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Article Excerpt
NOTE CONTENTS
INTRODUCTION I. THE PARTIAL REGULATORY TAKINGS MOVEMENT A. The Rise of State Takings Reform Legislation B. Defining Partial Regulatory Takings Regimes 1. Targeting Land Use Regulations 2. Low Barriers to Claims 3. High Resulting Costs C. Why Now? 1. Inequitable Burdens and a Weak Judicial Status Quo 2. Growing Distaste for Environmental and Land Use Laws 3. Connections to Eminent Domain D. Government Responses to the Costs of Partial Regulatory Takings Regimes 1. Universal Payment 2. Inaction 3. Waiver 4. Exemptions II. COMMUNITY IMPACTS: INEQUITY AND LIMITED PARTICIPATION A. Zoning and Neighborhood Character B. Zoning and Low-Income Communities III. A MORE EQUITABLE SOLUTION: REGULATORY BALANCES A. Proposed Solutions in the Current Literature B. A More Balanced Alternative 1. Improved Mechanisms for Participation a. Neighborhood Input Groups b. The Ombudsman "Plus" 2. Addressing Inequities: Funds for Community Projects CONCLUSION
INTRODUCTION
The United States is currently in the midst of a growing movement--at both the national and the state level--pursuing partial regulatory takings reform. (1) This movement, which has emerged as a response to perceived government abuses, seeks to extend current Fifth Amendment takings doctrine to give property owners a claim to compensation whenever government regulation causes even slight decreases in the value of their property. One recent change of heart highlights the growth of this movement: in 2006, Arizona voters approved an initiative--the Private Property Rights Protection Act (2)--that had the same purpose of mandating compensation for partial regulatory takings (3) as a 1992 act that Arizona voters repealed by referendum in 1994. (4) California, Idaho, and Washington saw similar initiatives on the ballot in 2006. (5)
Government action inevitably results in gains and losses for different groups of people. Viewed optimistically, and under the assumption that state and local governments are not corrupt, the very essence of government action is an attempt to serve the public good. (6) Whether because interest groups fight for legislative change (7) or because legislators are committed to the public welfare, (8) the overall effect of legislation may be one of relatively balanced gains and losses, (9) or takings and "givings," (10) that result in some level of fairness for everyone. Of course, governments do not always achieve a regulatory balance. (11)
Nevertheless, the partial regulatory takings solutions designed to respond to this mismatch, real or perceived, are too extreme--from the 2006 ballot initiatives and state bills to Oregon's already costly Measure 37, which became effective in 2004. (12) By raising regulatory costs and by failing to provide an alternative to regulation, the regimes could stifle government regulation and prevent individuals from influencing the growth and character of their neighborhoods--and in some cases already have.
This Note proposes a remedy that lies between the status quo and the recent regulatory takings proposals. Through what I call a "regulatory balances" planning process, states should address the impact of state and local government action on private property owners, including low- and middle-income groups. This regime would distribute regulatory burdens more evenly by supporting community participation in local planning processes; (13) by funding projects that stem from this planning; and by forming institutions that would oversee local planning systems, answer concerns, and provide alternatives to property rights litigation.
Part I describes the growing partial regulatory takings movement, analyzes the potential costs of this movement, and provides an overview of government responses to successful regulatory takings initiatives. Part II investigates the major flaws of both regulatory takings regimes and the status quo--including limitations on community planning mechanisms and greater inequities for communities that rely upon these mechanisms. Part III then suggests procedural and substantive mechanisms to address those problems.
I. THE PARTIAL REGULATORY TAKINGS MOVEMENT
The idea that a regulation's diminution of private property value can result in a taking dates back as far as the 1922 case of Pennsylvania Coal Co. v. Mahon. (14) An organized partial regulatory takings reform movement, however, is a recent phenomenon. This Part discusses the growth of that movement.
