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The Anti-Kelo Backlash?

Timothy Sandefur has an extensive post on "The Kelo Backlash So Far." His conclusion--it hasn't accomplished much so far. Few states have had an opportunity to consider the issue and those that have acted have done so with limited effectiveness. He has a detailed discussion of the provisions of several laws and is unimpressed.

He writes (in part):

In the months after the Kelo decision was announced there was much talk of a "backlash" in the states. Since state law can provide greater protections to people than federal law does, people hoped to change state law to protect themselves from eminent domain abuse. But, as I argue in a forthcoming paper (which will be posted on SSRN shortly), the backlash so far has accomplished little.

Most state legislatures have been out of session since shortly after Kelo was announced, which means that so far only four states have enacted laws in response to Kelo: Alabama, Texas, Ohio, and Delaware. Unfortunately, these four provide little protection for property owners, despite their big promises. In other states, the situation has been even more disappointing. California's legislature considered three measures to limit eminent domain abuse, and turned all three down, even though two of these would have been band-aid solutions that would have done very little. When the other state legislatures come back into session in January, can citizens of other states hope for greater protection? Only time will tell, but I'm pessimistic. There are two major obstacles to serious eminent domain reform: the public choice effect, and the sad state of American political philosophy. Still, there may be reason for optimism: the Pennsylvania state house has passed a bill which, if enacted, would create excellent protections for the state's property owners, and the U.S. House of Representatives has also passed an excellent bill limiting the availability of federal funding for projects in which eminent domain is used for economic development.

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Public Choice and the Waning Anti-Kelo Backlash:

Tom Blumer at BizzyBlog is not surprised that the Anti-Kelo backlash is already running out of steam as a result of public choice pressures.

Update:

More from the Affordable Housing Institute--in addition to the analysis, I recommend clicking through just to see the artistic renderings of the issue.

Update:

Timothy Sandefur notes in the Comments that Tom and I have misunderstood his position as one of a "waning" anti-Kelo backlash:

It's wrong to refer to the "waning" backlash. The point of my post and my article is that the backlash is not waning, but that it has not really begun at all. Most of the state legislatures are in recess, and have been since shortly after Kelo was decided. The four states that have acted are unusual in that regard (Texas and Alabama were in special session). My point was that the Kelo backlash has yet to begin and that if it is to do so, it must avoid the errors made by Ohio, Alabama, Texas, and Delaware.

I (and apparently Tom too) had understood Tim to say that it would be difficult to sustain the backlash and that weak legislation that had been enacted was an inevitable outcome of the legislative process. He appears to be optimistic that stronger legislation can be enacted elsewhere. I apologize if I misread his initial post.

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Anti-Kelo Reform in California and "Proposition 13 Takings":

Tim Sandefur has a report on California's efforts on the efforts to respond to Kelo in California, which he says addresses many of the weaknesses in the reform efforts in other states:

There are now at least two eminent domain ballot propositions that have been filed with the Secretary of State's office for placement on the November, 2006 ballot. There may be a third, I haven't heard yet. The text of one of these, written by State Senator Tom McClintock, I reproduce below. When I have the others, I'll post those, too.

As you can see, the McClintock proposal avoids the pitfalls I've pointed out in my article about the backlash so far. It does not contain exceptions that allow for redevelopment, in the way that Texas and Alabama's laws do. And it does not limit itself to a meaningless report like Ohio's. The important language is: "Private property shall not be taken or damaged without the consent of the owner for purposes of economic development, increasing tax revenue, or for any other private use, nor for maintaining the present use by a different owner." The bold language is especially important, because Kelo presents a special problem for Californians due to Proposition 13.

After Kelo, there is no reason the state cannot condemn homes and resell them to the owners or other users solely to increase the property tax assessment on the transfer of title as allowed under Prop. 13.

