Chapter 2.17

A Failure of Fairness? The Property Rights Movement is Reborn at the Ballot Box
(Public Management, October 2006)

By Richard Carson

Every once in a while a state voter initiative catches people's attention, and it takes the center stage nationally. Examples include creating term limits, setting property tax caps, and banning same-sex marriages. The next big trend is all about property rights, and it is well under way in 23 states.

This national movement about citizens' property rights is driven by two events. The first was the passage in Oregon in November 2004 of a property rights initiative called Ballot Measure 37. The second was the June 2005 U.S. Supreme Court decision, Kelo v. City of New London.

The American Planning Association says, "Radical property rights organizations have seized on the passage of Measure 37 to promote similar ballot measures in other states." These voter initiatives are described by opponents as the most draconian property compensation laws in the United States.

On the other side, proponents love measure 37 because it has brought new life to the property rights movement. Property rights initiatives have one thing in common: they exceed previous U.S. Supreme Court rulings in terms of what constitutes a property taking. In addition, they present the prospect of unraveling local and state laws regarding the environment and land use.

The Fifth Amendment to the U.S. Constitution protects a private landowner from the government "taking" of property without fair compensation, and the case law on compensation for government takings has been widely accepted for more than 70 years.

In the late 1800s, the U.S. Supreme Court ruled in several cases (Mugler v. Kansas and Lawton v. Steet) that in order for a landowner to get compensation, the land use regulations must be so restrictive as to completely deprive the landowner of the land's economic value. In other words, the government has had to compensate landowners for taking all the land's value, but it has not needed to compensate landowners for partial takings.

Some states-Louisiana, Texas, Mississippi, and Florida-have passed laws regulating compensation for partial property takings. The first three states essentially created partial takings thresholds at which a government must pay compensation. The thresholds are 20 percent for Louisiana, 25 percent for Texas, and 40 percent for Mississippi.

The Harris Act, passed in Florida in 1995, went farther than the laws in Louisiana, Texas, and Mississippi and was the first real precursor to the Oregon voter initiative. The act affords landowners the right to sue local governments should their property value be "inordinately burdened" or "restricted" by government regulations. It also applies only to government regulation that happened after the act was implemented. Many of the property rights initiatives passed since the Harris Act go further in that they are retroactive.

It is ironic that the state where the property rights movement has now been reborn is Oregon. In the early 1970s, the state of Oregon legislated state-mandated land use planning, which was touted as cutting-edge public policy and hailed by some as a grand experiment in land use planning.

In 1973, a bipartisan Oregon legislature and a progressive Republican governor named Tom McCall approved the first statewide land use planning program in the nation. The program required the use of comprehensive plans and urban growth boundaries, all in the name of saving farms and forests. For more than a quarter century, Oregon has received much national media attention for its innovative land use planning program.

On November 2, 2004, however, the very citizens who were purportedly served by this vaunted planning program permanently crippled and politically rejected the program with the passage of Ballot Measure 37. After 30 years, and by a decisive 61 percent to 39 percent margin, the voters essentially terminated the grand experiment by passing the severest property compensation law in the United States.

Oregon's Ballot Measure 37 is a historic precedent because local governments in Oregon must now pay for any partial takings. The ballot measure's language is as clear as it is devastating: "If a property owner proves that a land use regulation restricts the use of the owner's property and reduces its value, then the government responsible for the regulation will have a choice: pay the owner of the property an amount equal to the reduction in value or modify, change, or not apply the regulation to the owner's property." This has become known as "waive or pay."

The primary caveat to this is that the regulations in question must have been those in effect when the current property owner bought the property. Whether such a right is transferable to a new property owner is unclear and is now hotly debated.

The Oregonian, a Portland newspaper, reported that on the first day that measure 37 went into effect, citizens came in to file claims for such developments as a coastal subdivision with 400 one-acre lots, a farmland subdivision consisting of 350 two-acre lots, and a plan for a rural subdivision with a gambling casino, as well as numerous small rural subdivisions. The newspaper also reported that planners are "expecting proposals to build large retail centers or destination resorts on farmland that's been in the same families for generations."

