In 2005, the U.S. Supreme Court ruled that the City of New London, Connecticut, could use the power of eminent domain to take people’s homes and give them to a private developer. The idea was that the resulting economic development would serve the public interest. At the time, a friend sardonically asked me if that meant that eminent domain could be used to seize a Wal-Mart and turn it into a park. Ha, ha.
Amazingly, that general scenario is now getting a serious hearing before a superior court in Alameda, California. The question is essentially this: Can the City of Alameda exercise a buyback clause in a long-forgotten 1924 sales contract with two railroad companies, and re-acquire a 28-acre parcel of land for public purposes? (Thanks to Katie Silberman for bringing this to my attention; see the San Francisco Chronicle story of April 24 for more details.)
The City of Alameda originally sold the land to the railroads for $30,000 so that it could promote commerce along the city’s northern waterfront. But the sales contract contained a provision, Paragraph 14, enabling the city to buy back the land for its original price, plus the cost of any additions and improvements to the land. The apparent motive for the clause was that the City ought to be able to retain its ability to use the land for public purposes, especially if public needs and conditions changed.
Then in 1998, the corporate owners of the Alameda Belt Line decided to get out of the railroad business. A year later, they sold the land for $18 million to a private developer who announced plans to build 200 houses on the property.
This prospect angered Jean Sweeney, a retired schoolteacher and grandmother who said that when she first saw the land, she fell in love with the open space and the view of the East Bay hills. She decided to mount a ballot initiative campaign to get Alameda voters to approve a rezoning of the land as open space.
In the course of research for the initiative (which passed in 2002, but has been on hold until this legal dispute is resolved), Sweeney stumbled across the 1924 sales contract for the land. She was flabbergasted to learn that the City had the right to buy the rail yard — whose estimated market value is now as much as $53 million — for the original sales price of $30,000 (plus any “additional investments and extensions” made to the property since 1924).
So is a deal a deal? Is the 1924 contract still enforceable? Can the City of Alameda re-acquire the land it sold and turn it into a park, as Sweeney and many others would like?
The Alameda Belt Line owners worked very hard to prevent such questions from reaching any court, but they failed. The case went to trial on April 24. It will be fascinating to see if the Alameda Superior Court will affirm the contract. The railroad claims that the contract is unenforceable. The federal Surface Transportation Board argues that the city is trying to pull off a scam that would threaten the “integrity of the national rail system.”
But the language of Paragraph 14 is pretty darn explicit: “City shall have the right at any time hereafter to purchase said belt line railroad including all extensions thereof, for a sum equal to the original cost.”
What a wonderful gift from the past: a black-letter legal contract affirming the public’s inalienable interest in its own property. But times have changed, lawyers are a wily bunch, and economic theory has been known to say that black is gray and gray is white. Let us hope that the rights of Alameda citizens are properly vindicated.