California Court of Appeal Decision Leaves Room for Mitigation Bank as a “Highest and Best Use” for Eminent Domain Purposes

In County of Santa Barbara v. Double H Properties, LLC, the Court of Appeal for the Second District considered whether the trial court properly excluded evidence indicating that a condemned piece of property was worth more than its valuation.

The dispute arose over the County of Santa Barbara’s condemnation of 15.69 acres to establish a California Tiger Salamander habitat. The property owner’s appraiser opined that the condemned parcel’s fair market value should factor its value as a mitigation bank, resulting in a valuation five times larger than the County’s appraisal.

While the Appellate Court upheld the trial court’s exclusion of the property owner’s appraisal because the appraisal was based wholly on hypothetical mitigation credits lost. The property owner had not sought approval for a mitigation bank, and merely hypothesized that credits could be sold from the condemned parcel. Furthermore, while the property owner had a declaration from a zoologist claiming that the land was qualified for mitigation for impact, the declaration was inadmissible because the zoologist was not properly designated as an expert.

Still, however, the court left room for an argument that mitigation credits would be a factor in assessing a condemned parcel’s highest and best use if the property owner provides evidence that it had actually applied for and/or obtained approval to sell mitigation credits.