RIGHT OF WAY & LEGAL STRATEGIES FOR SUCCESSFUL PROJECT DELIVERY. March 2, 2017

Transcription

1 RIGHT OF WAY & LEGAL STRATEGIES FOR SUCCESSFUL PROJECT DELIVERY Marh 2, 2017

2 LEGAL ASPECTS OF EASEMENTS Brad Kuhn, Nossaman LLP Rik Rayl, Nossaman LLP Sott Delahooke, Delahooke Appraisal Company

3 Ageny / Legal / Appraisal Considerations of Easements Defining Easement Sope Easement Considerations What about the Projet? TCE Matters 3

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5 What is an Easement? An easement is an interest in real property that transfers use, but not ownership, of a portion of an owner s property. The Appraisal of Real Estate, 13 th Edition Fany way of saying: the legal right to use another s property for a speifi limited purpose. 5 5

6 Preparing the Easement Do you need to prepare the easement prior to ommening the appraisal proess? Agenies many times do not USPAP Std. Rule 1-2(e) requires a definition of the rights being appraised 6

7 Defining the Easement Sope Typial Ageny Approah: start broad - ask for everything in the world The Good: allows for all future uses (no need to go aquire additional rights), and usually not a problem for most voluntary aquisitions The Bad: inreases amount of ompensation The Ugly: In ondemnation, owner will seek ompensation based on most injurious use 7

8 Most Injurious Use - County of San Diego v. Bressi (1986) 184 Cal.Rptr. 3d 112 County ondemns avigation easement for every type of airraft whih is now in existene or whih may be developed in the future for both ommerial and nonommerial flights. County later laims it an t utilize jumbo jets. Court holds that County may not ontradit RON. Jury must find damages from the onstrution of the improvement and must onsider the most injurious use of the property reasonably possible based on entire range of uses permitted under the resolution of neessity. 8

9 Types of Easements Utilities (overhead and underground) Aess Streets / Highways Aerial Temporary 9

10 Issues to Consider Rights of Aess Use of Ground Spae / Aerial Spae Subsurfae Rights Rights retained by property owner Ability to Install, Reonstrut, Maintain Sope of Use (one line/multiple lines, overhead/underground, remove landsaping, transmission poles vs. overhead) Future Upgrades 10

11 Floating Aess Easements 11 11

12 Aerial Easements 12 12

13 Flood Control Easement Example 13

14 Flood Control Easement Example 14

15 Flood Control Easement Example The permanent easement and right of way is in, on, over, under, along and aross that portion of the property for exavation, removal, demolition, and alteration of failities, and for the onstrution, reonstrution, replaement, repair and use of improvements for flood ontrol purposes. No permanent improvements or enroahments permitted 15

16 Don t Forget to Consider the Projet! CCP : Damage to the remainder is the damage, if any, aused to the remainder by either or both of the following: The severane of the remainder from the part taken. The onstrution and use of the projet for whih the property is taken in the manner proposed by the plaintiff whether or not the damage is aused by a portion of the projet loated on the part taken. 16

17 Street Widening Easements 17

18 Temporary Constrution Easements Ageny often needs temporary rights in order to onstrut the projet Engineers often view these as inonsequential Agenies budget for only the rental value of the property TCE an reate massive severane-damage laim if owner is left with, for example, insuffiient aess during onstrution Wath for exlusive vs. non-exlusive rights Is the TCE really neessary, or just onvenient? 18

19 Design-Build Context Ageny may be aquiring property rights before hiring the design-build ontrator If design-build ontrator is going to finalize design and determine how projet will be onstruted, it may be diffiult to determine TCE needs Ageny response is often to leave the obligation to obtain TCEs with the design-builder Is this reasonable? Is it realisti? What is the bakup plan? 19

20 TCE Valuation Conepts Fair Market Value requires value based on highest and best use TCE typially valued based on fair rental value (Saramento & San Joaquin Drainage Dist. V. Goehring (1970) 13 Cal.App.3d 58, 66) Temporary severane: onsider present value of loss 20 20

21 Temporary Severane Damages Can a TCE result in ompensable temporary severane damages? It depends on atual intended use MWD v. Campus Crusade (2007) 41 Cal.4 th 954 City of Fremont v. Fisher (2008) 160 Cal.App.4 th 666 City of Livermore v. Baa (2012) 205 Cal.App.4 th

