Eminent domain’s slippery, costly slope

Marketplace Staff Nov 2, 2006

KAI RYSSDAL: Last year the Supreme Court handed down a ruling in a case called Kelo versus the City of New London. It was sort of controversial. The justices ruled local governments can force property owners to sell out to private developers. Next week, voters in 12 states will have their say on the government’s right to eminent domain. Whether to limit it or not. Ballot measures in four western states, California, Arizona, Washington, and Idaho go further than just limits. They would force governments to pay up if regulations reduced the value of private property. Commentator Jamie Court says a yes vote could actually wind up hurting taxpayers and homeowners.

JAMIE COURT: Reforming eminent domain is supposed to be about limiting the government’s right to bulldoze a house to put up a freeway or a mall.

But some of these measures go much further. They would let citizens sue when government authorities enforce land-use or other laws they personally don’t like and think might cost them money. Even though those laws are there to protect the community’s interest.

So if you don’t mind your next-door neighbors starting a disco nightclub at their house and then suing taxpayers when the government tells them they can’t, these are the initiatives for you.

Sound absurd? Oregon enacted just such a law two years ago. Oregonians have since filed 2,700 lawsuits against state and local authorities asking for $6 billion of taxpayer money.

Here’s just a little taste. A small Oregon landowner asked for $203 million because he wasn’t allowed to build a pumice mine and power plant in a protected national volcanic monument.

Oregon opened a Pandora’s Box for litigation over real estate. But the initiatives in four western states aren’t limited to real estate. If you read the fine print, you’ll see that state regulation of all kinds of assets is on the chopping block.

In California, the state legislative analyst says that new consumer, housing, and environmental regulations could become endangered species.

The big risk is that corporations can use the initiatives’ fine print as legal fire power to argue that the money consumers pay them is their property. That means they can sue if government tries to tell them what they can do with that property.

So the state may not be able to tell banks how much they can charge in ATM fees, or credit card charges, or obscene mortgage rates.

By voting for these measures, voters may think they’re protecting their homes. The truth is they will simply be raising the cost of home ownership while footing some astronomical legal bills.

RYSSDAL: Jamie Court is the president of the Foundation for Taxpayer and Consumer Rights.

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