Speech from the Ninth Annual National Conference
on Private Property Rights
(2005)

REGULATORY TAKING COMPENSATION —
THE SUCCESSFUL OREGON MEASURE 37 INITIATIVE

by Bill Moshofsky

I am very honored and please to be invited to speak at this outstanding forum on property rights and land use regulations. Thank you, Carol, for including me and thank you for all the great work you do.

Election night in Oregon in November 2004 was an exciting and memorable occasion. That’s when Measure 37 was approved by 61 percent of Oregon voters.

What is Measure 37 about?

It simply requires state and local governments to compensate landowners for a “regulatory taking” or to remove the regulation from the land.

It was a huge victory for property rights. But let me hasten to say, we won a great battle, not the war.

Opponents have not given up. They are throwing roadblock after roadblock against the Measure.

Just a week ago, a trial court decided Measure 37 is unconstitutional. Here’s a front page headline from our major newspaper which says it all “Judge razes Measure 37 land law.”

We are confident Measure 37 is constitutional, and we are appealing. Jim Huffman, Dean of Lewis & Clark School of Law and an outstanding expert on constitutional issues, says the court’s decision is bizarre. A leading Democrat Senator, opponent of Measure 37, says the decision is wacky. Pacific Legal Foundation, one of the nation’s best authorities on property rights issues, is convinced the decision has no merit.

Before talking further about Measure 37 itself, I’d like to give you some background which lead to its passage.

Measure 37 was needed because the courts failed to protect landowners from “regulatory takings.”

It plugged a bizarre loophole the courts created, which allows governments to use unfair regulations to literally steal up to 95 percent of the use and value of private land.

Courts generally hold that, under the Fifth Amendment, no compensation need be paid when a regulation restricts the use of land so long as the government does not occupy the land and the owner is left with any economic use. The courts do require compensation for any “physical” takings, no matter how minute the intrusion (such as a television cable in a building). But they require compensation for “regulatory” takings only when there is a total takings.

From the landowner’s perspective, this is a distinction without a difference. Taking the use of land — such as taking the right to a home on the land or the right to harvest trees — is taking the value of the land. The value of land lies in the “uses” it provides. If you take the uses, you take the land. If you lose the use of the kitchen and living room of your home, the value of your house is greatly reduced!

In my view, the basic problem is that the courts have failed to distinguish between (1) regulations imposed to prevent harm to the public (where no compensation need be paid), and (2) regulations imposed to provide benefits for the public (where compensation should be paid).

Even Justice Scalia, one of my favorites on the US Supreme Court, ducked the issue in Lucas v. South Carolina Coastal Council. He said that distinguishing between preventing harm and conferring benefits is “difficult, if not impossible.” With all due respect, he was wrong.

The irony is that the courts provide far more protection for other civil rights such as freedom of speech and freedom of the press. Just recently, the Oregon Supreme Court went so far as to hold that live “oral sex” on stage in a bar is entitled to freedom of speech protection. Incredible!

I should add, for the record, that the U.S. Supreme Court has held that landowners might be able to secure compensation for partial regulatory takings under the very complex and costly approach suggested in the Penn Central case, but I know of only one case in which a landowner was able to recover under this approach.

So, for all practical purposes, there is no workable way for landowners to secure compensation in court for regulatory takings, other than total takings.

To make matters even worse, legislators also failed to deal with “regulatory takings.”

State legislatures and the Congress have generally failed to require compensation. This is certainly true in Oregon. Even though the 1973 Oregon law that established our highly restrictive land use regulatory system specifically directed that a compensation program be developed and recommended to the next legislature, no compensation program was ever put in place.

As a consequence of such court and legislative failures, state and local governments in the state of Oregon literally had a license to steal.

They were able to impose all sorts of zoning and other regulatory restrictions on private land without any fear that they would have to compensate landowners — and that’s what they did. They were “regulatory takings.” As one of our supporters said “Why buy the cow if you can get the milk for free?”

A prime example is Oregon’s outrageous rural zoning.

Our state land use regulatory agency , the Land Conservation and Development Commission, forced the counties to zone almost 97 percent of all private land in the state into highly restrictive “farm” and “forest” zones — without regard to the productivity of the land for farm or forest uses, without regard to economic concerns, and without regard to the rights of the landowners. This down-zoning stripped landowners of the almost all the rights they had to develop and divide their land.

Of the 16 million acres zoned “Exclusive Farm Use” less than 2 million acres are “prime” farm land. Less than 5 million acres are actually farmable (this includes the prime land). The remaining 11 million acres are generally unproductive or low productive land, useful at best for grazing, which is generally of little value on a per acre basis. For example, in some areas, land that is so unproductive it takes 300 acres to feed one cow for a year must remain in exclusive farm use zones — this has generated the quip that a steer must graze at 40 miles per hour to stay alive.

