HUNTINGTON BEACH : City Rejects Move to Seize Properties

The city has backed away from plans to seize up to seven small businesses through eminent domain to accelerate a key component of the downtown redevelopment project, officials said.

Departing from a strategy dating back two decades for revitalizing the aging retail and residential center, city officials are working to guarantee loans for property owners who want to retain their buildings throughout the project, said Pat Spencer, the city’s housing and redevelopment director.

During a City Council meeting last week, held in closed session because condemnation lawsuits have been prepared, officials agreed to work to install a new plan by June for property owners in the block bounded by Pacific Coast Highway, Walnut Avenue, and Main and 5th streets, Spencer said. “We want to guarantee them that if they participate in the project, they’re not going to be bankrupt,” he added.

Property owners who want to become partners with the city in the redevelopment program must post a down payment of about $1 million. The project involves rebuilding existing two-story structures into three-story buildings that would offer both retail sales and office space.

Most of the property owners say that they are eager to participate in the project but add that they have been reluctant to put up the money because of possible problems in attracting reliable co-tenants. The city Redevelopment Agency, as a consequence, has long threatened to use its power of eminent domain to buy the remaining properties.

After a recent study, however, city officials discovered that condemnation proceedings would take at least a year to complete and would cost more than a negotiated settlement. Because of soaring property values, attorney fees and other related expenses, “to condemn these properties would probably cost us 40% or 50% more than the street value of the property,” Spencer said.

He added that a new marketing study completed for the city indicates that several large firms, including banks and a stock-brokerage company, are interested in renting offices in the new buildings. Commitments from such tenants would help guarantee the property owners’ ability to pay off their redevelopment loans, he said.

Several property owners said city officials have not talked to them about the plan. But they said they would welcome such a proposal and described it as a promising turn in negotiations.

However, skeptics remain, such as Jim Lane, president of the Main Street Property Owners Assn., which represents the seven owners in formal talks with the city.

Lane said he has read numerous studies that contradict Spencer’s optimism about attracting tenants because Orange County already has a big surplus of retail, restaurant and office space.

Moreover, Lane said, the city has frequently reneged on agreements reached with the owners during the last 20 years.

“You can’t seem to trust these folks. They’re just not trustworthy,” he said. “So I am very skeptical, to say the least. I hate to begin to sound like a pessimist, but we still have some serious problems here to be worked out.”

Despite Lane’s criticism, Spencer said he hopes within 90 days to formalize a new financing proposal for the City Council to consider.