A. The Rise of State Takings Reform Legislation
Although the partial regulatory takings reform movement has grown through action at both the federal and state levels, (15) most of the success has been in the states, while significant federal efforts largely have failed. In 1988, President Reagan issued Executive Order No. 12,630, which required federal government agencies to assess the takings implications of regulatory actions. (16) Members of Congress subsequently introduced federal regulatory takings legislation that would have forced the federal government to compensate landowners for diminished property values resulting from federal agency action, (17) but Congress failed to approve any of the proposals.
Takings-related initiatives and legislation at the state level have been more successful. (18) While most proposed initiatives have contained provisions concerning both eminent domain and regulatory takings, (19) this Note focuses on the takings provisions. (20) Regulatory takings initiatives appeared on ballots in Arizona, California, Idaho, and Washington in 2006, (21) and voters proposed regulatory takings measures in states such as Missouri, Montana, Nevada, and Oklahoma in 2005 and 2006. (22)
But after all of the ruckus, only Arizona's Proposition 207 won at the ballot box. Courts in Oklahoma and Nevada found that the initiatives violated state single-subject rules. (23) A Missouri court found that the fiscal note summary of the official ballot initiative on regulatory takings and eminent domain was insufficient, (24) and the Montana Supreme Court struck down the state's regulatory takings and eminent domain initiative based on a finding of unconstitutional signature collection. (25) For those initiatives that reached the ballots, the majority of voters in California, Idaho, and Washington rejected them. (26) Voters also rejected a local regulatory takings measure in Napa County, California, that preceded California's Proposition 90. (27)
The failure of several initiatives to reach ballots, as well as voters' rejection of three initiatives in 2006--one of which failed by a very slim margin (28)--by no means indicates that state and local regulatory systems will remain unaffected in coming years. The strong base of national support to modify judicial interpretations of regulatory takings, (29) coupled with increasing wariness about government control over private property and the failure of the courts to adequately check this control, (30) continues to fuel regulatory takings reform.
Indeed, although many local and state governments have opposed takings reform, (31) some politicians have endorsed it. (32) Republican groups in California and Washington supported the regulatory takings initiatives in their states, as did the Libertarian Party of California. (33) Legislatures in Florida, Louisiana, Mississippi, and Texas have passed legislation providing compensation opportunities for partial regulatory takings. (34) Alaska, (35) Georgia, (36) Maine, (37) Minnesota, (38) and Montana (39) also have attempted unsuccessfully to implement regulatory takings legislation. And at least seventeen states require governments to assess the impacts of potential takings before enacting legislation. (40)
Furthermore, influential individuals and national libertarian organizations with ample resources for further reform efforts have been the strongest backers of the state movements in Arizona, California, and Idaho. For example, lawyers who drafted Oregon's Measure 37 (41) helped write other states' initiatives, (42) and national libertarian groups such as Americans for Limited Government, Fund for Democracy, and America at Its Best provided millions of dollars to support the initiatives in Arizona, California, and Idaho. (43) In Washington, state and county farm bureaus and individual owners of farms, dairies, and orchards provided approximately 59% of the funding for the failed Initiative Measure No. 933 ("Initiative 933"). (44)
Supporters at all levels asserted that their regulatory takings reform agenda would not end with the 2006 elections. (45) The California Secretary of State already has approved the circulation of a new property rights initiative, the California Property Owners Protection Act. (46) As one leader of Americans for Limited Government pledged, "Where the initiatives to ... protect homes and churches have come up short, you can be sure that we'll be back, stronger than before. This is a movement that will continue to grow." (47)
B. Defining Partial Regulatory Takings Regimes
The emerging partial regulatory takings movement has several underlying goals. First, it focuses on regulations--particularly land use laws--that affect real property. Second, it broadens compensation opportunities by reducing substantive and procedural burdens for compensation claimants and by providing narrow exemptions and waivers from the compensation requirement. These lowered barriers result in high compensation and administrative costs.
