Legislative expansion of Fifth Amendment 'takings'? A discussion of the regulatory takings law and proposed compensation legislation.

• Author: Dillon, Molly L.

1. INTRODUCTION

   Until now, Congress has been content to let the judiciary draw the line on takings by deciding when the government must pay compensation to private property owners. However, some members of the 104th Congress proposed new legislation which would significantly change the current federal approach to regulatory takings.(1) These legislative proposals sought to replace much of the case law interpreting the Fifth Amendment Takings Clause. Despite judicial decisions favoring private property owners in the last few years, many in Congress believe that a clear standard on regulatory takings is needed -- a standard which will better protect private property rights in the face of government regulation by reducing the amount of property value diminution required before the government must compensate private property owners. These members believe expanded protection of property rights is consistent with the intentions behind the Fifth Amendment Takings Clause. At the heart of the conflict is the tension between individual rights and the interests of the public, or, as some would say, the will of the majority. There are no easy answers to this timeless dilemma.

   These recent legislative proposals reflect a general hostility toward government regulations, especially those designed to protect the environment and natural resources. Opponents of the proposals are concerned that the proposals would, if enacted, create a cost deterrent to needed regulations.(2)

   Proponents argue that needed environmental regulations would still be enforced, but would no longer be "on the backs of particular individuals." The government--"we the people"--should bear the costs when society as a whole benefits from the use of private land.(3) Proponents also argue that the costs would not be prohibitive if government agencies act efficiently.(4) By inference, acting efficiently would mean foregoing regulations necessary for the protection of public welfare and safety. The only other option under the proposed legislation would be to compensate landowners, because the proposals make compensation mandatory for regulations which affect property values even minimally. However, both the House and the Senate proposals found it unnecessary to allocate additional funds for landowner compensation required by the proposals. Instead, the money must come from an agency's existing budget. This forces government agencies to decide between bearing the expense of certain regulations or foregoing their promulgation altogether.

   The view that government regulation is overburdensome, and interferes with the landowner's ability to prosper is a familiar theme. This theme to some extent finds its roots in the libertarian ideology which advocates the limited role of government. In turn, the roots of the libertarian ideology may be found to some extent in the classical philosophy of property espoused by John Locke in the late 17th century.(5) Locke contended that property rights existed before government and therefore government's role is limited to that of protector of preexisting individual rights which are inherent in man.(6) House of Representatives 925 and Senate 605, both of the 104th Congress, reflect Locke's philosophy of property and, in turn, support a more protective and expansive view of individual property rights.

   The legislation adopts only the most libertarian concepts from current case law and fails to acknowledge the principles developed to address the necessary balance between public interests and private property rights. While proponents of this legislation seem to believe the libertarian ideology as stated by Locke was the inspiration behind the Fifth Amendment, contrary arguments exist. The proposals suggest an overly broad and ineffective solution to a problem which requires a balancing of the public interest, including protection of the environment, in conjunction with the protection of private property rights. As a result, the proposals ignore the struggle over current land use issues altogether.

   The justifications of this wave of proposals, and the underlying ideas about property rights, has been hotly debated both politically and academically.(7) Though neither of the proposals was enacted, the underlying clash of ideas will continue. The supporters view the property rights issue through the perspective of classical property theory. This perspective ignores the historical case law and even departs from the current case law.(8) Ultimately, these ideas fail to acknowledge that a balance of interests is necessary.

   Part II of this comment describes the rules developed in the legislative proposals and the extent of property rights protection advocated. I explain how such rules, the protection they would provide, and the arguments of their proponents are representative of the libertarian view of property rights. In Part III, I present the arguments against finding that the libertarian view of property was the sole influence behind the Fifth Amendment. Part IV is an analysis of the past and present case law which shows that the proposals adopt only the most libertarian ideas from the current case law, thus ignoring the need to find a balance between private and public interests. Proponents claim that protection of private property rights must be restored in order to carry out the intentions behind the Fifth Amendment Takings Clause. This contention finds no basis in the early case law. Lastly, in Part V, I present more balanced alternatives to the type of rules supported in the past proposals.

2. PROPOSED LEGISLATION

   1. H.R. 925

      The property rights protection bill that passed in the 104th House in 1995 is H.R. 925 or the "Private Property Protection Act of 1995."(9) House of Representatives 925 falls under the category of "compensation" bills as opposed to the "assessment" bills. Compensation bills focus on paying the landowner for a diminution in the value of his land. Assessment bills propose a "taking impact analysis" by federal agencies before they promulgate any regulations which might adversely impact the value of private property.(10)

      House of Representatives 925 would affect all federal agencies which promulgate regulations under the authority of those acts specified in the proposal.(11) The proposal requires federal agencies to compensate any landowner whose land value has been decreased by 20% or more by such regulations. If the diminution reaches 50% of the land value, the landowner can force the agency to buy the land outright for "fair market value." Additionally, the bill requires only the affected portion of the property to be considered in measuring the affect of the federal agency action, thus making it significantly easier to obtain compensation. Even if the landowner cannot meet the 20% level of diminution for the entire piece of property, she may make a compensation claim for a smaller portion.

      Section 3(B) prohibits indefinitely a restricted use for which the agency has paid compensation, even if the restriction is later withdrawn. If the agency later rescinds the restriction and the landowner wishes to pursue the previously restricted use, she must repay the compensation with the amount adjusted for inflation. In essence, the government is buying from the landowner the particular land use being prohibited by the agency action.

      Despite the attempt to clarify this area of law, ambiguities would arise if courts encountered the nuisance exceptions proposed in both bills. Two types of nuisance exceptions exist; those which defer to the existing state law and those which are defined in the legislation themselves. The House proposal contains both types. It requires the avoidance of inconsistency between state law and the federal Act. Under this provision, anything already prohibited by state nuisance law or local zoning will not be compensable. Those courts which have traditionally been more deferential to state legislatures in the area of land use law may find a more expansive definition of public nuisance possible. Thus, the bill will likely have a disparate affect on landowners according to the situs of the property. The second exception in H.R. 925 seeks to avoid compensation for the federal prohibition of those land uses which would cause a hazard to public health or safety or damage to "specific property" other than the regulated property. This may be a difficult distinction to draw given the interdependence of land and the broad effects land uses are now known to have.

   2. S. 605

      Proponents also attempted to pass a bill in the Senate that would expand the protection of property rights from its current judicial interpretation under the Fifth Amendment. The Senate version, S. 605, was the second introduced by former Senator Bob Dole.(12) Senate 605 or the "Omnibus Property Rights Act of 1995," is more comprehensive than H.R. 925 in that it is not limited to compensation but also has an extensive provision on agency assessment. In addition, the Senate proposal is not limited solely to the coverage of laws aimed at environmental protection. The proposal applies to all agency regulations regardless of the law under which the regulation was promulgated. This proposal also applies to state agency regulations required or funded by the federal government. The Senate version requires 33% diminution or greater before a property owner would be awarded compensation.(13)

      The proposal has five sections, the first of which is the statement of findings and purpose.(14) Title II sets forth the compensation provision. Section 204 is somewhat an attempt to codify existing law. This section provides for "just compensation" when private property is taken or invaded or when the owner is "deprived of all or substantially all economically beneficial or productive use of the property."(15) Section 204(D) provides for compensation when the "fair market value of the affected portion of the property" is diminished by 33% or more.(16)

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