, or 56 percent on average.

One of the foreclosure sale listings shown on the front page at Homes.com is a one-bedroom, one-bath condo built in 1990, located in a 12-story tower, and listed for sale for about $100,000.  This is $100,000 less than what a developer proposes to sell condos for in the planned — but now defunct — redevelopment project.

Citydata.com indicates the median household income in National City as of 2009 was $35,332, which is about $24,000 less than the statewide median income.

What redevelopment is about is creating luxury real estate for upscale chain-owned restaurants, chain retail stores, luxury theaters, local entertainment venues and luxury high-density housing.  The typical family in a working class community like National City has very little discretionary income to spend eating out, going to the movies rather than renting a film through Netflix, or buying high-end goods in trendy clothing and retail stores, especially in an economic recession where real inflation is taking off.

Redevelopment in California has redefined affordable housing as a new luxury condo, with pools, spas and gyms, located on pricey commercial land next to an upscale mall and light rail.  The traditional definition of “affordable housing” has been housing that is old, obsolescent as to design and/or building codes and located further from shopping centers and transit stations or freeways.  There is no discernible market for luxury condos in National City now or in the foreseeable future.

No More Raiding the Piggy Bank

Like all cities in California with redevelopment agencies, National City is desperate for a piggy bank to bail them out of their budgetary hole.  But like households that can no longer easily use the equity in their homes as a cash cow for living beyond their means, cities are learning there is no magic such as redevelopment that is going to save them.

After pigging out on debt and overspending for decades, cities, as well as households, have to learn to live within their means.

 

 

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