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Chapter 2.19

Pride and Prejudice
Land Development Today, July 10 2005.

By Richard H. Carson

Now that one highly contentious presidential election is over and the next is still a few months away, one might wonder what will be the next great populous movement to take the national civic stage. I can tell you in three words: property rights compensation.

In 1973, a bipartisan Oregon legislature and a progressive Republican governor named Tom MacCall approved the first statewide land use planning program in the nation. The program touted the use of mandated comprehensive plans and urban growth boundaries, all in the name of saving farms and forests. For over a quarter of a century, Oregon has received a lot of national media attention for this grand experiment in land use planning.

On November 2, 2004, the vaunted planning program was permanently crippled and politically rejected by the very citizens it purported to serve 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 most draconian property compensation law in America.

The state’s newspaper, The Oregonian, reported that on the first day the law went into effect (December 2), 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, a plan for a rural subdivision with a gambling casino, as well as numerous small rural subdivisions.

It also claimed that planners are “expecting proposals to build large retail centers or destination resorts on farmland that’s been in the same families for generations.”

The newspaper went on to say that “Most local government officials say they’ll have to give property owners freedom to use their land as they want. Pinched budgets don’t leave wiggle room for compensations payments they say.”

Ballot Measure 37 and the Supreme Court
The Fifth Amendment to the Constitution guards a private landowner from the government “taking” his or her property without compensation and the case law on compensation for government takings has been widely accepted for over 70 years. The United States Supreme Court cases, starting in 1922 in Pennsylvania Coal Company v. Mahon, have ruled that land use regulations had to be so restrictive as to rob the landowner of his or her land’s economic vitality. In other words, the government had to compensate for taking all the land’s value, but need not compensate for “partial” takings.

Oregon ballot measure 37 is a major historical precedent because local governments must now pay for “partial” takings. The ballot measure’s language is both as clear as it is devastating. The measure simply says that, “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.”

The primary caveat to this is that the regulations in question must have been those in effect when the person bought their property.

So, if you owned 40 acres of unimproved land and later the local government zoned it with a farm-forest zone with a minimum lot size of 40 acres, then you are allowed one house. It is also possible that you could have soil good enough, in terms of septic use, to create eight 5-acre sites. A random survey of the recent classified ads tells the story. In the Portland metropolitan area of Oregon, a 40-acre site sells for around $485,000 and 5-acre sites sell for about $320,000. So, the compensation math is $2,560,000 ($320,000 X 8 lots) minus $485,000.

This means that the measure 37 value of the property is about five times the artificially constrained value. It also means that the local government either pays the property owner just over $2 million or they let them develop their property to the maximum. The extreme calculus of the compensation means local governments can no longer afford to enforce the statewide land use planning requirements.

It should be noted that what the property owner thinks the land value is and what it really may be could be two different things. However, deciding what that value is can readily be determined by hiring a professional property appraiser. This will be of no solace to local governments because even the appraised value of the property will be beyond their ability to compensate.

The Poster-Child of Ballot Measure 37
Dorothy English is an unlikely poster child for a 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 subdivide her land, in order to give some land 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 voters who have stood by and watched a planning regime that literally ignored the will of the voters. In the year 2000, Oregon voters passed a similar compensation law by a 54 percent to 46 percent margin. However, the special interests successfully got the Oregon Supreme Court to nullify the vote. Prior to that the voters turned down the last two segments of the light rail system in Portland, but the city of Portland built them anyway. The level of regulation reached in the city became so difficult that the Portland homebuilders’ association actually advised its members not to build in the city anymore. Development stories, like the one about a pizza storeowner who was charged $27,000 in impact fees because he wanted to move across the street, have become the stuff of urban legends.

Mea Culpa?
Certainly there is a lot of hand wringing and wailing by Oregon planners these days. But the one thing you won’t hear is anyone acknowledging that planning caused this revolt. Indeed, in typical response, the planning profession simply says, “The voters just didn’t understand. If only we could have explained it to them.” I have been a professional planner for over 25 years and I hear that refrain a lot.

Why is it is never a failure on our part as planners to understand what citizens really want? Why is it always a failure on the citizens’ part to understand what a wonderful gift we are giving them? Do we not understand that we are guilty of the sin of pride and the ballot measure was the price of our prejudice? Why do we continue to believe that the voters aren’t capable of making intelligent decisions?

As a professional planner of almost 30 years, I am ready to say “mea culpa.” But then I have written numerous essays that foreshadowed this day. I have railed against the sins of centralized planning, social engineering and faux citizen involvement. This is especially true about the grand Oregon “experiment” that in time became institutionalized into a monolithic and unresponsive planning bureaucracy.

Whether we planners like it or not, one thing is certain. Ballot measure 37 will plant the seeds of discontent nationally. Just as the 1978 Proposition 13 tax limitation movement spread from California to the nation and just as the 1994 “Contract With America” made term limits the rage nationally, ballot measure 37 will gain national political attention. Sadly, the legacy of the Oregon planning experiment will not be leading America into the planning of the 21st century. It will be the unraveling of the planning gains made by others in the 20th century.

Abouth the author: Richard Carson is a practicing planner, writer and lecturer from the Pacific Northwest. A complete anthology of his essays, titled Common Sense, is available on the Internet.

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Common Sense
by Richard H. Carson