Citing ‘bias,’ defendants seek change of venue in Kings arena eminent domain lawsuit

Intensifying the court battle over an abandoned department store needed for the new Sacramento Kings arena, the property’s out-of-town owners are seeking a change of venue in the city’s eminent domain lawsuit.

Saying they probably couldn’t get a fair trial in Sacramento, the owners said the eminent domain case over the former Macy’s men’s store at Downtown Plaza should be transferred to Alameda Superior Court.

“Local bias is very likely to be an issue here,” said attorney George Speir in a court filing Monday in Sacramento Superior Court.

A separate filing spells out just how far apart the city and the property owners are on price. The owners said the property has been valued at $10 million for tax purposes. The city, by contrast, recently put $4.3 million into an escrow account – the amount it says the property is worth.

Located in the southeast corner of the mall, the old Macy’s site covers about half of the spot mapped out for the arena itself, plus the Kings’ practice facility and administrative buildings. Macy’s relocated the men’s store last fall to its main store at the other end of Downtown Plaza.

The city filed an eminent domain suit in January and is hoping for a court ruling in March that would give the city control over the property. A jury would determine price later, and the Kings would reimburse the city for the purchase. The Kings have already spent $36 million buying the rest of the arena site.

The litigation involves 10 separate parcels controlled by CalPERS, U.S. Bank and C-III Asset Management. C-III is a “loan servicer” for the bank, which represents a group of lenders that controls most of the property. CalPERS, which owns part of the property, filed court papers this week saying it doesn’t object to the city’s lawsuit. The pension fund owns other property nearby and would like to see the arena project go forward.

Speir, an attorney for C-III, said in court papers this week that a fair trial in Sacramento is unlikely.

The owners “are likely to be unknown to the community, other than as ‘outsiders’ trying to hold up much-needed infill development,” he wrote. “Project proponents claim that the project will generate thousands of jobs, add to the city’s tax base and generally revitalize downtown Sacramento. We agree. ... Defendants are likely to be perceived only as jeopardizing the city’s economic development.”

The city said it would fight the attempt to move the lawsuit. “We think the matter is properly venued in Sacramento County and would oppose a change of venue,” said City Attorney James Sanchez in an email.

City officials have said the Kings need swift access to the property. The new $448 million arena is supposed to open in 2016. The NBA has given the city a year’s grace period, to 2017; if the building doesn’t open by then, the league has the right to buy the Kings and move them out of town.

Court documents show the current owners bought the old Macy’s building for $5.8 million in a foreclosure auction in 2012. A tentative deal to sell the property to the Kings fell apart last spring, and attempts to renegotiate an agreement proved fruitless, leading to the city’s lawsuit in January.

In his papers, Speir complained that the city “discounted its offer” for the property by deducting the $1.8 million in building-demolition costs from the cost of the land, leaving just $4.3 million on the table. He also said the city made legal mistakes in how it submitted the offer. “Depriving someone of their property is not something to be taken lightly, and careless missteps by the condemning agency (the city) should not be tolerated,” he wrote.

The eminent domain case is one of three lawsuits pending over the effort to convert Downtown Plaza into a new arena. Several citizens are suing the city, saying the city has lied to citizens about the true value of a proposed public subsidy for the arena. The city pegs the subsidy at $258 million, while the lawsuit says it’s considerably higher.

Separately, some of the same citizens are suing the city to demand a public vote in June on sports facility subsidies. The citizens’ groups gathered enough signatures to force a public vote, but the city clerk rejected their petitions on the grounds that they were improperly worded.

C-III is also challenging the plans for Downtown Plaza in another matter: the city’s draft environmental impact report.

In a letter to the city in late January, C-III attorney Bryan Wenter said the arena doesn’t qualify for special treatment under SB 743, the new law designed to streamline the city’s navigation through environmental reviews and the eminent domain process. The special treatment only applies if the arena meets certain “green” standards, and Wenter said the draft environmental report doesn’t establish that the arena would meet those standards.

The draft environmental report, however, said the arena “would perform better than” the criteria demanded by SB 743.

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