Under Control?

By Richard M. Frank
This article appears on Page 7

      The heated legal and political debate over eminent domain reform, rent control and property rights generally, continues unabated in California. Two initiative measures, Propositions 98 and 99, will compete for voters' attention - and against each other - on California's June 3, 2008, primary election ballot.
      UC Berkeley School of Law's California Center for Environmental Law & Policy recently published a detailed, nonpartisan report analyzing the origins of this initiative debate, the major features of both Propositions 98 and 99, and some of the key, unresolved questions surrounding each measure. The full report can be found on the center's Web site (www.ccelp.berkeley.edu), but here are the critical points:
     
The Path to Props 98 and 99

      The impetus for Propositions 98 and 99 can be traced to three, related developments. The first, and most recent, is the U.S. Supreme Court's controversial 2005 decision in Kelo v. City of New London, 545 U.S. 469. In Kelo, the Supreme Court ruled that government may exercise its power of eminent domain to condemn privately owned property, even where that property is ultimately conveyed to other private parties for their use and occupation, as long as the government's exercise of its condemnation authority furthers general public economic objectives.
      The Kelo decision created a political firestorm, both here in California and across the nation. Indeed, Kelo is unquestionably the most unpopular and controversial property rights decision any court has issued over the past four decades. In direct response, over 40 states have changed their laws to preclude the type of "economic development" condemnation actions upheld by the Supreme Court in Kelo. California remains one of the few states not to have done so, much to the frustration of property rights advocates.
      The second development leading to the current initiative battle is a more long-running debate over the wisdom and effectiveness of rent control. In California, some 12 cities have in place apartment rent control ordinances, and over 90 local jurisdictions have enacted mobile home rent control measures. While approximately 1 million Californians live in rent-controlled housing, rent control remains a very controversial subject, and is bitterly opposed by California business and real estate interests.
      Third and finally, Californians have waged a battle for decades over a broader issue of property rights: the proper constitutional balance between government's exercise of the police power and private property rights. Property owners have for years asserted that various state and local measures to further environmental, land use and biodiversity objectives constitute a "regulatory taking" of their property, requiring monetary compensation.
     
Proposition 98

      Dissatisfied with how California courts, the Legislature and local governments have addressed these concerns, property rights advocates, taxpayer groups and landlords qualified Proposition 98 for the June 2008 ballot.
      Proposition 98 would amend California's Constitution to enact fundamental restrictions on the power of California governments to acquire private property through the exercise of their eminent domain authority. The initiative would effectively nullify Kelo in California by adopting an express limitation on the ability of state or local officials to condemn private property for purposes of facilitating third party, private economic development. Proposition 98 would also prospectively ban rent-control measures in California. Finally, the measure would potentially limit California governments' ability to enact a wide array of regulations that affect private property values.
     
Proposition 99

      Proposition 99 represents a political counterattack to Proposition 98, placed on the June 2008 ballot by a political coalition of California local governments, redevelopment interests and environmental groups as an alternative to Proposition 98. Proposition 99 was placed on the June 2008 ballot by those groups as a counterproposal to Proposition 98; these same groups vigorously oppose the latter, believing it to be too extreme. (By contrast, Proposition 98's proponents object to Proposition 99, calling it a misleading, "fig leaf"-type measure that doesn't provide effective eminent domain reform.)
      Proposition 99 is, in comparison to Proposition 98, much narrower in scope. It would circumscribe state and local eminent domain authority in California, but to a far lesser degree than Proposition 98. Proposition 99's limitations on government's power to formally condemn private property focus exclusively on owner-occupied single-family residences-the type of real property specifically at issue in Kelo. In contrast to Proposition 98, Proposition 99 would not affect "economic development" condemnation actions involving rental or multifamily residential property, agricultural lands or commercial properties. And Proposition 99, unlike Proposition 98, doesn't address either rent control measures or other forms of government regulation.
      In sum, Proposition 98 is broad and multifaceted, while Proposition 99 is narrow and surgical.
      Notably, Proposition 99 contains an express, so-called "poison pill" - providing that if Proposition 99 is enacted in the June 2008 election with more votes than Proposition 98 obtains, then Proposition 98 is null and void, and does not take effect.
     
