Proposition 90 - Government Acquisition and Regulation of Private Property

What it does

Proposition 90 is an amendment to the California Constitution that does two things:

• Prop. 90 imposes new requirements on the way that governments use eminent domain¹⁷ and increases the total amount that governments pay property owners when they make use of eminent domain.
• Prop. 90 requires compensation to property owners (real, personal and other kinds of property) when governments make changes to laws or regulations that diminish the value of property or business.

Under Prop. 90, the only public policy change that would not require compensation for economic loss would be actions to protect public health and safety, or during a state of emergency. The amendment would apply to all levels of government, including school districts. This provision is not retroactive and would apply only to new regulations that reduce the value of land, improvements on land, or a business.

Why it is on the ballot

There has been a long battle in U.S. courts and before local governments about the amount of compensation required to property owners when government rules or actions "take" economic value away from property owners. While a "takings" clause was included in the Bill of Rights to ensure that governments would not take over or destroy people's property without paying them (as had happened under the British), recent debates have focused more on "regulatory takings," which result from government policies or decisions - often in planning and zoning. These actions may change the potential use to which property may be put, and thus change the value of land. While the courts have typically given governments fairly wide latitude for planning and zoning, there has been a growing "property rights" movement that views government planning decisions with mistrust and asserts that property owners should have mostly unrestricted rights to develop their property as they see fit.

Prop. 90 makes political use of the backlash against the 2005 ruling by the Supreme Court of the United States: Kelo v. City of New London. In the Kelo ruling, the Supreme Court held that a city could use its eminent domain powers to acquire property from a land owner and sell the property to another private owner or business if the government could identify a "public purpose" such as job creation or increasing tax revenues. The Kelo decision caused many people to worry that local governments would use the case to condemn homes and neighborhoods in favor of higher-value economic activities. These concerns have been particularly acute in lower-income communities that previously experienced a generation of eminent domain takings in the 1950s and 1960s.

Property-rights advocates have made use of the concerns about Kelo to push changes to state and local laws, such as Prop. 90 that limits the power of government in land use and planning. East Coast developer Howard Rich is the main financial backer of Prop. 90. Since the Kelo decision, Rich has donated several million dollars to various organizations focused on reducing the role of government, and to qualify ballot measures that challenge the Kelo decision and increase the costs of "regulatory takings" (the creation of rules that limit or prevent the most profitable potential use of property). Prop. 90 is one of seven similar ballot measures in Western states. The other states are Arizona, Idaho, Montana, Nevada, Oklahoma and Washington.

Pros

Those who support this measure claim:

• In light of the Supreme Court's Kelo decision, neither federal law nor California law protects private property and a person's home from being taken by the government, even for other private use.
• Past abuse of eminent domain authority wreaked havoc on communities nationwide. It is necessary to erect greater barriers to the misuse of eminent domain by increasing its costs and imposing stricter requirements on how the government uses the property.
• Governments do not always provide enough payment for the property they take in eminent domain cases and this measure could result, in some cases, in increased and fairer payments for seized property.
• This measure would prevent governments from using zoning to force down the value of land as a tactic to make it easier for them to use eminent domain to seize property. The potential to abuse zoning and planning would be diminished if this measure passed.
• This measure might inadvertently result in greater use of up-zoning to avoid costly litigation and payouts. This could result in desirable higher densities in existing urban areas as developers are given wider latitude to respond to market demand and provide more intensive uses on the same land - all to avoid new regulatory takings and costly litigation or payouts.