To give you some idea of the restrictions imposed under the Oregon land use regulatory system — to qualify for a farm dwelling, the farmer has to prove he or she has produced over $80,000 gross farm income in the two preceding years or in three of the last five years.

There are other restrictions in farm and forest zones —

The reality is that such rural zoning was a scam, and Measure 37 provides only partial relief from such zoning.

As I explain in my book, Regulatory Overkill, the underlying objectives of the system were “open space” and “urban containment,” which are forcing cities to needlessly densify (build up, not out).

The farm and forest zoning has little to do with preserving farming and forestry. The zoning was a gimmick used to help achieve the open space and urban containment objectives. Actually, Oregon has lots of open space without such zoning — over 55% of the land in the state is federal land which is off limits to any kind of development.

The “urban containment” objective in the land use regulatory system crams more and more people into crowded urban areas.

Under the Oregon land use system, very rigid Urban Growth Boundaries (UGBs) were mandated around every city, making it very difficult to expand urban areas. This makes no sense. At the most UGBs should be a planning tool to guide growth, not block it.

Only about two percent of the land base in the state is urbanized. Even though there are millions of acres that could accommodate expansion, it is extremely difficult to expand urban areas because of the UGBs and farm and forest zoning.

So the system severely limits land needed for housing, industrial and commercial uses. It is driving up housing costs and mandating compact living (tiny lots, row houses, apartments). To make matters worse, in the Portland Metro area, money that should be going into streets and roads is going into light rail that serves less than 1 percent of commuter travel, increasing congestion and decreasing livability. The congestion and scarce land for industry and commerce inhibits economic growth needed for the region.

Incredibly, public officials and the media have the audacity to call this “Smart Growth” and brag about it to other states. Unfortunately, Measure 37 does little to address these flawed urban regulations. Making land scarcer and increasing densities actually increases the per acre value of land in urban areas.

But there are other aspects of the Oregon land use system that Measure 37 does address — the system imposes highly restrictive environmental overlays on top of all the rural and urban land use controls I have discussed.

These overlays include regulatory restrictions to provide wildlife habitat, preserve natural areas, and protect riparian areas, and provide scenic views — again without compensation to landowners for loss of use and value.

These overlays further restrict the use of private land. They are basically “conservation easements” which should be purchased — they are providing public benefits and the public should pay for them.

To put this in perspective, these state imposed regulatory overlays are little different than the regulatory overlays imposed under the federal Endangered Species Act — which restricts the use of private land to provide habitat for so-called endangered or threatened species of animals, birds and bugs.

Over the past thirty years in Oregon, there have been efforts to require compensation and deal with this regulatory overkill that literally has the state of Oregon in a land use “straitjacket.”

Here are some examples of such efforts:

This brings me to Measure 37, a statutory program to require compensation for regulatory takings, or removal of the regulations.

After being slapped down by the court, we went back to the voters with Measure 37 in 2004. We took a statutory approach to get around the Supreme Court decision.

The bill passed with a 61 percent majority despite the fact that we were outspent by over 3 to 1, and that every newspaper but one editorialized strongly against our Measure. They tried to scare the voters with all sorts of phoney “sky is falling” claims, such as Wal-Marts everywhere, destroying farming, and state and local governments having to spend hundreds of millions of dollars in administrative costs. Opponents’ efforts didn’t work. We stressed the need for fairness and the people came through.

Unfortunately, as I indicated at the outset, opponents of Measure 37 have not given up.

Despite the continuing opposition, we are excited about the progress we’ve made and the impact of Measure 37 is having in Oregon and all across the country. We have a mini-revolution underway. We are helping other states move ahead with efforts to adopt similar protections for private property. We’ve been to many states. Ten have efforts under way and there is positive activity in others.

Also, the U.S. House of Representatives has included in an Endangered Species Act reform bill a provision that calls for compensation for regulatory takings.

The U.S. Supreme Court’s decision in the Kelo case has given a big boost to property rights and to all these efforts to get relief from regulatory takings.

People all over the country, Democrats and Republicans and liberals and conservatives, are very upset that the court allowed eminent domain to be used to take private property for private uses. We say that people who are concerned about takings of private property for a developer where compensation is required, should be outraged over regulatory takings of private land for a critter, plant or bug where no compensation is required.

It’s a great time to fight for property rights, which are the cornerstone of our economic system and the underpinnings of all the freedoms we enjoy. Our rights to own and use our property are the most basic civil rights we have.

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