1. Targeting Land Use Regulations
The partial regulatory takings measures that have been proposed or adopted primarily target laws that negatively affect owners who have real property and who could profit from development. (48) Many of these reforms have been prospective, targeting new land use regulations or advocating compensation requirements when governments enforce existing laws. For example, Arizona's Proposition 207 allows compensation claims only for land use laws enacted after an owner acquires the property and after the proposition's effective date. (49) Idaho's Proposition 2 contained nearly identical language, (50) and California's proposition applied only to laws that "damaged" (51) property after the partial regulatory takings language took effect. (52) Other reforms, however, have contained retroactive compensation requirements. Washington's Initiative 933 applied to land use regulations that existed as of January 1, 1996. (53) Oregon's statute requires compensation for claims based not only on the enactment of new regulations but also on the enforcement of any land use regulation enacted before the effective date. (54)
Both retroactive and prospective partial regulatory takings regimes can restrict community planning options. Retroactive regulatory takings initiatives undermine governments' ability to apply or enforce existing regulations. Residents purchasing property within a zoning district would have no guarantee that the uses within that district actually would be limited to those listed on a zoning map. In other words, local governments that faced high compensation claims when they attempted to enforce an existing zoning ordinance potentially would permit nonconforming uses in the area rather than enforce the ordinance. Prospective regulatory takings laws, by contrast, mainly prevent future land use planning regulation. These measures particularly affect areas that might need more zoning laws, such as those growing rapidly into previously unzoned or lightly zoned regions.
2. Low Barriers to Claims
In addition to targeting land use regulations, the partial regulatory takings regimes tend to have low barriers to claims. This Note defines partial regulatory takings regimes to include any laws that set lower thresholds than do the courts (55) for the diminution in value sufficient to constitute a taking. For example, Mississippi places the compensation threshold at a 40% reduction of fair market value, (56) Texas at 2.5%, (57) Louisiana at 20%, (58) and Oregon at any diminution in the fair market value of the private property. (59) None of the 2006 state initiatives articulated a precise threshold, (60) thus creating the most striking departure from existing law. The trend in the takings reform movement has been toward decreasing or, most recently, eliminating the threshold values that trigger the right to compensation. Given the negligible or nonexistent threshold values in some of these states--for example, in Oregon and Arizona (61)--private property owners could make a compensation claim if a regulation caused a mere 0.5% decrease in the fair market value of their land.
If the cost of pursuing a claim outweighed the amount of compensation, many landowners would not bother to bring actions for such small losses. (62) Most of the state initiatives and legislation, however, would impose few bureaucratic obstacles for compensation claimants, meaning that a staggering number of claims could ensue if landowners with small, moderate, or large claims chose to follow through. (63)
The remaining procedural restraints governing claims typically include time limitations, filing specifications, proof standards, and occasionally ripeness requirements. While some states such as Florida require landowners to enter settlement negotiations and to consider agency ripeness decisions before making an official compensation claim in court, (64) many of the recent partial regulatory takings proposals--both successful and unsuccessful--only require landowners to make written claims to a state agency. The most generous provisions allow landowners to receive compensation based on a preenactment assumption that a law will damage property value (65) or to make claims without submitting proof that they planned to engage in a prohibited or regulated use. (66)
Under most regimes, landowners have sufficient (and typically ample) time to bring claims for compensation. Some partial regulatory takings regimes identify windows of time for takings actions--essentially serving as statutes of limitations that determine when a claim is time-barred. (67) Under Arizona's Proposition 207, for example, landowners have "three years [from] the effective date of the land use law" to bring a compensation claim. (68) In Texas, landowners must file contested takings cases against state agencies or political subdivisions within 180 days after they "knew or should have known" of the agency action's impact on their land. (69) Other regimes fail to specify any such limitations period. The Louisiana and Mississippi statutes, for instance, have no time limitations on landowner actions. (70) This style of open-ended allowance for landowner claims confounds government planning. Absent further administrative or judicial interpretation, (71) landowners could bring claims several years after the application or enforcement of government regulations, thus hindering governments' ability to identify when compensation claims might impact future budgets and how large these claims might be.
