California county's use of eminent domain upsets developers: San Jose (CA) Mercury News, 6/17/06

By Samantha Young, Associated Press

A 17,000-acre swath of farm land that is rich in water reserves went up for sale two years ago, catching the eye of real estate developers but alarming local officials who feared its water would be siphoned off to satisfy Sacramento's sprawling suburbs.

The sale set off a costly court case when the Yolo County Board of Supervisors decided to seize Conaway Ranch through eminent domain, saying it wanted to protect the water rights and open space. The ensuing fight has pitted a rural county against a consortium of wealthy Sacramento developers who maintain they have no plans to build on the land.

But it also has sparked wider interest. Property rights advocates upset over last year's U.S. Supreme Court decision expanding the governments' right to seize land point to Conaway as another example of eminent domain abuse.

The controversy has become a flashpoint during a year in which an initiative seeking to restrict the use of eminent domain appears headed to California's general election ballot in November.

Two courts so far have sided with the county, ruling that it has a legal right to protect the area's rice fields, water and wildlife from the threat of development by its owners, the Conaway Preservation Group.

"I believe to my core if these guys were to keep this property, they would market this water to the highest bidder," said Supervisor Mike McGowan, one of the lead negotiators in the county's talks with the developers. "Their motive is to make money. They've acquired this ranch as an investment."

In court, attorneys for the Conaway Ranch's owners have argued the county has manufactured a "self-created threat or fear of development" that puts agricultural land across the country at risk of government takeover.

"Speculation does not serve as a ground that allows government to take private property," wrote attorney Gary Livaich. "Conaway ranch and its resources are being preserved and protected under the stewardship of its private owners."

In the spring, Conaway Ranch is covered by rice paddies and alfalfa crops. A few buildings are clustered at the center of the ranch - a warehouse used by the tenant farmers and two others that serve the ranch's duck-hunting club.

About half the land also is used during the winter as a floodplain when the Sacramento River reaches dangerous levels, serving as a crucial outlet for rising waters and as a key link in Sacramento's flood-control plans. Because of that, only the westernmost sliver of the ranch between Woodland and Davis, home to a University of California campus, is eligible for development.

Supporters of the county's eminent domain effort say precedent for the action already exists, pointing to the federal government's buying development rights from farmers in 2002 to protect land at Point Reyes National Seashore.

Antonio Rossmann, an adjunct professor of law at the University of California, Berkeley and an expert in land-use law, said the courts have given local governments the prerogative to buy land to preserve it.

"I think the county is on firm ground," Rossmann said. "The Conaway Ranch case is essentially a political dispute that the landowners are trying to divert into a legal case."

Nevertheless, the case has fired up local property rights advocates who complain the county has no business buying a working ranch from unwilling sellers.

The next twist in the case is expected to come this fall from a Yolo County jury, which will decide how much the county should pay to the Conaway Preservation Group. If the developers are not satisfied with the result, they could appeal.

The coalition of developers paid $60 million for the ranch in 2004 after the county began its eminent domain proceedings on the ranch. Their appraisers now estimate it is worth as much as $240 million for its development potential, water resources and hunting rights.

In another twist, the Rumsey Band of Wintun Indians, which operates the Cache Creek casino in northwest Yolo County, has offered to loan the county the money to buy the land. That has prompted concern among critics that the tribe might seek favors from the county in the future.

McGowan, the county supervisor, said there's no such deal between Yolo County and the tribe. He said the Rumsey Band simply wants to be "a good neighbor" and that the property would never be home to a casino. He promised full disclosure of the loan details when the terms are set.

The land comes with title to 30,000 acre-feet of water from the Sacramento River and another 20,000 acre-feet from groundwater wells. Combined, that's enough to supply 200,000 people a year - 15,000 more than the population of Yolo County, according to U.S. Census Bureau estimates.

Over the years, county elected officials have fought proposals by area farmers to sell their water outside the county. It is among a dozen jurisdictions in the state that regulates exports of groundwater but lacks the authority to regulate water drawn from rivers.

Experts in state water law say Conaway Ranch owners could sell their rights to Sacramento River water.

"If we can have a fair price for the land, then I think it would be a good idea for Yolo County to secure its water supply," said Richard Howitt, a professor of agriculture economics at the University of California, Davis, who has studied the impacts of water transfers out of Yolo County.

The farm land also presents an attractive target for housing developers, said Dave Jarnette, a commercial appraiser in Rocklin, a Sacramento suburb.

"In the grand scheme of things, looking out 10 to 20 years, it certainly seems to make sense, because we're running out of land to develop," Jarnette said.

All but 2,000 acres of the ranch is designated as farm land under a state law granting farmers tax incentives to maintain agricultural use.

But in a preliminary development proposal drawn up for the Conaway Preservation Group, a private planner hired by the group suggested that 3,800 acres could be turned into a planned community of 12,000 houses, commercial and retail buildings.

In spite of those plans, Conaway Preservation Group representatives said they have no interest in developing the land. The development proposal was pitched to investors when the group president, Steve Gidaro, wanted to buy the land in 2004, but the investors scuttled the plan in January 2005, said Tovey Giezentanner, a ranch spokesman.

Instead, the property will be marketed as a conservation investment to developers looking for open space that can be preserved to offset their building enterprises elsewhere.

"The difference between now and the early 1990s is there wasn't money in conservation then, whereas there is now," Giezentanner said.

Neither Gidaro nor any of the investors agreed to be interviewed for this article.

The Yolo County Farm Bureau and the ranch's 20 tenants are opposed to the county's eminent domain bid.

"There are ulterior motives behind their quest," said Joe Martinez, the farm bureau president. "They want to divert the water to urban use."

That point resonates with farmers who have watched elected officials snap up parts of the ranch at least three times to meet the needs of area residents - by Woodland and Davis for sewage treatment and by the county for a garbage dump, Martinez said.

Martinez said farmers trust the Conaway Preservation Group not to sell the water because several of the group's leaders are avid duck hunters and have an interest in preserving the land for open space.

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