Dorothy English is an unlikely symbol of this cultural revolution. The 92-year-old grandmother bought 19 acres in the scenic hills overlooking Portland in 1953. When she went to the city of Portland to get permission to subdivide her land in order to give some to her children and finance her retirement, she had a rude awakening. "There were no restrictions on the land when we bought it," said English. "To come in and put new restrictions on it 20 years later, I think is stealing."

Dorothy English's story resonated with Oregon voters who had stood by and watched a state and city planning regime that literally ignored the will of the voters. In 2000, Oregon voters passed a similar compensation law by a 54 percent to 46 percent margin, but special interests got the Oregon Supreme Court to nullify the vote. The level of regulation reached in the city of Portland was perceived to be so onerous that the Portland homebuilders' association actually advised its members not to build in the city anymore.

The Kelo v. City of New London decision is a different kind of taking. New London had used its eminent domain powers to condemn private property for a private sector development, not for a public purpose such as a street, a library, or a school. The legal question was whether this action was a violation of the public use section of the Fifth Amendment to the U.S. Constitution. When the U.S. Supreme took up the case, it decided in favor of New London.

This enraged the property rights devotees nationwide, and they began to campaign in the states to ban this practice at the ballot box.

Ballot Measure 37 and the Kelo decision have planted the seeds of discontent nationally. Just as in 1978 when the Proposition 13 property tax limitation movement spread from California to the nation and just as in 1994 when the Contract with America made term limits the rage nationally, property rights is gaining national political attention and reaching the ballot box in at least half the states of the nation.

One example is the state of Washington's Initiative 933, which is called the Property Fairness Initiative. If enough registered voters vote to pass the initiative, the law will be retroactive to either any existing use in the past or to certain regulations back to 1996. Like Oregon's measure, Washington's initiative says "any ordinance, regulation, or rule to private property shall first pay the property owner compensations...." Washington also has state-mandated land use planning, but its program is more decentralized and less litigious than Oregon's.

To the south, in California's Napa Valley, the Fair Payment for Public Benefit Act was considered by the voters in June 2006. It was modeled on both Oregon's and Washington's compensation requirements, and legal and administrative costs for just the unincorporated county were estimated at up to $3 million a year. The law was to be retroactive to February 2005, the date of the initiative filing.

Because the retroactive date was fairly recent, it was believed that the main impact would be that the county would avoid adopting any new land use ordinances and that a static regulatory environment would result. The county, however, could not have avoided implementing new federal or state requirements over time. This measure was on the June 6, 2006, primary ballot, and failed as 64 percent voted "no."

Another initiative petition being fielded by activists is called the Nevada Property Owners' Bill of Rights. This initiative also provides for compensation for loss of property value. One of the automatic-loss triggers in this initiative is down zoning, but its primary goal is to prohibit the use of eminent domain for private sector projects. Down zoning is when a government rezones property from a classification that puts a higher value on the land to a lower one. If commercially zoned land was rezoned to rural category, for example, then the property owners would lose value.

The political tactics used in all these states are strikingly similar. Proponents seem to believe that if it worked in Oregon, it is exportable to other states as well. The theme of all the current campaigns is that big government is not fair to the small property owner. Proponents seek out the most egregious examples of someone's property rights being trampled, and they publicize the most sympathetic victims they can find. So all of the proponents are out looking for the next Dorothy English.

Another common denominator in all of the ongoing property rights initiatives is they are meant to curb government land use regulation with the threat of compensation. The truth is that local and state governments cannot afford to pay landowners for the regulations that the government imposes on them. It is yet another irony that the property rights movement and local government are both playing the unfunded-mandate card for different reasons.

Local governments tell state governments that if the state creates a mandate, the state should pay for it. The property owners, in turn, are telling local governments to pay for their mandates. Another profound result of these initiatives will be the unraveling of the environmental and land use planning gains made in the United States in the 20th century.

Richard Carson, Director, Clark County Community Development, Vancouver, Washington.

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Common Sense
by Richard H. Carson