When you hear the phrase “a perfect storm,” it’s likely to conjure images of roiling whitecaps, perhaps a daring Coast Guard rescuer dangling from a helicopter to pull half-drowned sailors from their foundering vessels. Chances are the last thing it will bring to mind is land-use regulation.
But in four Western states, the unexpected confluence of two largely unrelated land-use issues — a “perfect storm” of popular dissatisfaction — is threatening to undo rules that have guided the development of Western communities for a generation or more.
On Election Day, voters in Arizona, California, Idaho, and Washington will face statewide ballot initiatives that would require taxpayers to pay landowners if a zoning rule or environmental law reduces the speculative value of their property. In some places, if a government couldn’t pay, it would have to waive rules that limit what, or where, a landowner may build. These “regulatory takings” initiatives are styled after a controversial initiative, Measure 37, that Oregon voters approved in 2004 — but this time, supporters have a new weapon in their arsenal.
Backers of the initiatives are billing them as a way to curb abuse of eminent domain — the power of a government to seize property, with fair-market compensation, for a public purpose. They are hoping to capitalize on popular outrage over last year’s U.S. Supreme Court decision allowing the city of New London, Conn., to condemn private homes for a private economic development project. But in doing so, they are falsely equating limits on development with government seizure of homes.
Sound confusing? That’s exactly what the initiatives’ proponents are counting on.
Eminent domain and regulatory takings are two separate issues. In fact, the Nevada Supreme Court ruled in early September that an initiative in that state that addressed both issues had to be narrowed to just one (it now focuses solely on eminent domain). Still, the national anti-regulation movement sees the combination as a chance to spread the revolution ushered in by Oregon’s Measure 37.
Meanwhile, environmentalists and supporters of land-use planning are fighting to squelch what they see as a radical infringement on the rights of communities to protect property values and ecosystems and to shape growth.
And voters are left trying to sort out the perplexing details.
Yes, Your Eminents
In June 2005, the U.S. Supreme Court breathed new life into the property-rights debate when it ruled, in Kelo v. City of New London, that the city could clear the path for a development project that included a $270 million research facility owned by pharmaceutical giant Pfizer.
The idea of forcing working-class people out of their homes for the benefit of a private developer provoked outrage, whatever the potential boon to local tax coffers. Property-rights groups pounced on the ruling to stoke fear that governments everywhere were poised to seize homes for big developments. Demand for reform of eminent domain — not normally high on anyone’s list of sexy political issues — suddenly became hot.
“The reaction to Kelo was a big surprise,” says Dartmouth College economist William Fischel. “To those of us who follow this issue, it was just reaffirmation of a long-standing principle. But the rest of the country went, ‘Say what?’ We had this wonderful perfect-storm convergence.”
Less than a year after the Supreme Court handed down its decision, the Reason Foundation, a libertarian think tank, published a 64-page report entitled “Statewide Regulatory Takings Reform: Exporting Oregon’s Measure 37 to Other States” [PDF]. The report specifically acknowledged the debt to the eminent-domain decision: “The national property-rights movement has been galvanized in recent years by Measure 37’s passage, as well as widespread popular disenchantment with the abuse of eminent domain highlighted by the U.S. Supreme Court’s Kelo vs. New London decision. Public recognition of the need to protect the constitutional rights of private property owners has never been higher.”
No one has done more to push this agenda than Howard Rich, a Reason Foundation contributor and chair of the group Americans for Limited Government. Rich has reportedly contributed nearly $3 million to these initiatives in the West — more than three-quarters of all the funding the efforts have received.
Americans for Limited Government did not return several phone calls requesting comment. Its website says the bundle of initiatives, which it calls Protect Our Homes, “stops the government from taking your home simply because they want higher tax revenues. It also provides protection from regulatory takings, ensuring just compensation if the government devalues your property through regulatory actions.”
While many in the opposing camp agree that eminent-domain reform should be addressed, it’s the mish-mashing of the two issues that causes concern. “They’re trying to slip these takings initiatives through the back door, riding Kelo in the front door,” says Jason Jordan, a former government-relations consultant for the American Planning Association who heads a firm called Advocacy Associates. “That is clearly the strategy the property-rights community has embraced around these initiatives.”
Even without the added layer of eminent domain, the takings question is a messy one. Zoning decisions are always a sensitive balance between the rights of property owners and the responsibility of government to protect the public welfare. The Fifth Amendment to the U.S. Constitution says, in part, “nor shall private property be taken for public use, without just compensation.” Currently, under guidance established by the U.S. Supreme Court, land is usually only considered “taken” when the landowner has been denied “all economically viable use” of the property — not in the event of a partial loss like a perceived devaluation from zoning. But property-rights advocates want to extend the definition.
The Board Giveth, and the Board Taketh Away
Say a landowner with 100 acres wants to subdivide, and the zoning board says he has to allocate an acre for every house. The property-rights camp’s argument now goes that if the developer wants to put up, say, 10 houses per acre, he should be compensated for the difference in income denied by the zoning decision. The zoning board argues that it is protecting the neighborhood’s quality of life, and enforcing desires of the existing residents for slower, smarter growth.