22 TCE Duration Constrution ommenement date unertain When to start? Upon providing advane written notie? Upon exeution of the agreement / OPP? When to end? No deadline or upon notie of ompletion? Defined date? Extensions 22

23 FHWA Poliy on TCEs 23

24 Caltrans Poliy Manual Setion Temporary Easements Compensation for a temporary easement ommenes when the State obtains legal possession of a property. Although the atual/physial use of a property may be antiipated for a limited duration within a set time frame, a property is onsidered to be enumbered for the entire duration of the easement term. For example, a temporary easement for a 12-month antiipated duration to be used within a 36-month time frame results in a 36-month easement period to be evaluated and valued. 24

25 Temporary Constrution Easements 25

26 Other TCE Conditions Restoration Protet in Plae / Replae-in-Kind Cost-to-Cure Driveway / Aess Re-onnetion of utilities / sprinklers 26

27 Contat Information Brad Kuhn Rik Rayl Sott Delahooke 27

28 THE PROJECT INFLUENCE RULE David Graeler, Nossaman LLP John Ellis, Integra Realty Resoures

29 Muppets and Eminent Domain 29

30 Disussion Overview Legal Conepts Two Reent Case Studies Appraisal Considerations and Case Studies 30

31 Code of Civil Proedure setion

32 Remedial Purpose Adjusts basi definition of fair market value under setion Eliminates unfair impats to both the publi ageny and the property owner Rendering Faility or Waste Water Faility Light Rail Station 1975: Minimal ase authority 32

33 Nuanes of Setion Are hanges in value aused by a projet other than the one for whih the property is taken admissible? What if the projets are related? YES People v. Cramer (1971) 14 Cal.App.3d

34 Nuanes of Setion Property is affeted by a projet but is not to be taken for that projet. Subsequently the sope of the projet is hanged or expanded and the property is taken. Should impats be onsidered in determining value? YES (to an extent) People v. Miller (1971) 21 Cal.App.3d

35 Nuanes of Setion A ondemning ageny and zoning authority are the same. It plaes zoning restritions on property to be ondemned in order to depress land values. Should zoning restritions be onsidered in determining value? NO City of San Diego v. Ranho Penasquitos Partnership (2003) 105 Cal.App.4 th

36 Nuanes of Setion Should a dediation requirement be exluded in determining the fair market value of a property that is being ondemned? Maybe It depends on the date of probable inlusion of the property in the projet as opposed to plan to mitigate possible development (City of Perris v. Stamper (2016) 1 Cal.5 th 576) 36

37 Case Studies Expo v. City of Santa Monia (Pathett) Expo v. City of Santa Monia (402 Colorado) 37

38 Expo Line 38

39 Expo v. City of Santa Monia (Pathett) 39

40 Expo v. City of Santa Monia (Pathett) 40

41 Expo v. City of Santa Monia (Pathett) 41

42 Expo v. City of Santa Monia (Pathett) 42

43 Expo v. City of Santa Monia (Pathett) 43

44 Expo v. City of Santa Monia (Pathett) 44

45 Expo v. City of Santa Monia (Pathett) 45

46 Expo v. City of Santa Monia (Pathett) Property purhased by City of Santa Monia in 1989 with TDA funds in order to ensure availability for eventual transitrelated use Metro authorized funding for property aquisition in antiipation of the light rail projet for whih Expo is now aquiring the property 46

47 Expo v. City of Santa Monia (Pathett) Beause projet was years away, City made produtive use by leasing it to Bergamot Station, LTD starting in 1994 To ensure availability for the planned light rail projet, City s lease had a termination lause with one year s notie if for transitrelated use 34 art galleries eventually take tenany 47

48 Expo v. City of Santa Monia (Pathett) Pathett then subleases from Bergamot and forms Trak 16 Expo omes forward to aquire Trak 16 and City issues its one-year notie to terminate lease and sublease Pathett laims multi-million in lost business goodwill 48

49 Expo v. City of Santa Monia (Pathett) Pathett argues seurity of oupany beause lease would ontinue into perpetuity. Argues for 4 years remaining on lease instead of 4 months Claims Projet Influene Rule prohibits onsideration of lease termination 49

