Under California law, local government can condemn your property for bargain basement prices, if it was going to require you to give that property up as a condition of development approval.
Generally, when government takes property through eminent domain, it is required to pay the property owner the value of the property assuming the highest and best use. California courts developed an exception to that rule in City of Porterville v. Young. Under the Porterville doctrine, if the government would have required the property owner to give up the property in question as a condition to approval of a development approval, then the property is not valued at its highest and best use in an eminent domain proceeding. Instead, the property is only valued in its undeveloped state. The only thing that the government needs to establish to take advantage of the price discount is that the dedication requirement is constitutional.
Under a recent decision by the court of appeal, however, that is not a very significant hurdle for governments looking to build highway projects.
The court in State Route 4 Bypass Authority v. Superior Court (Morimoto) rejected arguments that the dedication requirement was unconstitutional on the grounds that these property owners were being forced to shoulder a greater burden for traffic impacts than other development projects with similar impacts. In reaching this decision, the court of appeal considered two United States Supreme Court decisions regarding property exactions: Nollan v. California Coastal Commission and Dolan v. City of Tigard.
In Nollan, the US Supreme Court ruled that state and local government may not demand an exaction in exchange for building approval unless the government agency had the authority to deny the building approval because of an adverse impact that would be caused by the project. If the agency could deny the project outright, then it could grant approval with conditions only if there was a nexus between the alleged adverse impact of the development and the specific exaction. Thus, Mr. Nollan could not be required to give up an easement across his beach-front property because that easement was unrelated to the alleged adverse impact of his new house blocking the public view of the ocean from the street.
The Dolan case added the requirement that the exaction or condition required must be roughly proportional to the adverse impact.
In the State Route 4 case, the court of appeal ruled that these Supreme Court decisions do not require an equitable distribution of the burdens of building exactions. It does not matter that other property and businesses would also benefit from the new road. The requirement that these particular property owners give up their land in exchange for development approval is justified since that development would increase traffic. Since there was testimony that the exaction and traffic impact fees would be less than the burden imposed by any new development, the requirements of Dolan and Nollan were met, according to the court.
What was not explained, however, is how this exaction could be charged to this property in the first place. Under Nollan, the exaction must be related to the adverse impact from the project. Yet in the State Route 4 case, there is no project that has been proposed. The Authority is going to build this new highway bypass project regardless of any development on the Morimoto property. How, then, does this exaction meet the Nollan test?
Perhaps, if the case is appealed further, the courts will devote some attention to that question.