Cons

Those who oppose this measure claim:

• The effect of this measure on cities and counties would be immediate, dramatic and far-reaching: billions in additional costs to governments as they are forced to compensate property owners for many activities that are basic to the functioning of the state, such as building schools, roads, parks and utility infrastructure.
• The constitutional amendment would increase property prices so much they would limit governments' ability to acquire property for virtually any purpose.
• Prop. 90 would limit the government's ability and authority to adopt certain land use, housing, consumer, environmental and workplace laws and regulations. Every new regulation could trigger concerns about takings and make the price of the new regulation so high that the government cannot afford to enact it.
• This measure will prevent new environmental regulations or changes to local land use controls unless state and local governments have enough money to compensate a property or business owner for a reduction in value. This could include business regulations, such as limits on telemarketing or consumer-protection laws. Oregon's similar law has produced $3 billion in claims.
• The measure will inspire millions in costly litigation for the state due to the vagueness of many of the concepts and terms.

SPUR's analysis

Proposition 90 would limit government's authority to adopt many land use, housing, consumer, environmental and workplace laws and regulations - except when necessary to preserve public health or safety - by requiring payment to the owners of property (land, structures or businesses) for substantial economic losses resulting from new laws and regulations. Examples of policies that would be affected include agricultural easements, rent control, down-zonings and limitations on the use of private air rights.

Eminent Domain: The measure would change the rule on calculating compensation for the government taking property through its eminent domain power, from one based on "fair market value" or "just compensation" to the "highest and best use" or "the use at which the government intends to put the property" (whichever is greater). Not only will this change likely result in massive and costly litigation to interpret the true meaning of the new standard, it also could result in a scenario where a landowner demands a portion of the revenue the government earns from the land - such as from a toll road - even if the landowner could never have developed that particular use. This would also increase government and taxpayer costs for basic infrastructure and public works projects such as schools, utility infrastructure, roads, and levees.

Governments would be required to occupy condemned property or lease it for public use. Condemned private property would have to be offered for resale to the prior owner or the owner's heir at current fair market value if the government abandons the objective behind condemning the property.

Regulatory Takings: The measure also would change the valuation for regulatory takings (where government action such as zoning results in substantial economic loss to private property). Under Prop. 90, any government action that is not explicitly for the protection of health and safety invites compensation for the loss in value - not only to the specific property or business owner, but also to owners of surrounding properties. This is a change from the current standard, which gives governments wide latitude for zoning changes so long as the changes do not destroy all economic use. Prop. 90 defines government action as "any stature, charter provision, ordinance, resolution, law, rule or regulation."

Because the law is written to apply to all new land-use changes and rules, it could result in governments not changing their existing zoning or land use laws for fear of having to pay property owners for theoretical economic losses. One of the major areas where this will occur is in farmlands in the Central Valley. Fast growing communities have often tried to create buffers to preserve agricultural land. If Prop. 90 passed, new attempts by governments to control the spread of urban sprawl might become cost prohibitive.

According to the state legislative analyst and state director of finance, the fiscal impact on state and local governments is unknown, but there may be potentially significant future costs to pay damages, or to modify regulatory policies or other policies to conform to the measure's provisions. Further, there are also unknown and potentially major changes in governmental costs to acquire property for public purposes for everything not related directly to health and safety.

We do not often have as strong a position as our "No" stance on Prop. 90. This measure would be disastrous for all levels of government in California. Not only would it require massive payments to continue basic planning functions in cities, but it also would wreck havoc on our state's environmental laws and attempts to control sprawl throughout agricultural and environmentally sensitive areas. Although the measure appears to be based on popular discontent with the Supreme Court's Kelo decision, it is really an attempt to do an end run around all planning and zoning actions and new business regulations. Its passage would bring land-use planning and approvals to a halt, leading to lawsuits and untold monetary claims. It would drive up the cost of all infrastructure projects where the government must buy private land, regardless of any use of eminent-domain law. If it passes, it will spell a watershed moment in California greater than the passage of Proposition 13 - and potentially far more damaging to cities and counties.

SPUR recommends a "No" vote on Proposition 90.

¹⁷Eminent domain is the power of government to force the sale of private property to the government if that property is to be put to a public use. In redevelopment activities, property must first be declared "blighted." However, eminent domain is also used for everything from freeways to schools to large-scale new developments.