50 Expo v. City of Santa Monia (Pathett) Expo laims lease agreement is a ontrat that limits Pathett s rights What are the poliy impliations? Should the Projet Influene Rule apply under these irumstanes? 50

51 Expo v. City of Santa Monia (Pathett) 51

52 Expo v. City of Santa Monia (Pathett) What did the Court do? 52

53 Expo v. City of Santa Monia (Pathett) 53

54 Expo v. City of Santa Monia (402 Colorado) New Case filed more than 2 years later Same judge Same projet Same TDA funds Similar irumstanes SAME OUTCOME? 54

55 Expo v. City of Santa Monia (402 Colorado) 55

56 Expo v. City of Santa Monia (402 Colorado) 56

57 Expo v. City of Santa Monia (402 Colorado) 57

58 Expo v. City of Santa Monia (402 Colorado) 58

59 Expo v. City of Santa Monia (402 Colorado) In 1984, LACTC and City reate Rail Reserve by using restrited TDA funds Rail Reserve was for onstrution of rail projets within the City In early 2000s, planning began in earnest on light rail line alled Exposition Line Rail Transit Projet 59

60 Expo v. City of Santa Monia (402 Colorado) City identified 401 Colorado as a promising site for terminus City proposed using TDA rail reserve funds to purhase the property for $30 million City told Metro that it would reserve the property for the terminus station and not undertake uses inonsistent with planned publi transit 60

61 Expo v. City of Santa Monia (402 Colorado) City told Metro it was good idea to protet Metro against prie inflation In 2006, Metro approves City s request and gives City ~ $30 million from TDA rail reserve to buy 402 Colorado 61

62 Expo v. City of Santa Monia (402 Colorado) Metro approval expressly subjet to Santa Monia maintaining its purhased property for transit-related use until the terminus stations is onstruted Use restrition not disputed by City 62

63 Expo v. City of Santa Monia (402 Colorado) City onvines Expo to realign the projet and take only one-third of 402 Colorado City laims ompensation of $30 million for part taken and severane damages for the two-thirds of property not taken and whih it keeps 63

64 Expo v. City of Santa Monia (402 Colorado) While Board minutes are lear, there is no speifi ontrat between City and Metro Alternative legal theories onsidered Ultimately, valuation question tied to use restrition City argues Projet Influene Rule 64

65 Expo v. City of Santa Monia (402 Colorado) Expo argued No projet influene or preliminary ations ausing impat; it was funding agreement (i.e., ontrat) by City under TDA (i.e., law) that imposed the use restritions This was MUTUAL agreement. No prevention of up-zoning like Ranho Penasquitos Expo ould have seleted a different alignment with use restrition persisting 65

66 Expo v. City of Santa Monia (402 Colorado) Expo argued Entire transation is projet influened. Must we ignore City s purhase too? No ill to protet. City wanted projet City even gets to keep two-thirds Not what Projet Influene Rule designed to protet Slippery slope. Must all ontrats be written out of existene? 66

67 Expo v. City of Santa Monia (402 Colorado) Unintended Consequenes? City got money from Metro and then will get paid again? City is onverting restrited tax dollars into unrestrited funds 67

68 Expo v. City of Santa Monia (402 Colorado) How did the Court deide? 68

69 Ignoring the hange in fair market value attributable to the Projet for Whih the Property Is Taken (in a situation where there is a different projet that may also affet value) San Bernardino County Transportation Commission v. Hefftner, et al. Subjet property in the before ondition 69

70 San Bernardino County Transportation Commission v. Hefftner, et al. Subjet property in the before ondition 70

71 San Bernardino County Transportation Commission v. Hefftner, et al. Street modifiations from Projet for Whih the Property Is Taken in Gray Street modifiations from nearby Caltrans Interstate 15 projet in Orange 71

72 Fair market value shall not inlude any inrease or derease in the value of the property attributable to: The eminent domain proeeding for whih the property is taken. LACMTA v. Gilbert Foundation, et al. 72

73 LACMTA v. Gilbert Foundation, et al. Subjet property in ondition before ommenement of eminent domain proeeding in whih the property is taken 73

