April 2006

The Statehouse

By James Lawlor

Eminent Domain Update. By the National Conference of State Legislatures' count, about 42 states have either enacted or are considering limitations on the exercise of eminent domain for economic development. As of March 28, legislation had passed in Idaho, Indiana, South Dakota, and Utah. The last is a technical amendment bill to legislation passed last year. Legislation in New Mexico was vetoed by the governor. Bills in Kentucky, West Virginia, and Wisconsin have passed both houses and are awaiting the governor's signature or veto.

Georgia: Dubious Constitutional Amendment. APA chapter president Dan Reuter alerted members about the potential problems associated with a proposal to amend the state constitution. The amendment would make it easier for landowners to collect compensation for property value losses claimed to have been caused by government action. S.R. 1040, which has been reported out favorably from committing and has had its second reading, would amend the constitution to permit the legislature to enact laws allowing compensation "with respect to the taking of private property which results from unreasonably burdensome governmental actions." The amendment also would permit the legislature to define the scope of actions constituting a regulatory taking.

In his message to chapter members, Reuter pointed out that such legislation would limit the ability of local governments to enforce land-use regulations that would have even the most minor effect on property value. He predicted that the result would be increased litigation over land-use decisions and a likely rollback of development controls.

In other news, the House and Senate passed different versions of a bill, H.B. 1313, that would substantially overhaul statutory provisions governing the use of eminent domain. Among other provisions, the bill tightens the definition of blight, requires personal notice to owners of property slated for condemnation and bars the use of eminent domain except for a public use.

Michigan: Constitutional Amendments. In December 2005, the legislature enacted a joint resolution (Senate Joint Resolution E) proposing to amend the state constitution to restrict the power of state and local government to take property by eminent domain to eliminate blight and promote economic development. The proposed amendment would appear on the November 2006 ballot.

The proposed amendment provides that "public use" does not include taking of private property to be transferred to another private entity for the purpose of economic development or enhanced tax revenue. The condemning authority has the burden of proving by a preponderance of the evidence that the taking is for a public purpose, unless the taking is to eliminate blight. In that case, the burden of proof is higher, "clear and convincing evidence." In addition, the amendment would require that where an individual's principal residence is taken for public use, compensation must be at least 125 percent of the property's fair market value.

House Joint Resolution Q, introduced October 18, 2005, would amend the state constitution to provide compensation to landowners for reductions in the fair market value of property caused by land-use regulations. Like the provisions of Oregon's Measure 37, recently upheld by that state's supreme court, the proposal contains exceptions for land uses that constitute public nuisances under common law, sexually oriented businesses, regulations to protect public health and safety, and regulations required to comply with federal law. The compensation provision would not apply to land-use regulations enacted before the owner of the property acquired it. The resolution is presently in a House committee.

California: Eminent Domain Initiatives. Although at least four bills filed in the legislature would affect takings for redevelopment or economic development, the chapter's legislative representative, Sande George, predicts the main event will be ballot initiatives now in the signature collection phase. One proposal, authored by state Sen. Tom McClintock and three others, would amend the state constitution to bar state and local government from taking private property for economic development, tax revenue, or "other private use."

A second measure would bar condemnation of private property for economic development, defined as selling or leasing the property to a private entity for a commercial enterprise, or to increase tax revenues, tax base, employment, housing density or general economic health. It would require a court to examine the proposed public use and affirm that the use in fact is public. A third measure would require that the government occupy condemned property or a lease it for public use. It would also limit governmental authority to adopt land-use, housing, consumer and environmental and workplace laws and regulations except where required to preserve the public health or safety, and bar unpublished and eminent domain court decisions.

Each of the initiatives would need to collect almost 600,000 signatures to get on the November ballot. The California Redevelopment Association, which opposes the initiatives, says enactment of any of them would essentially eliminate the use of eminent domain for redevelopment projects.

The potential for levee failure and ensuing catastrophic flooding in the Sacramento River Delta have caught the attention of both the legislature and Gov. Schwarzenegger. In a dramatic move, the governor on February 24 declared a state of emergency after taking a helicopter tour over the Sacramento and American Rivers, in company with members of the state's congressional delegation. The declaration allows the state to set aside environmental and contracting regulations to speed up levee repairs. The governor also has asked President Bush to declare a federal state of emergency, permitting federal environmental regulations to be set aside. He is also seeking some $56 million in federal aid to address 24 critical erosion sites, in addition to earmarking up to $100 million from the state's reserve fund for repairs. Homeland Security Secretary Michael Chertoff has agreed to tour the Sacramento River levees this month in an effort to expedite consideration of the emergency funding request.

A survey carried out by the Army Corps of Engineers and the state's Department of Water Resources last fall identified 100 serious erosion sites in the levee system, 24 of which were deemed critical, because levee failure in a flood is a distinct possibility. Last month, residents of the Natomas Basin north of Sacramento got some bad news, when the Sacramento Area Flood Control Agency reported that levees protecting the area do not meet the 100-year level of flood protection. Repairing the problems, due largely to seepage deep below the levees, could cost upwards of $270 million, the agency estimated.

The governor proposed a $2.5 billion bond package just for improvements to the levee system over the next 10 years. However, the package would have to be approved by the legislature and the voters. Some provisions of the legislation that would enact the bond issue are likely to be controversial, because they would shift some of the liability burden if levees fail from the state to cities and counties. Proponents of the liability shift argue local governments would have a greater incentive to plan more conservatively for development if they knew that a levee failure would result in significant liability. Local government officials, on the other hand, contend the state should be the deep pocket, not local governments.

An attempt to get the governor's full $68 billion infrastructure bond package on the June ballot failed in mid-March. The Assembly approved a proposal for a $4.15 billion bond issue for flood control, and the Senate okayed $1 billion for levee repairs. However, the Senate adjourned before the Assembly could send its measure over for consideration.

Utah: 'Developer Wish List' Sinks. Sen. Al Mansell, sponsor of S.B. 170, a controversial measure being pushed by development interests and the real estate brokerage industry, dropped the bill early in February, in the face of united opposition from municipalities and the state APA chapter. He told members of the press he never really intended to pursue the bill as originally drafted by a coalition of developers, including at least one that has a number of lawsuits against cities, claiming they are improperly restricting its development plans.

Mansell, a commercial real estate broker and former president of the National Association of Realtors, described some of the provisions in the original bill as "way over the top." Some of those provisions included restrictions on hillside construction rules and aesthetic zoning, and a provision making local land-use decisions administrative rather than legislative. That last provision would have effectively ruled out almost all citizen ballot box initiatives challenging rezoning decisions.

Instead of S.B. 170, the legislature enacted S.B. 267, which includes largely procedural changes to the development approval process, and S.B. 268, relating to the appointment process for the state's property rights ombudsman and the types of cases he or she can take on.