When the City of Lake Forest added the power of eminent domain to a 14-year-old redevelopment plan, the city should have made new blight findings, the Fourth District Court of Appeal has ruled.

The city had argued that it was only changing the focus of the original redevelopment plan for the El Toro Road area and, therefore, could rely on the original blight findings. The court rejected that argument, concluding that the addition of eminent domain authority was a “material and significant” amendment to the redevelopment plan that required updated blight findings.

The decision could make redevelopment more difficult in California, although how much more difficult is not clear. The court said that its decision was based on the case's particular facts and should not “be read to establish an automatic rule to the effect that any time a power of eminent domain is added to a redevelopment plan, a new finding of blight is ipso facto 'warranted.'”

The fact-bound decision is good for cities generally, said attorney T. Peter Pierce, who filed an amicus brief in the case for the League of California Cities. Cities had feared the court might create a far-reaching new rule. Still, Pierce acknowledged that the ruling does not settle the issues at hand.

“This leaves open a lot of questions,” Pierce said of the ruling. “It doesn't give us any concrete guidance. I think there is going to be a lot more litigation.”

Attorney Kathryn Reimann, who represented Lake Forest, predicted the ruling would hinder redevelopment.

“These things take a long time. One would hope the level of blight is not the same after 14 years,” Reimann said. “If courts are going to require agencies to re-establish the same level of blight every time they change the focus of a redevelopment plan, it's going to be much more difficult for cities.”

In 1988, before Lake Forest incorporated, the Orange County Board of Supervisors adopted a redevelopment plan with 14 sub-areas, one of which was the El Toro project area. The primary motivation was not to improve the commercial centers along El Toro Road, but to alleviate the thoroughfare's traffic congestion. The 1988 plan expressly disavowed the use of eminent domain.

The city incorporated three years later and in 1998 gained jurisdiction over the redevelopment project area. By that time, the commercial strips along El Toro Road were suffering with declining sales and increasing vacancies. In May 2002, the city amended the redevelopment plan to focus on improving commercial and industrial properties while also maintaining residential properties. The city also included the power of eminent domain because officials wanted to condemn the Saddleback Valley Plaza and a shopping center whose anchor, K mart, had closed in 1994.

Harvey Boelts, who owned an interest in one of the shopping centers, filed a lawsuit challenging the validity of the city's actions. He contended that the city's findings to justify its decision were not supported by substantial evidence. Orange County Superior Court Judge C. Robert Jameson ruled for Boelts and blocked implementation of the plan amendment. Judge Jameson determined that the addition of eminent domain authority was a material and substantial plan amendment that warranted new findings of blight. The county made the original blight findings under different circumstances, and those findings were insufficient to support the plan amendment, Jameson ruled.

The city appealed, but a three-judge panel of the Fourth District, Division Three, upheld the lower court.

The city's primary argument was that once the initial finding of blight was made and the time for challenging that finding in court had passed (which it did in 60 days), blight was conclusively established. The city based its argument on Health and Safety Code § 33368, which addresses procedures for adopting an initial redevelopment plan.

But the Fourth District said that the city was improperly reading § 33368 in isolation. The city needed also to consider § 33457.1, which deals with redevelopment plan amendments. In some circumstances when a plan is amended, blight findings are warranted under § 33457.1, the court ruled.

“[O]riginal blight findings remain conclusive under § 33368 until a timely validation action brought pursuant to an amendment (if such findings are warranted under § 33457.1), but, by the very terms of § 33368, only until then,” Presiding Justice David Sills wrote for the court.

Property owner Boelts filed the validation action here. And because the power of eminent domain is extraordinary, the addition of such power is a material change to the plan that warrants new blight findings, the court held. The city, though, did not attempt to support the plan amendment with updated blight findings.

Reimann contended that the court misread the law and said she would ask the state Supreme Court to review the decision. All the city did in 2002 was add the power of eminent domain because the city did not want to pay “speculative prices” for commercial real estate, she said.

“It's clearly the same overall plan. The goals and objectives remain the same. The agency was always authorized the buy and sell property,” Reimann said.

The Case:
Boelts v. City of Lake Forest, No. G033549, 05 C.D.O.S. 1680, 2005 DJDAR 2277. Filed February 24, 2005.
The Lawyers:
For the city: Kathryn Reimann, (831) 647-1430.
For Boelts: Michael Leifer, Palmieri, Tyler, Wiener, Wilhelm & Waldron, (949) 851-9400.