74 LACMTA v. Gilbert Foundation, et al. Subjet property after ommenement of eminent domain proeeding in whih the property is taken 74

75 LACMTA v. Gilbert Foundation, et al. Timing of inspetion and photography is important to avoid portrayal of projet influene on the subjet property. 75

76 LACMTA v. Gilbert Foundation, et al. Photo Taken: Marh 2014 Date of Value: Otober 8, 2014 Photo Taken: February

77 There may be multiple soures of photographs that show the ondition of the subjet property without any projet influene. 77

78 LACMTA v. Gilbert Foundation, et al. View north along La Cienega Boulevard from a point near the Gilbert property. Stinking Rose at left; Benihana on right. 78

79 The projet for whih the property is taken may affet the priing of potentially omparable sale properties. 79

80 55 North La Cienega Boulevard The Stinking Rose, Beverly Hills Prie: $17,000,000 Land Area: 38,500 SF Zoning: C3 Improvements at Sale: Restaurant and Parking Lot Sale Date: Otober 2014 Prie PSF Land $442 80

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87 38 North La Cienega Boulevard Benihana, Beverly Hills Prie: $20,500,000 Land Area: 22,000 SF Zoning: C3 Improvements at Sale: Restaurant and Parking Lot Sale Date: Marh 2016 Prie PSF Land: $932 87

88 Another example of projet influene showing up in the priing of a omparable sale Why would anyone want to park in San Ysidro and then walk into Tijuana? Is there a premium for being the last ommerial parking lot in California before the freeway rosses into Mexio? 88

89 San Ysidro Border Crossing 89

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91 UETA Parking Lot at 5774 Camino Camiones Way San Ysidro 91

92 Reported daily parking usage sometimes exeeded 100% Volume of parking usage was verified using surveillane ameras 92

93 UETA Parking Lot 93

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95 Border Station Parking Lot UETA Parking Lot 95

96 After the projet site is aquired, Sale 3 (Border Station Parking Lot) will beome the last ommerial parking lot in California before the freeway rosses into Mexio. 96

97 Contat Information David Graeler John Ellis 97

98 DEMYSTIFYING BUSINESS CLAIMS: THE CROSSROADS OF RELOCATION AND GOODWILL Artin Shaverdian, Nossaman LLP Bernadette Duran-Brown, Nossaman LLP Donna Desmond, Donna Desmond Assoiates Mark La Bonte, Overland, Cutler & Paifi

99 Reloation and Goodwill Considerations The Legal Framework - Reloation Business Reloation Benefits Trends in Today s Business Reloation Claims Demystifying Business Reloation Claims Cross Roads of Reloation and Goodwill Goodwill Entitlement Dupliative Compensation/Casasola 99

100 Reloation Statutes The Reloation At, Govt. Code 7260 et seq. California Code of Regulations Title 25, Division 1, Chapter 5.5 & et seq. Uniform Reloation Assistane and Real Property Aquisition Poliies At of 1970 (Uniform At) 42 U.S.C et seq. Implementing Regulations to the Uniform At Code of Federal Regulations Title 49 at 49 CFR 24.1 et seq. 100

101 Reloation Assistane Program General Requirements Doumentation Reimbursement Program, 49 CFR (a) Claim to be support by expenses inurred Advane Payments Redue hardships 49 CFR () Time for Filing No later than 18 months after: Tenant - Displaement of tenant Owner - Displaement or date of final payment to owner for aquisition of real property 49 CFR (d) 101

102 What Are Business Reloation Benefits? Atual out of poket osts inurred to aomplish the move No Limit Value of some personal items that annot be reloated eonomially No Limit Costs assoiated with loating a reloation site State - $1,000 Federal - $2,500 Costs assoiated with reestablishing the business at the new site Work to make reloation site suitable for business State - $10,000 Federal - $25,

103 Business Reloation Benefits Fixed Payment In-Lieu State - $1,000 - $20,000 Federal - $1,000 - $40,

104 Reloation Isn t What it Used to Be Then Now 104

105 Demystifying Reloation Claims Suessful Reloation Conflit Ineligible Reloation Claims 105

106 Today s Typial Business Reloation Claim Large $ value laims Driven by Build out osts Maximize the Atual Reasonable Moving & Related Expenses Column - 49 CFR Moving of IPTR Creates Issues of Entitlement/Apportionment Virtually Nothing in Reestablishment Column Minimal Doumentation Displaees Requesting Advane Approval of Claims 106

