Sacramento council votes to file eminent domain lawsuit against owners of Macy’s building

Seeking to gain control of a vital parcel for the development of a new sports arena, the Sacramento City Council voted Tuesday to file an eminent domain lawsuit against the group that owns the former Macy’s men’s clothing and furniture store at Downtown Plaza.

By a 7-2 vote, the council gave city attorneys the authority to file the suit immediately against an ownership group that includes the California Public Employees’ Retirement System and a Texas-based firm that has negotiated the sale on behalf of U.S. Bank, which holds a ground lease on the property.

The Sacramento Kings reached a tentative deal to buy the property last spring, but the agreement collapsed after the NBA decided to block a Kings move to Seattle. City officials have negotiated with the building’s owners on behalf of the Kings since last summer, but the sides have been unable to agree on a sale price for the property.

Two hours before the council debated the issue, CalPERS issued a statement voicing support for the city’s intention.

“CalPERS has no objection to the city’s right to acquire the property through eminent domain,” spokesman Brad Pacheco said in an email. “We recognize the significance of the city’s downtown redevelopment efforts and are eager to find a resolution that is in the best interests of everyone involved – including our members, the city of Sacramento and the tenant of the property.”

George Speir, an attorney representing C-III, the firm negotiating on behalf of U.S. Bank, wrote in a letter to the city that the company objects to the eminent domain plan. Speir wrote in the letter that U.S. Bank had not received a formal offer for the property and that “public interest and necessity do not require the project.”

City Attorney James Sanchez said the city’s offer for the property was conveyed to U.S. Bank in September.

Assistant City Manager John Dangberg said eminent domain was necessary “given the public benefit (of the arena) and a critical schedule,” referring to an NBA-imposed deadline that the arena be open by 2017.

Plans for a new $448 million arena at the Downtown Plaza show that the property at 600 K St. covers more than half the footprint for the proposed arena complex, including much of the stadium and an adjacent facility housing Kings practice courts and team offices.

The city has placed $4.35 million in escrow in anticipation of taking control of the property. That money was wired to the city last week by the Kings as part of an agreement that requires the team to cover all pre-development expenses for the arena.

Officials have said that the money used to file an eminent domain suit and to take control of the Macy’s store would not increase the proposed city contribution of $258 million to the arena project.

To be successful in an eminent domain case, city officials must convince a judge that the arena would serve a public benefit. The judge would rule on the city’s suit 60 days after it is filed and, if that ruling favors the city, control of the property could be transferred to the city and Kings 30 days after that.

The sale price would later be determined by a jury.

Top city officials have argued that the Macy’s property is necessary for the arena, which they contend would serve a public good. The arena would be owned by the city, which would have the rights to hold nine events at the facility each year rent free.

“You need places to assemble, to exchange ideas,” said Councilman Steve Hansen. “This facility is something we need for that purpose.”

Council members Darrell Fong and Kevin McCarty voted against the plan. Fong said the arena “does not cross the threshold” of a necessity for eminent domain.

Business and labor leaders said the move was appropriate.

“This is an opportunity to create jobs and to help people to step up on the ladder leading to upward mobility,” said labor leader Bill Camp.

John Hyde, a political consultant who last year worked for a campaign seeking a public vote on sports arena subsidies, said “the situation in Sacramento stretches the definition of a public use” in eminent domain cases. He said the decision to seize the property would benefit “wealthy developers and individuals who have certainly wielded disproportionate power.”

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