California is known for titanic and sometimes meaningful political battles, and this year is proving no exception. Among the seven statewide candidates and 13 ballot measures are three particularly high-profile campaigns, accounting for more than $200 million in campaign spending. These include the Schwarzenegger-Angelides race for governor as well as two ballot measures, Proposition 86, a $2.60-per-pack tobacco tax increase, and Proposition 87, a $4-billion tax on oil to fund research on ethanol and other alternative fuels.
Sailing just under the radar with less than $7 million in combined spending from the support and opposition camps is Proposition 90, the most far reaching and potentially most significant state-level political event in America this year. Proposition 90 is a state constitutional amendment with the short title of “Government Acquisition, Regulation of Private Property.” It seeks to reform both eminent domain abuse and regulatory takings.
In the wake of last year’s disastrous Supreme Court Kelo ruling, conservative California lawmakers tried to pass legislation in Sacramento to guard property rights. Their efforts were blocked by the Democrat majority. Not easily deterred, State Sen. Tom McClintock, the GOP candidate for lieutenant governor, turned to the initiative process for remedy. California constitutional amendment initiatives require 598,105 valid signatures to reach the ballot, however, causing Sen. McClintock’s effort to stall for lack of the more than $1 million needed to qualify a measure in the state of 37 million people.
Enter libertarian financier Howard Rich of New York. Rich, a director at the Cato Institute, chairman of Americans for Limited Government, and president of U.S. Term Limits, invested the needed $2.5 million to draft Proposition 90 and qualify it for the ballot. A Rich-allied group named Montanans In Action kicked in another $600,000. In total, the pro-Proposition 90 forces raised $3.7 million by the end of September, having a balance of about $343,000 cash on hand, small by California standards.
Proposition 90’s opponents are a mighty array of almost the entire apparatus of local government and nearly every environmental group, developers, redevelopment agencies and construction companies. Environmental groups have raised almost $500,000 to spend against Proposition 90 while local government has banked $2.5 million, with $1.3 million cash on hand—barely enough to run a few cable TV ads.
There is scant polling data available on Proposition 90, but what there is suggests that it strikes a chord in the heart of voters disgusted by the Kelo decision, with Proposition 90 running ahead in some cites by as much as three to one.
Assuming Proposition 90 passes in California, as now seems likely, what might be its effect? Government advocates warn that restricting the government’s ability to seize homes and businesses for development would also increase the cost to build freeways, schools, and levees. This has the potential of doubling the cost of government-sponsored infrastructure projects such as those paid for by the $37.3 billion in bonds placed on the November ballot earlier this year by the legislature.
The reason for the alarm is that Proposition 90 would entitle property owners forced to sell through eminent domain to compensation based on the value of the land after if it was rezoned to allow a higher use. In other words, it prevents government, redevelopment agencies and private developers from enriching themselves by using the government’s ability to target and seize land from individuals. Thus, Proposition 90 rightfully restores the value of land taken to the original property owner. This addresses the crux of the Kelo case, and this is why California voters are instinctively supporting the measure in large numbers.
Pernicious Regulatory Takings
If the eminent domain curbs in Proposition 90 cause alarm, then its provisions on regulatory takings instill loathing at both city hall and the Sierra Club. A regulatory taking occurs when government levies new restrictions on a property owner that serve to diminish the value of the property. This most frequently happens two ways: down-zoning and environmental regulations. Proposition 90 would not overturn existing environmental rules and government restrictions on the use of land, as happened with Oregon’s Measure 37 in 2004, but it would protect landowners from overreaching government power going forward.
Regulatory takings can be even more pernicious than eminent domain. A regulatory taking is, by definition, a non-compensating event in which a landowner’s right to use his property as he purchased it to be used is restricted after the fact, reducing the value of the land in some cases to virtually nothing. The “virtually” point is important as courts have ruled that so long as landowners retain some bit of value, then the government does not have to compensate the landowner.
Proposition 90’s opponents claim that the regulatory takings provision alone may cost California’s public agencies billions of dollars. Of course, that depends entirely on whether those agencies will continue to demand benefits for the public at large by placing uncompensated restrictions on individual landowners. What some would call good government, others would call theft.
While government and environmental groups may not have much money to stop Proposition 90 in November, history’s guide tells us they will fight it in the courts. Government agencies will no doubt battle Proposition 90 to the bitter end, using taxpayer funded lawsuits until its twin defense of property rights is ruled unconstitutional.