Unresolved Questions

      Both Proposition 98 and Proposition 99 contain ambiguities, and raise legitimate questions about their ultimate scope and effect if enacted. Given the relatively broader scope of Proposition 98, it is perhaps unsurprising that the majority of unresolved issues involve that measure, rather than Proposition 99.
      Proposition 98's uncertainties extend to all three of the eminent domain, rent control and regulatory takings issues noted above. Regarding eminent domain reform, some of the biggest ambiguities involve two potential restrictions on state and local governments' power to condemn land that go beyond proscribing "economic development" takings: The first bars a public agency from condemning land "for the consumption of natural resources." The latter phrase, undefined in the initiative, calls into question a wide array of future utility, energy, water and related projects for which eminent domain arguably could not be used if Proposition 98 is enacted. Among such projects are controversial water storage and conveyance facilities currently being proposed for the Sacramento-San Joaquin Delta and other regions of California.
      Proposition 98 similarly bars public agencies from condemning private property "for the same or a substantially similar use as that made by the private owner." Arguably, this language would prevent government from purchasing land or easements for flood control purposes, among other objectives.
      The rent control provisions contained in Proposition 98 are among the measure's most straightforward. But even here, questions arise: These provisions would appear not only to prohibit rent control, but also a wide array of current inclusionary zoning and affordable housing measures. Nearly 200 cities and counties in California have enacted such measures to date, which are designed to ensure that developers include a component of low- and moderate-income housing in their development projects. If Proposition 98 passes, these ordinances will likely be unenforceable in the future, along with rent control measures.
      Proposition 98 would also ban any state or local "regulation" of private property that "transfer[s] an economic benefit to one or more private persons at the expense of the property owner." Government officials and conservation groups worry that this language calls into question a wide array of California land use and environmental measures. As courts have frequently recognized, regulation to limit housing densities, control mining, reallocate scarce water supplies, etc., often works to the economic advantage of some constituents at the same time that it disadvantages the regulated property owner.
      Finally, both Propositions 98 and 99 exempt from their bans on "economic development" condemnation actions those eminent domain proceedings undertaken to abate "criminal activity." But neither initiative defines the latter phrase, and it remains uncertain whether, for example, a city could condemn a dilapidated residence involved in gang activity or illegal drug sales if a criminal prosecution had not first been filed or even successfully concluded against the individuals involved.
      To be sure, the answers to these questions are unclear. In particular, the proponents of Proposition 98 insist that their measure would not bar state and local governments from using eminent domain to pursue needed water and energy projects. And they maintain that they did not intend Proposition 98 to affect government's power to regulate - as opposed to condemn - private land and related property interests.
      Proposition 98's detractors claim with equal passion that the measure's imprecise wording makes a contrary interpretation possible, if not likely.
      The initiative's rent control and potential "regulatory takings" provisions have motivated an ad hoc coalition of housing advocates and environmental organizations to oppose Proposition 98 and support Proposition 99. And Proposition 98's potential, deleterious effect on major, proposed infrastructure projects such as water storage and conveyance facilities has prompted several major water districts and a number of prominent California political leaders - led by Gov. Schwarzenegger - to oppose the initiative.
      What is clear is that if either or both of these measures are enacted by California voters on June 3, Californians can expect a great deal of litigation over the initiatives. A successful Proposition 98, in particular, promises to be the subject of numerous lawsuits that will likely be needed to resolve definitively the scope and meaning of that measure.
      Conversely, if both Propositions 98 and 99 are defeated at the polls, it can be safely predicted that California's longstanding legal and policy debate over eminent domain, rent control and property rights will continue well past June.