Additionally, some of the laws even suggest that private property can decrease in value at the moment the regulation is proposed. (72) The failed initiatives in California and Washington, for example, would have required compensation to property owners before the government enacted or enforced a regulation that purportedly would diminish property values. (73) The "preemptive payment" requirements are problematic because it is difficult to determine, before the enactment and application of a regulation, how property values will change. (74) A regulation requiring an owner to maintain a portion of her land in open space may decrease her land value immediately, but the land values of the entire neighborhood (and the long-term value of the owner's land) may rise because of the attractive open space and the greater scarcity of land created by the regulation. (75)
In a similar vein, under several statutes and initiatives, compensation claimants need not submit proof that they intended to use their land in a manner barred or limited by a regulation. (76) Thus, the speculative claims for just compensation under a partial regulatory takings regime would require a great deal of guesswork--a cost that state governments would bear.
3. High Resulting Costs
As discussed in Subsection 2, low procedural barriers to regulatory takings claims allow large numbers of potential claims. This creates high administrative costs for governments and delays the processing of claims, which detracts from the benefits offered by the compensation system.
Oregon's partial regulatory takings regime is a case in point. Under Measure 37, property owners have two years to bring claims after a regulation has been enacted or enforced, and they need not submit an application for a land use permit when they request compensation. (77) Additionally, to trigger the compensation review process, claimants only need to make a "written demand for compensation ... to the public entity enacting or enforcing the land use regulation." (78) The sheer number of claims under any system similar to Oregon's may force governments to waive the application of most regulations rather than to compensate claimants or challenge questionable claims. As of April 12, 2007, property owners had filed a total of 6680 claims totaling approximately $15 billion. (79) And as of March 2006 (the most recent date available), county and state governments receiving these claims had waived--rather than paid--all uncontested damages claims. (80)
Although Florida has not maintained regular records of claims and claim costs, preliminary data suggest that Florida's Private Property Rights Act also has inspired expensive compensation claims. In 2003, Miami-Dade County alone faced as many as 258 claims under the Act, (81) and by June 23, 1998, developer claims relating to floor-to-area ratio (the allowed height of a building based on the plot size where the building is located) and to unit bonus reductions totaled nearly $40 million. (82) These claims have concluded in a variety of ways. One, for example, resulted in a settlement involving partial waiver of development restrictions imposed by a local referendum, (83) while another led to discussions for cash settlement between the government and the property owner. (84)
In addition to low barriers to claims, the fact-finding and administrative procedures required of governments under partial regulatory takings regimes make these compensation systems costly. The government must incur the costs of transacting not only with the individuals bringing takings claims but also with the owners of adjacent or nearby property who might be affected. (85)
Florida's procedures for compensating landowners provide a vivid example of the layered administrative procedure that exists for processing landowners' regulatory takings claims. (86) After receiving a landowner claim, the government agency must then notify all parties who participated in the claim action and any owners of property bordering the claimant's property that a claims process has commenced. (87) The statute also requires the agency to make a written settlement offer within the 180-day period between an owner's filing of a claim and a court action. (88) During this period, if the property owner does not accept the settlement offer, the agency must "issue a written ripeness decision identifying the allowable uses to which the subject property may be put." (89) Following a claimant's rejection of the settlement offer and the ripeness decision, the claimant may file a compensation claim in the Florida circuit courts, and the statute provides detailed requirements for the courts' review of these claims. (90)
Oregon's claims process also involves a multistep administrative response, requiring the state's Department of Administrative Services to provide written notice to owners within the vicinity, to review the claim, and to forward it to all agencies that have enforced or enacted the challenged land use regulation. (91) The agencies involved must then produce a draft report with preliminary determinations on the merits, followed by a comment period and a final report by the Department and the agencies. (92) Initial estimates of the costs of these administrative activities are high. (93)
C. Why Now?
Courts have applied regulatory takings analyses for years. So why has this movement recently grown stronger? This Note argues that the partial regulatory takings movement is gaining strength for three reasons: (1) a belief that the courts and the takings precedents have not sufficiently addressed...
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