Sacramento City Officials Seek Authority to File Eminent Domain Proceeding to Take Downtown Plaza Macy’s Building

On Tuesday January, 7, 2014, high-level Sacramento City officials will request authority from the Sacramento City Council to file an eminent domain lawsuit seeking to take the former Macy’s men’s clothing and furniture store located at 500 K Street in the Downtown Plaza shopping mall. The property on which the Macy’s building is located comprises over half of the property the City needs for its planned $448 million arena. If the City moves forward with its eminent domain action, the City could take control of the property as soon as 90 days after the date the City files the action.

A threshold determination in the action will be whether the construction of the arena satisfies the definition of a “public use” within the meaning of the Eminent Domain Law. Common examples of public uses include the construction of schools, roads, libraries, police stations, and fire stations. On the one hand, the arena will be owned by the City, and the City will be permitted to host nine events at the arena per year at no cost, including high school graduations, concerts and sporting events. On the other hand, the arena project is being paid for by a private entity—the Sacramento Kings—for the direct benefit of that private entity. The court will have to determine whether the indirect benefits that the arena project will provide to the community, such as job creation and redevelopment, are enough to satisfy the definition of a public use.

After the City Council approves the proposal, the City will be required to deposit $4.35 million into an escrow account. The escrow fund will eventually be applied toward any settlement that the parties reach for the purchase of the property outside of court, or toward an award of just compensation to the property owners if the matter goes to trial. On Thursday, January 2, 2014, the Sacramento Kings wired the money to the City pursuant to an agreement requiring the Kings to cover all pre-development costs related to the arena.

If it obtains City Council approval, the City could file its eminent domain proceeding at any time after the January 7 hearing, which could result in the City taking possession of the property as soon as April 2014.