“We’re not just talking about the Postal Service’s ability to sell one piece of property, but their obligation to serve the whole country and be self-sustaining,” said Julie Berman, a Justice Department attorney arguing on behalf of the Postal Service. “The financial situation of the Postal Service is such that it’s putting the mission at risk.”
Her argument did not convince U.S. District Judge William Alsup.
“You could still do a pretty good deal,” he said, even with the possible 39 percent decrease in value.
The Postal Service announced plans to sell the 104-year old neoclassical style building, designed by Oscar Wenderoth and listed as a National Historic Landmark in 1981.
In September 2014, the Postal Service struck an agreement to sell the building to urban developer Hudson McDonald. That same month, Berkeley passed an overlay restricting nine parcels of downtown land, including the post office, to civic and nonprofit uses.
The Postal Service argued the developer backed out of the deal because the overlay had so devalued the property that the developer said it was “destroyed and worth very little.”
At a hearing on cross-motions for summary judgment Thursday, Alsup said the Postal Service had all but conceded it would have to prove that the city’s overlay did more than simply interfere with the sale. He said the agency must show “total frustration” of its ability to dispose of its property and manage its resources to the point it violates the 1970 Postal Reorganization Act, which mandates disposal of unused property.
“If it devalues the property in a way that obstructs the Postal Service’s ability to manage its finances and the potential for sale at only 61 percent of market value, the court should examine that potential,” Berman said, adding the Postal Service fears a ruling in favor of the city would encourage others to enact similar zoning laws. “If this overlay ordinance is upheld, other municipalities would follow suit.”
Berman said the overlay reduces the number of potential buyers by about 80 percent of the market.
“That still leaves 20 percent,” Alsup said. “Where does it say they’ve got to sell it for full value? They paid almost nothing for this property. They could still sell it for a profit. If it just comes down to ‘We could get more without the overlay,’ you’re going to lose. Because it’s not a total frustration.
“I just think you need something stronger to be able to show it’s total frustration. They could sell it for 30 percent. That’s good money. The Postal Service goes and buys a lot of stamps for that,” he joked, appearing weary of Berman’s constant dodging of his direct questions.
“I’m not going to rule on this now,” he said, ending the hearing with an admonition to Berman that the Postal Service is going to need a stronger argument to proceed to trial other than the law says it should be able to make maximum profit off of the sale.
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