107 A Bad Movie The Rise of the Move Planner The new expert in town The Move Planner The Reloation Agent 107

108 The Move Plan The Inventory List Personal Property, M&E, FF&E Moving Bid No replaement site No plans No bids The Design Build Argument Hard to Evaluate/Justify Costs 108

109 The Self Move The Self-Move Intention What Are We Seeing? The All-Inlusive Settlement Expedient but Eligible? 109

110 Obsolete Equipment Move Cannot be Guaranteed They want replaement new No Downtime Purhase of Substitute Personal Property Loss of Tangible Personal Property 110

111 Cross Roads of Reloation and Goodwill Business Goodwill: Eligibility Business must possess goodwill Maybe Loss must be aused by the Projet Owner must take reasonable steps to preserve goodwill Compensation must not be dupliative of reloation payments or other awards (Code of Civil Proedure et seq.) 111

112 Cross Roads of Reloation and Goodwill Entitlement Of ourse we have goodwill, it says so on our building. Dupliation/Casasola 112

113 Business Goodwill 101 There is no onstitutional right to ompensation for loss of business goodwill. (See Community Redev. Ageny v. Abrams (1975) 15 Cal.3d 813; see also Community Dev. Comm n v. Asaro (1989) 212 Cal.App.3d 1297.) Just ompensation as required by the California Constitution is limited to the fair market value of real property taken or damaged by publi projets. (Community Redev. Ageny v. Abrams, supra, 15 Cal.3d at ) The right to ompensation for business goodwill was reated by the California legislature and it exists only within a statutory framework. 113

114 Reloation + Goodwill = Entitlement? In order to establish entitlement to ompensation for loss of business goodwill, a business owner must prove: 1. that the loss was aused by the aquisition; 2. that the loss annot be reasonably prevented by reloation or other prudent steps to preserve goodwill; 3. that ompensation for the loss is not inluded in reloation assistane payments; and 4. that the ompensation for the loss is not dupliated in any other ompensation to be awarded to the business owner. (Code Civ. Pro., , subds. (a)(1)-(4); see also Law Rev. Comm n Comments [ Goodwill loss is reoverable only to the extent it annot reasonably be prevented by reloation or other efforts by the owner to mitigate. ].) 114

115 Reloation + Goodwill = Entitlement? Where the ondemnee annot establish the fats showing it took reasonable steps to preserve its goodwill, it will not be entitled to any ompensation for alleged loss of goodwill. (11 Cal. Real Est., 30A:45 (3d ed.) Goodwill is defined as the benefits that arue to a business as a result of its loation, reputation for dependability, skill or quality, and any other irumstanes resulting in probable retention of old or aquisition of new patronage. (Code Civ. Pro., (b).) Ultimately, if a business an retain some goodwill value at a new loation by serving new ustomers, it must do so, even if it loses many of its old patrons. (1 Matteoni & Veit, Condemnation Pratie in California (3d ed. 2011) Just Compensation, se. 4:71, p. 117.) 115

116 Case Study: Metro v. Yum Yum Donuts Quik fats: Full take, reloation required Metro hired a reloation agent to assist Claimed reloation was impossible and laimed a total loss Metro proeeded with a goodwill entitlement trial Compare to operative ase: Regents of University of California v. Sheily (2004) 122 Cal.App.4th 824, 832. Full take of dental offie in rented spae 116

117 Case Study Comparison of Reloation Efforts to Determine Entitlement Sheily s Reloation Reloation agent s efforts were ompletely ignored Sent numerous relo sites; efforts were dismissed Refused to allow ageny to inventory FF&E No searh riteria provided Wanted idential site and refused to negotiate otherwise Didn t dislose new loation Yum Yum s Reloation Rejeted all reloation sites for various reasons Agent never allowed to speak to business emloyees Didn t dislose 2 new stores Rejeted all relo sites based on unreasonable positions Efforts limited to re-running same loopnet searh 117