Property-rights activists kick up a fuss about government preventing individuals from doing whatever they want on their land, but environmentalists point out that land-use regulations protect individuals and their property — by, say, keeping a person’s neighbor from building a hazardous-waste incinerator next door, or preventing an agri-biz conglomerate from putting up a factory farm at the edge of a subdivision.
While such decisions might reduce the perceived value of one landowner’s property, they may actually increase the value of nearby property by keeping a neighborhood more clean and desirable, or by restricting the amount of land available for new housing, thus making existing housing more sought after. In fact, this complexity suggests that the fundamental premise of the initiatives may be flawed. “Some people have asked, If there is such a thing as a regulatory taking, aren’t there just as many regulatory ‘givings’?” says David Goldberg, communications director of Smart Growth America.
The only systematic research on the question of increased values through zoning appears to be work by University of Washington extension student John Abbotts. He looked at changes to land values in rural King County, Wash., from 1993 to 2004, and found that regulated land appeared to gain more value than land not covered by regulations.
“These takings initiatives say that when you change a regulation and it reduces the speculative value of my property, you have to pay that,” Goldberg says. “The absurdity of it becomes clear when you look at the inverse: if you change a regulation that increases the value of my property, I owe [the government] the total amount of the profit.”
Of course, no one’s filing a claim in Oregon under the latter principle.
Since Measure 37 passed there, nearly 3,000 claims have been filed for compensation, totaling more than $5 billion, according to Portland State University’s Measure 37 database. The most notorious of these claims, which was profiled in The New York Times, is for $203 million for a parcel of private property that’s surrounded by the Newberry National Volcanic Monument. The owner of the property wants to be compensated for a pumice mine and power plant that he can’t build.
Many observers think the passage of Measure 37 was in part a reaction to Oregon’s aggressive land-use regulations. “Oregon’s land-use regulations are awfully extreme, more extreme than any other place, especially their restrictions on out-of-city development,” says Fischel. “This extremity creates polarized factions, gets good sympathetic stories, and creates a backlash.”
According to Eric Stachon of 1,000 Friends of Oregon, a group that supports the state’s land-use controls, “People didn’t understand what they were voting on in 2004.” The poster case during the campaign for Measure 37 was a nonagenarian who was prohibited from building a long-coveted home on land she owned, and residents “thought they were just voting on allowing a little old lady to build her dream home,” he says. “When we conducted focus groups about the measure, people felt that the potential impacts we’re now seeing were not believable.
“I think voters support individuals being able to do certain things, within limits, on their land,” Stachon says, “but they also support the land-use planning that we have in this state. If you had a statewide vote on this in November, given what folks know now, it would be a very different outcome.”
Outcome, Outcome, Wherever You Are
Anti-regulation advocates haven’t limited their efforts to the states considering ballot initiatives this fall, but they’ve run into trouble in other areas. A Measure 37 clone in Georgia didn’t get out of the state legislature. A statewide ballot initiative effort in Colorado was suspended in June after negotiations between the proponents and lawmakers. Missouri and Montana struck down takings measures for technical reasons. A proposal for an Oklahoma initiative didn’t make the ballot because the court ruled that it addressed more than one issue, much like the Nevada decision. The South Carolina legislature considered, but couldn’t agree on, takings language for a ballot initiative. And in June, voters in Napa County, Calif., rejected a takings initiative by 64 percent to 36 percent.
Meanwhile, California’s version of the takings initiative, Proposition 90, has spurred the creation of a broad coalition of opponents. “We agree that we need to do something to address eminent-domain abuses, but Prop 90 is not what we need,” says Kathy Fairbanks, a spokesperson for the “No on 90” campaign. “The regulatory takings provisions are too extreme. They will result in costing billions of dollars.”
“It would be so expensive, it would diminish our ability to keep up with population growth in both metro and rural areas,” echoes Nick Bollman, the founder and senior adviser of the California Center for Regional Leadership. And Tom Steinbach, executive director of California’s Greenbelt Alliance, says, “Prop 90 would create a huge financial burden for government and for taxpayers. It [would] put a dramatic chilling effect on new protections for the environment, public health, and safety.”
Will this emphasis on economics and smart growth hit home with voters, or will the specter of government seizures loom larger? We’ll find out on Nov. 7. Planner Jordan says the public polling he’s seen from the various states is “all over the place.” But one thing, he says, has become clear: “The more people learn about the initiatives, the less support they express.”
The Fine Print
Check out the Reason Foundation report [PDF], and for an opposing view, see the American Planning Association’s regulatory takings rundown. Better yet, peruse the texts of each state’s takings initiative: Arizona’s Prop 207, California’s Prop 90 [PDF], Idaho’s Prop 2, and Washington’s I-933 [PDF].