I personally hope that Tim is right that California will act with stronger reforms than elsewhere. One advantage in California is that the reforms will be proposed as ballot propositions, rather than being generated by the state legislatures. This thus avoids the agenda-setting and related public choice problems otherwise associated with enacting reforms designed to tie the government's hands when it comes to taking property.

Nonetheless, the public choice problems remain daunting, but perhaps not overwhelming. As Tim writes, "Now that this proposition has been submitted to the Secretary of State, it must get enough signatures to qualify for the ballot. That costs money, and that's one of the big problems this initiative faces. If it gets on the ballot, polls suggest it would pass overwhelmingly. But getting it on the ballot requires money, and who's going to pay it? There's little money to be gained in eminent domain reform…."

Tim also raises a question that others have asked me--Could the state condemn homes and resell them solely to increase the property tax assessment under Prop. 13? My reading of Kelo is that Sandefur's concern appears to be largely justified (although not inevitably so). (I am not aware of precedents other than Kelo that might govern this question). Parts of the Kelo opinion suggest that the Court seems to indicate that the possibility of an increase in tax revenues can qualify as an adequate public use, and so the state could simply take a home and sell it to someone else, thereby getting a property tax boost.

On the other hand, there is some language in the opinion that refers to the Taking as being part of an integrated developmental plan, so it is not clear whether a taking of particular homes simply to increase the tax revenues would qualify. Reading the opinion, however, it does not seem to require an integrated development plan for a Kelo-style taking, or whether that is a factor to be considered. Rather, it simply suggests that the fact that there was an integrated development plan in the case makes the Taking less questionable than would be the taking of a discrete parcel of property. Certainly Justice O'Connor's Dissent assumes that such a plan is not required but that individual parcels could be taken, as her famous Motel 6 example makes clear. Stevens does not appear to offer any response to O'Connor's expression of concern. Moreover, whereas there was merely the prospect of increased tax revenues in Kelo, in a "Prop. 13 taking" the government would be guaranteed an increase in property tax revenues.

As to this point, Justice Stevens writes in Kelo (some citations omitted):

It is further argued that without a bright-line rule nothing would stop a city from transferring citizen A's property to citizen B for the sole reason that citizen B will put the property to a more productive use and thus pay more taxes. Such a one-to-one transfer of property, executed outside the confines of an integrated development plan, is not presented in this case. While such an unusual exercise of government power would certainly raise a suspicion that a private purpose was afoot, the hypothetical cases posited by petitioners can be confronted if and when they arise. They do not warrant the crafting of an artificial restriction on the concept of public use [fn].

He adds in a footnote [fn]:

A parade of horribles is especially unpersuasive in this context, since the Takings Clause largely "operates as a conditional limitation, permitting the government to do what it wants so long as it pays the charge." Eastern Enterprises v. Apfel, 524 U.S. 498, 545, 118 S.Ct. 2131, 141 L.Ed.2d 451 (1998) (KENNEDY, J., concurring in judgment and dissenting in part). Speaking of the takings power, Justice Iredell observed that "[i]t is not sufficient to urge, that the power may be abused, for, such is the nature of all power--such is the tendency of every human institution: and, it might as fairly be said, that the power of taxation, which is only circumscribed by the discretion of the Body, in which it is vested, ought not to be granted, because the Legislature, disregarding its true objects, might, for visionary and useless projects, impose a tax to the amount of nineteen shillings in the pound. We must be content to limit power where we can, and where we cannot, consistently with its use, we must be content to repose a salutory confidence." Calder, 3 Dall., at 400, 1 L.Ed. 648 (opinion concurring in result).

This does not appear to rule out the possibility of a Prop. 13 Taking to me. Nor does his response to the "parade of horribles" stand up to scrutiny here, because the government can simply resell the property, so it is a financial wash on that front. But it can then capture an increased tax revenue if it chose to do so. Finally, as the form of the transfer would be a taking from A to give to B, assuming the property were resold the primary beneficiary of the transfer would be the government, this does not seem to be a purely private taking (at least as Stevens sees it). Thus, as I read the case, Sandefur's concern and the California law that is being proposed in response, seems appropriate.