118 Case Study Outomes: No Entitlement to Goodwill Sheily Matter Reloation efforts were unreasonable Yum Yum enjoyed 90% repeat business Failed to show loss ould not reasonably be prevented Searh riteria appliable for new stores, not relo site Personal irumstanes, i.e. no time to reloate, finanial ondition, age, physial ondition irrelevant Yum Yum Matter Ageny foused on three sites, prepared pro forma of finanials and showed YY ould have retained some goodwill at any of the 3 sites Reloation efforts were unreasonable 118

119 The Casasola Conundrum Can mitigation osts be inorporated into the alulation of loss of goodwill? The fats of the ase: LAUSD aquires property housing a atering truk ompany Goodwill value $126,000 Casasola purhased and improved reloation site LAUSD reimbursed $224,000 for reloation expenses Casasola sought additional $1,131,000 as osts to mitigate loss of goodwill 119

120 The Casasola Conundrum The Question: Can mitigation osts be inorporated into the alulation of loss of goodwill? The Court says no: [A] diplaed property owner may not reover under the eminent domain law expenditures deemed nonreoverable under the Reloation Assistane At. Inludes a lass of nonreoverable expenses and reestablishment expenses in exess of $10,000. Legislature intent ap reestablishment osts, thus not reoverable in goodwill 120

121 The Casasola Conundrum What does this mean in alulating loss of goodwill? Before Casasola, goodwill appraisers typially inluded a return on unreimbursed re-establishment osts (tenant improvements, et.) as part of the after ondition rent expense. After Casasola, all ategories of osts eligible for reestablishment reimbursement are not to be inluded as part of goodwill loss alulation Modifiations to reloation site First two years of inreased ost of operation 121

122 The Casasola Conundrum Ageny responses: To failitate early settlement - ignore it Value goodwill in after ondition onsidering all unreimbursed reestablishment expenses Consider only some of the osts Inreased operating osts Inlude osts inorporated within a TI allowane Strit Casasola interpretation Court may exlude an appraisal that inludes any of the disallowed mitigation osts 122

123 State v. Presidio Performing Arts Foundation For purposes of the threshold determination of entitlement to ompensation, a party must establish that the taking aused some amount of loss of goodwill due to the taking, but need not quantify the loss [in a speified manner]...we are not onvined.that the only way to quantify lost goodwill is by establishing pre-taking goodwill value and subtrating post-taking goodwill value. Nowhere in the statutory language is there a preondition that this [goodwill] ompensation is available only to a business that, before the taking, had a total business value in exess of its tangible assets, or profits in exess of a fair rate of return on its total assets. 123

124 Ageny Solutions Advisory Assistane Require Replaement Site Require Plan Require Competitive Bids Require Entire Bid Pakage for Entire Job Total GW Loss Claim? Chek Fats Provide Ongoing Reloation Assistane Set Realisti Expetations re Reestablishment 124

125 Contat Information Artin Shaverdian Bernadette Duran-Brown Donna Desmond Mark La Bonte 125

126 CASE LAW UPDATE Katherine Contreras, Nossaman LLP

127 California Supreme Court Double Header Game 1 City of Perris v. Stamper (2016) 1 Cal.5th 576 Projet Influene Rule [T]he projet influene rule generally applies when it is probable at the time a dediation requirement is put in plae that the property subjet to the dediation will be inluded in the projet for whih ondemnation is sought Judge and Jury We hold that the onstitutionality of a dediation requirement under Nollan and Dolan is a question for a ourt, not a jury. 127

128 Supreme Court Double Header Game 2 Property Reserve v. Superior Court (2016) 1 Cal.5th 151 Statutory Rights of Entry A publi ageny may enter upon property to make photographs, studies, surveys, examinations, tests, soundings, borings, samplings or appraisals or to engage in similar ativities reasonably related to aquisition or use of the property for that use. CCP

129 Supreme Court Double Header Game 2 Property Reserve v. Superior Court The Bakstory Environmental Testing & Surveys Geologi Investigations Trial Court Court of Appeal 129

130 Supreme Court Double Header Game 2 Property Reserve v Superior Court Does entering the property for environmental and geologi testing onstitute a taking? Do the Right of Entry statutes pass onstitutional muster? [W]e onlude that both the language and the legislative history of the preondemnation entry and testing statutes demonstrate that the statutes were intended to apply to the types of preondemnation ativities at issue here. 130

