Government Takings
A Production Spectrum
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A Production Spectrum
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Regulation
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Financial Incentive
– taxation – income, property
– loans, grants
Risk assumption – mortgages
Public Infrastructure - construction
– water treatment, sewers, roads, schools,
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recreation areas
Collecting and disseminating statistics
- public records
- others
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Givings and Takings
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General Resources
Protecting Private Property Rights from Takings (Cato Institute, 1995)
Regulatory Takings and Proposals for Change (Congressional Budget Office, 1998)
Regulatory Takings Claims (Bench & Bar of Minnesota, 2002)
Police Powers - the fundamental right of a government to make all
necessary laws
Federal government
• Article I [The Legislative Branch] (see explanation)
• Section 8. [Scope of Legislative Power] (see explanation)
• Section 9. [Limits on Legislative Power] (see explanation)
Police Power
•
•
•
•
state police power comes from the Tenth Amendment to the Constitution, which
gives states the rights and powers "not delegated to the United States"
Amendment X [Rights Reserved to States or People (1791)] (see explanation)
the power to establish and enforce laws protecting the welfare, safety, and health of
the public
can delegated by the state to municipalities, government subdivisions, or even
private persons or corporations when they are authorized to exercise functions of
public character
Police Power
Includes the power
•Covenant – defeasible fee - easement
• to restrict how landowners owners can
exercise the legal rights they possess
and use real property and thus
promote/prohibit certain types of uses –
to regulate – called “takings” in extreme
cases
•Regulation
• specific
• general - zoning
•Regulatory takings
• to acquire the legal rights of landowners
•Eminent domain
– the power of eminent domain –
through condemnation proceedings
•Confiscation
Power of Government
Power to control how the rights of ownership can be used – police power
"We think it is a settled principle, growing out of the nature of a well ordered civil
society, that every holder of property, however absolute and unqualified may be his
title, holds it under the implied liability that his use of it may be so regulated that it
shall not be injurious to the equal enjoyment of others having an equal right to the
enjoyment of their property, nor injurious to the rights of the community. All property
in this commonwealth is derived directly or indirectly from the government, and held
subject to those general regulations, which are necessary to the common good and
the general welfare. Rights of property, like other social and conventional rights, are
subject to such reasonable limitations in their enjoyment, as shall prevent them
from being injurious, and to such reasonable restraints and regulations established
by law, as the legislature … may think necessary and expedient" (Commonwealth v
Alger. 7 Cushing's (Massachusetts) Reports 51 at 84; 1851)
Origin of Power
Fifth Amendment to the Federal Constitution (part of the Bill of Rights)
No person shall be held to answer for a capital, or otherwise infamous crime, unless on
a presentment or indictment of a Grand Jury, except in cases arising in the land or
naval forces, or in the Militia, when in actual service in time of War or public danger;
nor shall any person be subject for the same offense to be twice put in jeopardy of
life or limb; nor shall be compelled in any criminal case to be a witness against
himself, nor be deprived of life, liberty, or property, without due process of law; nor
shall private property be taken for public use, without just compensation
Due Process includes
Right to a fair and public trial conducted in a competent manner
Right to be present at the trial
Right to an impartial jury
Right to be heard in one's own defense
Laws must be written so that a reasonable person can understand what is criminal
behavior
Taxes may only be taken for public purposes
Property may be taken by the government only for public purposes
Owners of taken property must be fairly compensated
Fifth Amendment to the Federal Constitution (part of the Bill of Rights)
No person shall be held to answer for a capital, or otherwise infamous crime, unless on
a presentment or indictment of a Grand Jury, except in cases arising in the land or
naval forces, or in the Militia, when in actual service in time of War or public danger;
nor shall any person be subject for the same offense to be twice put in jeopardy of
life or limb; nor shall be compelled in any criminal case to be a witness against
himself, nor be deprived of life, liberty, or property, without due process of law; nor
shall private property be taken for public use, without just compensation
National Eminent Domain Power
Minnesota Constitution Article l, Section 13 and Article 13, Section 4
Eminent domain
Fourteenth Amendment to the U.S. Constitution
“All persons born or naturalized in the United States, and subject to the jurisdiction
thereof, are citizens of the United States and of the state wherein they reside. No
state shall make or enforce any law which shall abridge the privileges or immunities
of citizens of the United States; nor shall any state deprive any person of life,
liberty, or property, without due process of law; nor deny to any person within its
jurisdiction the equal protection of the laws” Ratified July 9 1868
Former Supreme Court Justice David Souter has called this amendment “the most
significant structural provision adopted since the original Framing”
True significance of the Amendment was not realized until the 1950s and 1960s, when
it was interpreted to prohibit racial segregation in public schools and other facilities
in Brown v. Board of Education
Minnesota Constitution Article l Bill of Rights
General issues
•
Appropriate exercise of police power
•
Due process
•
Public use
•
Just compensation
Planning
Comprehensive Planning (Metropolitan Council)
Local Planning Law in Minnesota (Admin Minnesota)
MN Stats 394. Planning, Development, Zoning
MN Stats. 462 Planning, Zoning
Comprehensive Municipal Plans
Comprehensive Planning, Land Use and City-Owned Land (League of Minnesota Cities)
Citywide Plans (St Paul)
The Minneapolis Plan for Sustainable Growth
Zoning (MN Stats.)
Zoning Guide for Cities (League of Minnesota Cities)
Zoning Ordinances (MN Stats.)
Counties – zoning (MN Stats.)
