Givings: The Flip Side of Takings

Last November, by a resounding margin (61-39 percent) Oregon voters approved Measure 37. The ballot measure requires public entities to compensate property owners for any decline in the value of their property due to a public regulation.

The initiative's passage may have marked the sweetest victory to date for the 25-year-old "takings movement," a private property rights advocacy effort that seeks to "justly compensate" owners for any government action that reduced the value of their land. I hope it also marks the end of the defensive way we oppose such measures (e.g., arguing that compensating the victims of government action will cost us too much).

It is time we took the offense in the takings debate and launched a "givings movement." If the public must pay private property owners whenever a public action diminishes the value of their property, then property owners should compensate the public whenever public actions increase the value of the property.

The fact of the matter is that the vast majority of public actions elevate land and property values. If the public were compensated for the increase in land value that results from public actions, a number of public services, such as transit, could become self-financing.

The takings movement gets its traction from 12 words in the Fifth Amendment to the U.S. Constitution: " ... nor shall private property be taken for public use without just compensation." For almost 200 years after the Constitution was ratified, the courts interpreted those words to mean that compensation was due only if the government physically confiscated or occupied the property, or issued a regulation that stripped the property of virtually all its economic value.

For example, in 1978 the U.S. Supreme Court decided a case involving Penn Central, the owner of the Grand Central Station in mid-town Manhattan. Penn Central wanted to build a 50-story building above the station. The New York City Landmarks Commission rejected its application. The Supreme Court ruled that no taking had occurred because the property retained its economic use as a railroad and transit station.

In 1980, Ronald Reagan won the presidency and the takings clause quickly became one of the conservative movement's principal levers for restricting the public sector. University of Chicago law professor Richard Epstein's 1985 book, Takings, became the movement's bible. Epstein asserted that a compensable taking occurs even when there is only a minor and even hypothetical economic impact on the affected land. Moreover, he declared that the takings clause could and should be extended to hobble many government actions.

He boldly maintained that the clause renders "constitutionally infirm or suspect many of the heralded reforms and institutions of the 20th century: zoning, rent control, workers' compensation laws, transfer payments [and] progressive taxation."

In March 1988, Reagan adopted Epstein's thesis as federal policy when he signed Executive Order 12630: "(e)xecutive departments and agencies should review their actions carefully to prevent unnecessary takings ... "

In his memoir, Reagan administration Solicitor General Charles Fried recalls that era. "Attorney General Meese and his young advisers--many drawn from the ranks of the then fledgling Federalist Societies and often devotees of the extreme libertarian views of Chicago professor Richard Epstein--had a specific, aggressive, and it seemed to me, quite radical project in mind: to use the Takings Clause of the Fifth Amendment as a severe brake upon federal and state regulation of business and property."

By the mid 1990s, takings bills had been enacted in 14 states and had been debated in many others. In the 1990s the U.S. Supreme Court began to broaden the use of the takings clause to inhibit local land use regulations. We can expect equivalent initiatives to Measure 37 to gain ballot status in other states.