131 Supreme Court Double Header Game 2 Property Reserve v Superior Court Three Requirements 1. Institution of a legal proeeding 2. Limited to reasonably neessary ativities 3. Deposit of probable ompensation 4. Proess for obtaining additional ompensation 131

132 Supreme Court Double Header Game 2 Property Reserve v Superior Court The Big Question The Right of Entry proedure satisfies the California takings lause when reformed to permit the property owner to obtain a jury determination of damages in the proeeding 132

133 California Supreme Court The Post-Game Show Property Reserve Right to Disovery Young s Market Per se Taking? The Bottom Line: The right to a jury trial is paramount. Everything else is details. 133

134 Meanwhile, Bak at the Court of Appeal Boxer v. City of Beverly Hills (2016) 246 Cal.App.4th 1212 No physial taking, no ompensation 616 Croft Ave. LLC v. City of West Hollywood (2016) 3 Cal.App.5th 621 In lieu housing fee not an exation Caltrans v. Presidio Performing Arts Foundation (2016) 5 Cal.App.5th 190 No profit, no goodwill? 134

135 How to Lose an Eminent Domain Case Without Really Trying Designate Your Experts County of Santa Barbara v. Double H Properties No Double Counting SANDAG v. Vanta Fight Your Own Battles SDMU LLP v. County of San Diego 135

136 And the Winners Are 136

137 The View From Washington, D.C. More publi / private partnerships The first $137.5 billion Streamlining regulations Buy Amerian 137

138 What s Next? AB 408 Leverage for landowners Impats to budgets and timelines The Border Wall The Roosevelt Reservation Exemptions from environmental review 138

139 Contat Information Katherine Contreras 139

140 NEGOTIATION STRATEGY ISSUES ARISING IN RAILROAD RIGHT OF WAY ACQUISITIONS Kevin Sheys, Nossaman LLP

141 Overview Truth & Consequenes Speial issues that arise when aquiring railroad right of way Truth ICCTA Preemption is broad Timing of negotiations & environmental review are at odds 141

142 Overview Truth & Consequenes Consequenes Signifiant limitations on railroad ROW ondemnation Cannot effetively use appraisals to lok in a prie range Prie negotiations are late in the proess, whih imposes signifiant limitations on your leverage 142

143 Overview Truth & Consequenes Solutions Preemption is not infinite Railroads an be brought to the table Negotiations & environmental review an be reoniled Prie negotiations an be earlier in the proess and leverage an be preserved 143

144 ICCTA Preemption The Statute [49 U.S.C (b)]: STB jurisdition over transportation by rail arriers is exlusive The remedies provided in this part with respet to rates, lassifiations, rules (inluding ar servie, interhange, and other operating rules), praties, routes, servies, and failities of suh arriers are exlusive (Referenes to this part refer to Part A Rail, Subtitle IV, Title 49) STB jurisdition over the onstrution, aquisition, operation, abandonment, or disontinuane of railroad traks is exlusive 144

145 ICCTA Preemption Express Preemption Proviso: Exept as otherwise provided in this part, the remedies provided under this part with respet to regulation of rail transportation are exlusive and preempt the remedies provided under Federal or State law. 145

146 ICCTA Preemption How has Statute been interpreted? Whether a partiular ativity is onsidered part of transportation by rail arrier under is a aseby-ase, fat-speifi determination 146

147 ICCTA Preemption Two types of ation are ategorially preempted: any form of state or loal permitting or prelearane that, by its nature, ould be used to deny a railroad the ability to ondut some part of its operations or to proeed with ativities that the [STB] has authorized; and any state or loal regulation of matters diretly regulated by the [STB] suh as the onstrution, operation, and abandonment of rail lines; railroad mergers, line aquisitions, and other forms of onsolidation; and railroad rates and servie. 147

148 ICCTA Preemption These two types of state ations are: per se unreasonable interferene with interstate ommere the preemption analysis is addressed not to the reasonableness of the partiular state or loal ation 148

