City Council authorized the use of eminent domain last year in anticipation of a deadlock, but had delayed actually filing the lawsuits in hopes that the city could reach a settlement with each owner.

"I'm not wild about it," Councilman Bob Dillon said. "But I don't think they've been very reasonable about the prices - especially a few of the people."

The city has negotiated sales with two of the five property owners, according to Gilroy's Facilities and Parks Manager Bill Headley, who has sat in on the discussions.

"For the other three property owners, however, we have reported that we have been unsuccessful in reaching an agreement," he said. "It would appear that we're headed to the next step of the eminent domain process."

That will involve filing lawsuits in coming days to seize property from the Oyao family, Loi Dong, and Marko Gera.

The Oyao properties, at 57 and 67 W. Seventh Street, lie on the area slated for the future arts building. The Dong property is planned for use as an art gallery, gardens, and parking. And the Gera property, which makes up half of the 2.33 acres needed for the arts center, includes a piece of land needed for the arts building as well as much of the vacant land along Eigleberry Street that will provide the majority of parking.

"We certainly would like to settle without having to go in front of a judge, but we have certain limitations in terms of what we can do with land price," Headley said. "We have to do fair market [value] and the debate is over what's fair market."

The city first approached the Oyao family about buying the land several years ago, when Oyao's grandmother Baleriana still lived in and owned the property. Her grandson Francisco Oyao, a disabled veteran who is 56 years old, said his grandmother died in July. He now shares the home with his brother.

A July 2003 memo between city officials set the combined purchase price for the Oyao properties at $310,000, along with an additional $50,000 in "relocation benefits."

"My grandma didn't want to sell at the time," said Oyao. "The family didn't feel the money they had offered is enough."

He said they now hope for at least $600,000 for the two homes and the .2-acre plot of land on the north side of Seventh Street.

To date, Dong and Gera have also rejected the city's offers.

"When you go to trial, the issue is what's the value?" City Attorney Andy Faber explained. "You have an appraiser, and the jury or judge decides the value. In effect it's a forced sale to the city."

City officials have said all properties must be acquired by March to stay within the 2008 opening date for the new arts center, slated for construction just north of Seventh Street between Eigleberry and Monterey streets.

If the city needs to obtain property on shorter notice, it can go to court and deposit the amount of appraisal and get an order of immediate possession.

"The court will have to balance the interests of whoever is using the property," Faber explained

A court-ordered property seizure requires the city to relocate people living at the home, Faber said.

Officials have successfully negotiated the purchase of two properties so far. The city paid $300,000 for the .17 acre at the corner of Seventh and Monterey streets, where a taqueria now stands. For the Salvation Army property next door, the city paid $723,540 for the half-acre property plus $429,282 to move from its current location at 7341 Monterey Street.

The city has used eminent domain sparingly in the past, according to Headley. The few cases in recent years that actually reached a courtroom involved instances in which the city required private property to expand roadways. Headley still held out hope for a settlement, but it appears such a resolution may only come in a court room.

"If you can't agree on a market value, you can't agree on a market value," Headley concluded. "And I think we're there."

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