High Court Ruling to Add to Costs of Redevelopment

Times Staff Writer

In a costly decision for redevelopment agencies, the state Supreme Court ruled Thursday that agencies must pay market-rate interest when they take people’s property, striking down a law allowing interest payments at far less than the going rate.

When an agency files a condemnation suit, it deposits money in a trust account and pays interest on the amount. Displaced property owners receive the money, plus interest, after a court determines the property’s value, a process that can take years.

Acting on a Burbank case, the unanimous court, citing a recent U.S. Supreme Court decision, declared unconstitutional a state law that placed a 7% cap on interest paid to people whose property is condemned.

Property owners in Thursday’s case were seeking interest rates of 20.5%, the going rate at the time of the suit in 1980 and 1981. The property, which was condemned so that condominiums could be built near Burbank City Hall, was worth nearly $800,000.


“We cannot see how justice is served by restricting the condemnee during times of high interest to a ‘legal’ rate which may be far below the rate the agency would have to pay in its usual financial markets for the same funds,” Justice Joseph Grodin said for the court.

Agencies Interested

The case attracted wide interest from government agencies, including the California Department of Transportation and redevelopment agencies in Los Angeles, San Bernardino, Riverside and several other counties.

Municipalities began making increased use of redevelopment for streets, shopping malls and industrial parks after losing revenue because of the 1978 property tax-cutting Proposition 13. They are spending $1 billion a year statewide to encourage developments, ranging from new shopping malls and industrial parks to freeway overpasses. In nearly all projects, redevelopment agencies must condemn property.


Although the ruling is expected to result in added costs, the agencies can limit those costs by, for example, seeking quicker resolution of the suits, said Richard Marston, attorney for the Burbank Redevelopment Agency. He said there is no way to estimate just how costly the ruling will be. (Redevelopment Agency of Burbank vs. Gilmore, L.A. 31891.)

In a second case, the court ruled 4 to 3 that a San Francisco judge should have sent a 17-year-old to the California Youth Authority rather than to state prison for the murder of a teen-age girl.

Writing for the majority, Justice Allen Broussard said the judge should have relied on the Youth Authority recommendation that Javier Anthony Aguilar could be rehabilitated by the authority. The judge rejected that option after two probation officers recommended state prison.

Victim Strangled


The judge also cited the brutal nature of the 1980 crime--strangulation of the girl, who struggled for several minutes--Aguilar’s lies and other efforts to cover up the crime and his past arrests.

The judge noted that Aguilar might serve as few as 40 months in Youth Authority custody and that the sentence for second-degree murder in state prison is 15 years to life.

Dissenting Justice Malcolm Lucas, joined by Justices Otto Kaus and Stanley Mosk, said the prison sentence should have stood, noting that the judge had ample reason to overrule the Youth Authority recommendation.

A recently enacted law apparently would have allowed the judge to impose the tougher sentence, although the 1982 law did not apply to Aguilar, who committed his crime before its passage. (People vs. Javier A., crim. 23869.)