Negotiations are in process with Spruce Street property owners, but redevelopment itself is delayed.

The City of Santa Clarita is meeting with property owners on Spruce Street in Old Town (Downtown) Newhall to negotiate for the purchase of those properties.

CarQuest Property Owners Reach Agreement

The owners of the CarQuest building have reportedly reached an agreement with the City of Santa Clarita for the purchase of their property. However, this is a different negotiation than for some of the other Spruce Street businesses, since this is not an owner-occupied building. Thus the negotiations were only for the building itself, and did not include relocation costs or relocation assistance.

Owner-Occupied Buildings Have More Complicated Negotiations

Owner-occupied buildings such as White Light Chiropractic and the Antique Flower Garden have much more complicated negotiations to look forward to, since they’ll be negotiating for both the price of the building and the costs for relocating their businesses. That is, if suitable locations can be found for them to relocate to!

Initially, the City had indicated the possibility of constructing new facilities in the redevelopment area prior to relocating businesses such as White Light Chiropractic, so these businesses could just move into the new building instead of being forced to find space elsewhere. This option seems to have fallen by the wayside, and it remains to be seen whether the City will help in finding new facilities for these businesses or not.

Library? What Library?

Chris Price from the City of Santa Clarita has indicated that the actual redevelopment is expected to take at least 15 years. Chris also repeated a prior statement that the current Spruce Street businesses can stay put for 18 months or more, even after the buy-out is complete, since the supposed library building won’t be started until at least that many months in the future.

I say "supposed library", since it doesn’t appear that the library will ever be approved, and thus the project slated for the Spruce Street area will be just a standard commercial (office and/or retail) building instead. Quite a neat trick, really, with proposing a massive library project that’s not likely to get approved by Los Angeles County… Eminent domain rules allow a City much more latitude in ousting current property owners if the project slated is for "public use" rather than for a strip mall.

Regardless of what type of building eventually occupies the Spruce Street area, the City’s Chris Price and Paul Brotzman are doing their "good cop, bad cop" routine with the Spruce Street property owners as the negotiation process continues.

Will the City Offer Friendly Eminent Domain to Ease the Tax Effects of These Sales?

So far, it doesn’t appear that the City of Santa Clarita is offering up the "friendly eminent domain" option that was mentioned in earlier interviews with Price and Brotzman. We’ll see if they decide to play hard-ball with this or not as the negotiations continue.

With "friendly eminent domain", the property owners would be able to defer the tax impact of the "sale" of their properties by using the IRS 1033 Exchange rules to defer the tax impact for up to 2 years, at which time they must purchase a replacement property.

In order to qualify for the 1033 Exchange, the property owner needs to be able to show that the property was subject to an involuntary conversion, which in this case is a taking of the property through condemnation (eminent domain). Thus it’s more of a documentation issue than anything else: The property owner needs to show that the City did not allow them any choice in the matter.

Newhall Redevopment: Pie in the Sky?

So far, there’s been lots of hype and very little action (or apparent interest) in the Old Town Newhall Redevelopment Project. Other than painting new parking stripes (twice), changing some street signs, adding murals (removable) to a few buildings, and changing some traffic patterns, the area remains as ugly and decrepit as before. The biggest difference is that now you have to take a closer look at the ugly buildings as you stop at the additional stop signs on newly-renamed Main Street.

In addition, there’s likely to be stiff competition in luring the more desireable retailers to the area, with the planned expansion of the Valencia Town Center Mall and the planned upscale hotel/retail complex dubbed The Avenue at Santa Clarita on the horizon. With no anchor store in sight for Old Town Newhall, they’ll be hard-pressed to attract the boutique stores that they’ve been banking on.

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