Pacific Avenue property owners challenge eminent domain action: Santa Cruz (CA) Sentinel, 7/17/05

By Shanna McCord

Ron Lau and his family, in a fierce fight to hold on to the downtown property they’ve owned since 1969, vow to appeal their eminent domain case all the way to the U.S. Supreme Court.

"There are no words to describe how this feels. It’s totally unforgivable. We’re outraged," said son Eric Lau. "We have a right to own our property. We don’t break any laws, we pay taxes and there’s three businesses running there."

After years of watching Ron Lau fail to develop the 1547 Pacific Ave. plot, the City Council voted unanimously on June 7 to seize the property that was crushed nearly 16 years ago in the Loma Prieta earthquake. Through the years a large chunk of the site has sat empty and become what city officials call a "blighted hole in the ground," covered with graffiti and weeds.

The Redevelopment Agency began formal eminent domain proceedings Tuesday by filing for condemnation of the site in Santa Cruz County Superior Court — the first step in taking title of the land in an overall ordeal that could drag out several years.

Attempting to ward off the eminent domain — the power of government to condemn private property and seize title for public use, provided owners receive fair compensation — Ron Lau transferred the decision-making authority of the land to his two children Eric and Lani Lau, both of Santa Cruz. The irrevocable power of attorney, they hope, sways city officials to let the family keep the property and put their own project there.

The power of attorney, which Eric Lau said he and Lani signed Wednesday, strips Ron Lau — a devout environmentalist — of having any say of what happens at the site.

"Me and my sister are very different from our father," Eric Lau said. "We share his values to a large degree, but we are very, very practical business people."

Eric Lau, 36, owner of Oswald, an upscale restaurant located on the now-condemned property, and Lani Lau, 38, a certified nurse midwife, say they plan to develop the site in the same fashion as city-picked developer Bolton Hill — mixed use that includes retail and housing.

But they have no solid plans.

"How close are we?," Eric Lau asked. "We’re talking to a number of people and considering many offers. If the city were to give us a chance, we could build it faster than Bolton Hill could do it considering they’ll be tied up in a lawsuit for the next five years."

The 20,000-square-foot lot, on the north end of Pacific Avenue between Lulu Carpenter’s and World Savings Bank, has been appraised at $1.6 million.

Before the earthquake, the site was home to Bookshop Santa Cruz, now located across the street.

Several development proposals by Ron Lau since the earthquake have never made it beyond the drawing board. Frustrated that nothing has been built on the property, the city Redevelopment Agency agreed to take the land and sell it to local developer Bolton Hill, which envisions building a towering complex of condominiums, shops, a restaurant and parking.

Law of the land
The Laus plan to use the eminent domain ruling by the U.S. Supreme Court in June to bolster their case, despite the 5-4 decision making it easier for local governments to force property owners to sell out and allow private economic development when officials decide it would benefit the public.

However, if the public benefit is "merely a pretext" for selling to a "favored insider," according to the Laus’ attorney, William Markham, eminent domain is not allowed. Markham said he can convince the court that Bolton Hill is the "Redevelopment Agency’s crony and favored insider."

Markham, a former Capitola resident and Bay Area real estate lawyer who now practices in San Diego, described the Supreme Court ruling as "the very kind of central planning authority they used to have in the Soviet Union."

"The city should give the Laus one chance, one decent chance to develop their property," he said. "We recognize that Ron Lau is not the appropriate person to negotiate this development. "It’s appropriate now to give irrevocable and absolute authority to Eric and Lani Lau.

"Taking should be an absolute last resort."

Louis Rittenhouse, a former councilman who owns the other empty hole on Pacific Avenue resulting from the 1989 earthquake and is often criticized for not moving faster on his proposed project, disagrees with the city’s decision to condemn the Laus’ property.

"Is this the end of the city just because there’s a hole in the ground? No," he said. "If something isn’t built, it’s not like a number of underprivileged kids won’t be fed. I don’t see the urgency."

Still, Rittenhouse said his situation is vastly different from Ron Lau’s and he’s simply waiting for businesses to sign a lease before putting a building on the site.

"We have spent hundreds of thousands of dollars for design plans approved by the City Council," he said. "We just need tenants. Ron has no plans."

Rittenhouse refused to disclose details about which possible businesses might move in.

"We’re having discussions with a number of entities," Rittenhouse said. "Nothing has born any fruit yet."

Eric Lau said city officials haven’t dealt with the two vacant plots fairly and he feels there’s a "double standard here."

"That’s not to say I want them to condemn his property," Lau said. "But looking for a tenant is essentially what we’re doing. What everyone in the development business is doing is looking for a tenant."

Cindy Geise, owner of the Mission Street Italian restaurant Avanti, said the city’s move to seize Lau’s property makes her nervous about what could happen in the future.

"How can that be blight when there’s three viable businesses and a parking lot on the property?" Geise asked. "It’s scary for everybody. Property owners have the right to determine when they’re going to develop on their property."

Moving on
Redevelopment Agency Director Ceil Cirillo said she would like to resolve the Lau case without going to court, but the agency is not in a position to back out of the deal because of its contractual obligation to Bolton Hill — a deal unanimously backed by City Council.

"We’ll talk with (the Laus) about whether there’s an opportunity to resolve the ownership issue without going through a whole eminent domain," Cirillo said. "The Laus have been longtime members of this community and I want to be supportive of their interests."

Bolton Hill representatives say they’re bracing to follow eminent domain to the end and take ownership of the property. They say 18 months of public hearings and last-minute pleas from Lau to the City Council is enough.

Up to now city officials have been extremely patient with the "recalcitrant" downtown landowner, who ignored repeated offers by the city to purchase the property, said Norman Schwartz of Bolton Hill.

"I made a commitment to the elected officials and to many people in the community who want to see that property developed," Schwartz said. "We’ve spent a considerable amount of money to get this far. I feel an obligation to move forward."

If the city is successful with eminent domain, three businesses currently housed on the site — Oswald, Asian Rose Cafe and Artforms — would be forced to relocate.

Bolton Hill would pay for the cost to uproot and relocate the businesses.

"I’m looking at locations and investigating that whole relocation process," Eric Lau said. "To say I feel slighted is the understatement of the century."

Santa Cruz Sentinel: www.santacruzsentinel.com