149 ICCTA Preemption What if the ation is not ategorially preempted? The STB and the ourts use an as-applied test whih requires a fatual assessment of whether [a state or loal] ation would have the effet of preventing or unreasonably interfering with railroad transportation. As applied, a state ation is preempted if it: imposes an unreasonable burden on railroading or disriminates against railroads. 149

150 ICCTA Preemption If you get to the as applied test, you open up a good list of pronounements and favorable presumptions: Congressional purpose is the ultimate touhstone Presumption that polie powers are not preempted Presumption that state property law is not preempted If a statute has more than one plausible reading, Courts disfavor preemption Preemption disfavored on issues left to the states 150

151 ICCTA Preemption Beyond the favorable presumptions, you get to put on fats. Fats about how your aquisition does not impose an unreasonable burden on railroading Fats about how you would use the same approah with non-railroad owners and therefore are not disriminating against railroads or treating them differently than other owners 151

152 ICCTA Preemption Linoln ases two ases that present some support for this approah Linoln I City sought delaratory order that taking a 20 portion of a 100 railroad ROW for a trail and a storm sewer was not preempted by the ICCTA STB ruled that City did not meet its burden of proof to show that the taking would not unreasonably interfere with railroad operations 152

153 ICCTA Preemption The City appealed and lost; then is took out the trail plan but ontinued with the sewer system Linoln II City sought delaratory order that taking a 20 portion of a 100 railroad ROW for sewer system alone was not preempted by the ICCTA 153

154 ICCTA Preemption Linoln II STB said: Preemption an shield RR property where the effet of eminent domain law would be to unreasonably interfere with railroad operations Preedent does not suggest a blanket rule that any ondemnation ation against railroad property is impermissible 154

155 ICCTA Preemption Get beyond ategorial preemption and to the fats Negotiation onsiderations 155

156 Negotiations vs. NEPA On large publi projets, it is good to know what you will pay for property (or rights in property) before you spend 2-5 years and millions of dollars onfirming that the property is the best available for your intended use 156

157 Negotiations vs. NEPA The environmental review proess under NEPA (and CEQA and other states environmental learane laws) generally does not allow the government buyer (using federal or state funds) to aquire property before ompletion of the environmental review proess Cannot ommit the federal or state gov t to an expenditure before knowing and dislosing the environmental impat 157

158 Negotiations vs. NEPA Not an insurmountable problem of you an ondemn You an do an appraisal and you then know the ost range You an then ondut the environmental review without fear that you get to the end of the proess and the seller will demand a prie beyond what the projet an justify or afford 158

159 Negotiations vs. NEPA However, if you annot ondemn, an appraisal will not give you your prie range True, a Railroad s prie will be loosely based on an appraisal 159

160 Negotiations vs. NEPA 160

161 Negotiations vs. NEPA Railroads are very little about appraised value They ertainly do not feel bound in negotiations by appraised value Okay, but what ompany does not want to sell exess right-of-way? This raises a related issue about a railroad s time horizon 161

162 Negotiations vs. NEPA 162

163 Negotiations vs. NEPA 163

164 Negotiations vs. NEPA The Challenge on Railroad property aquisitions How an you know your prie range with the railroad before the environmental learane? How an you get a prie without running afoul of NEPA (or CEQA or equivalent)? Beause of the preemption hallenges, what you need on rail aquisitions is an early agreement on prie 164

165 Negotiations vs. NEPA An early agreement on prie, a/k/a an Option to Purhase An option does not limit the evaluation of alternatives for future projets An option to purhase is similar in this respet to other aquisitions of an interest in real property (e.g., seni easements) that do not hange the use of the property and are ategorially exluded from environmental learane requirements under FTA and FHWA rules 165

166 Negotiations vs. NEPA Solution Given the preemption hallenges in railroad ROW aquisitions, I respetfully suggest greater exploration of purhase options They offer potential to avoid bad outomes in prie negotiations while still omplying with environmental learane requirements 166

167 Key Take-aways Preemption is not infinite get beyond the presumptions and to the fats; reate enough healthy doubt about the outome and you an get the railroad to the table Prie negotiations an be before environmental learane and leverage an be preserved, by onsidering greater use of purhase options 167

168 THANK YOU FOR YOUR TIME AND ATTENTION. 168

169 Contat Information Kevin