The Court's repeated reliance on Ruckelshaus v. Monsanto in the Kelo decision also suggests that the existence of an integrated development plan is not a necessary condition for a Kelo-style taking (although the Court suggests that it may be a sufficient condition), but that it is sufficient to take the property of discrete property-owners if the government believes that some abstract public benefit might result. In characterizing that case, the Court wrote in Kelo:

In Ruckelshaus v. Monsanto, Co., 467 U.S. 986, 104 S.Ct. 2862, 81 L.Ed.2d 815 (1984), the Court dealt with provisions of the Federal Insecticide, Fungicide, and Rodenticide Act under which the Environmental Protection Agency could consider the data (including trade secrets) submitted by a prior pesticide applicant in evaluating a subsequent application, so long as the second applicant paid just compensation for the data. We acknowledged that the "most direct beneficiaries" of these provisions were the subsequent applicants, id., at 1014, 104 S.Ct. 2862, but we nevertheless upheld the statute under Berman and Midkiff. We found sufficient Congress' belief that sparing applicants the cost of time-consuming research eliminated a significant barrier to entry in the pesticide market and thereby enhanced competition.

As I read Kelo then, with respect to a "Prop. 13 Taking," the Court seems to leave this in the hands of the political process with no constitutional protection. I don't see constitutional restrictions in Kelo that would prohibit this sort of taking, especially with the unquestioned increase in tax revenues that would result.

Update:

My initial post inadvertently omitted an important "not" before "overwhelming." I have corrected the typo.

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More on the "Waning Anti-Kelo Backlash":

Steven Anderson of the Institute for Justice and the Castle Coalition also cautions against prematurely tolling the bells for the Anti-Kelo backlash in the states. He, like Tim Sandefur, remains optimistic that the states will come through with strong reforms that address the issue.

Steven writes:

There's little doubt that government's ability to dole out favors through eminent domain creates the classic rent-seeking problem, but to say the legislative response to the Kelo decision is running out of steam is a bit premature. The fact that eminent domain remains a topic of debate both on these pages and in legislatures around the country after almost six months is just one indicator of the issue's importance -- and the activity behind it. And that's not the only reason for optimism.

As Tim Sandefur suggested, yesterday the Pennsylvania Senate unanimously passed comprehensive and historic reforms of its eminent domain laws (though it did carve out exceptions for Philadelphia and Pittsburgh). Legislators in more than 30 other states and even more local governments are also preparing reform bills for the legislative sessions that begin early next year. It's important to note that there are very few full-time legislatures; reform cannot occur when they're not in session. In addition to changes by the legislature, there are movements by citizens in several states for ballot initiatives to restrict eminent domain to its more historic bounds.

Sure, the Alabama and Texas laws Tim writes about could have been better if they also tackled blight condemnations, but they are certainly good first steps. That these bills passed despite intense pressure from the well-funded beneficiaries of eminent domain abuse is surely a good sign for future efforts -- at least as much as it's a call for proponents of eminent domain reform to work as hard as possible to make good reform a reality. While Ohio's moratorium puts the issue off, Delaware essentially did nothing and California whiffed, many battlegrounds remain.

Eminent domain reform won't happen overnight. There are powerful groups interested in protecting their territory. But it is happening and any attempt to characterize the fight as over disserves not only the issue, but also those home and small business owners around the country actually working toward a constructive solution. This is a long-term effort and many positive results are on the way.

Certainly I hope that Steven is right that strong responses to Kelo will be possible. Moreover, as I just suggested, it may be that such reforms may be more plausible in states where citizens can propose a referendum on the issue (such as in California), as citizens in those states may have greater ability to circumvent the natural agenda control power of politicians. (Note, I am not saying referenda are always good, just that they may be more effective where policians have conflicts of interest and agenda control). It will be interesting to see how public opinion plays out against public choice theory in the coming months as states continue to address this issue.

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