Zoning Administration (Minneapolis)
• Zoning code
• Zoning maps
Zoning (St. Paul)
Zoning upheld
Village of Euclid, Ohio v. Ambler Realty Co. 272 US 365 (1926)
• the first significant case regarding the relatively new practice of zoning, and served
to validate zoning ordinances in towns nationwide in the United States
• the Court accepted the argument that zoning met two needs
• extended and improved on nuisance law, providing advance notice that certain
types of uses were incompatible with other uses in a particular district
• was a necessary municipal-planning instrument
The case hinged on whether zoning was unconstitutional under any set of
circumstances
There have been no more such challenges to the general scheme
By the late 1920s most local governments had developed zoning ordinances
Regulatory Takings
How far to the left can regulation go before there is a “taking”?
Regulatory Takings
The requirement of the 5th amendment is relatively straightforward when the
government formally condemns privately owned land – to build a road
But the issue becomes much more complex when owners allege that government
regulations have effectively taken their property – by restricting the ways in which
they can use it – and that they should be compensated
In Pennsylvania Coal Co. v. Mahon (1922) the Court recognized that a taking may
occur even if there is no physical invasion of the property
Established the diminution-of-value test
Until then the eminent domain applied only when the government physically seized or
occupied property
•
Regulating land uses was not a taking but simply an exercise of the government’s
police power to protect the public health, safety, welfare, and morals
In the Pennsylvania Coal Co. case the Court stated, “While property may be regulated
to a certain extent, if a regulation goes too far, it will be recognized as a taking”
Cannot deprive the property owner of all reasonable use or value of the property
Subsequently zoning – land use regulations generally recognized as a legitimate
exercise of police power – may not deny an owner all economically viable use of the
land
In Agins v. Tiburon, 447 U.S. 255 (1980) the court stated that the application of land-use
regulations to a particular piece of property is a taking only "if the ordinance does not
substantially advance legitimate state interests ... or denies an owner economically
viable use of his land"
Land-use regulations that deny the property owner any economically viable use are
deemed a taking of the affected property Lucas v. South Carolina Coastal Council,
505 U.S. 1003 (1992) First English Evangelical Lutheran Church v. County of Los
Angeles 482 U.S. 304 (1987)
More recently, the courts have changed the definition of "substantially advance"
In Penn Central Transp. Co. v. New York City (1978), the Court had rejected any set
formula for determining when “justice and fairness” require that injuries caused by
public action be compensated by the government
The Court identified several factors of significance in an essentially factual inquiry
which includes
• the economic impact of the regulation on the claim
• the extent to which the regulation interferes with the landowner’s distinct
investment-backed expectations
• the character of the governmental action
The Minnesota courts have tended to analyze regulatory takings cases on whether the
regulation deprives the property of all economically viable uses
Have held that the denial of a building permit, rezoning request, or conditional use
permit does not constitute an impermissible taking
Airport overflight cases and airport noise cases are analyzed in a different manner
• MACnoise.com
Regulatory Takings (Wikipedia)
Beginning in 1987, the US Supreme Court cases ruled that such regulation was
a taking requiring just compensation under the Fifth Amendment to the Constitution
First English Evangelical Lutheran Church v. Los Angeles County even a temporary
taking may require compensation (1987)
Nollan v. California Coastal Commission ruled that a construction permit conditions that
fail to substantially advance the agency's authorized purposes require compensation
(1987)
Lucas v. South Carolina Coastal Council ruled that environmental concerns were not
sufficient to deny all development without compensation (1992)
Dolan v. City of Tigard ruled that conditions of a permit must be roughly proportional to
the impacts of the proposed new development (1994)
Eminent Domain
Federal Statutes and Rules
National Eminent Domain Powers (Legal Information Institute)
Delegation of the Federal Power of Eminent Domain to Nonfederal Entities (CRS, 2008)
Eminent Domain. Information about Its Uses and Effect on Property Owners and
Communities Is Limited (GAO, 2006)
Eminent Domain: Should Private Property Be Taken for Public Use? (Federal Reserve
Bank of S. Louis, 2007)
Legal Information Institute <US Code><“eminent domain”>
<CFR><“eminent domain”>
Search various agency sites using “eminent domain”
Google using agency name and “eminent domain”
Condemnation Process
The Rules of Civil Procedure for the United States District Courts govern the procedure
for the condemnation of real and personal property under the power of eminent
domain, except as otherwise provided in this rule
28 USC Appendix Federal Rules of Civil Procedure Rule 71.1
Kelo et al v City of New London et al (2005)
In 2000, the city of New London approved a development plan that, in the words of the
Supreme Court of Connecticut, was “projected to create in excess of 1,000 jobs, to
increase tax and other revenues, and to revitalize an economically distressed city,
including its downtown and waterfront areas.”
In assembling the land needed, the city’s development agent had purchased property
from willing sellers and proposed to use the power of eminent domain to acquire
the remainder of the property from unwilling owners in exchange for just
compensation
Does the city’s proposed disposition of this property qualifies as a “public use” within
the meaning of the Takings Clause of the Fifth Amendment to the Constitution?
Question Court Answered
What protection does the Fifth Amendment's public use requirement provide for
individuals whose property is being condemned, not to eliminate slums or blight, but
for the sole purpose of "economic development" that will perhaps increase tax
revenues and improve the local economy?
The 2005 decision authorizing the use of eminent domain for private development
projects ignited controversy and has led to nationwide efforts to throttle back
eminent domain powers
Minnesota Statutes & Rules
Eminent Domain - Minnesota Statutes Subject Index (Minnesota Revisor of Statutes)
Minnesota Statutes 117 Eminent Domain (Minnesota Revisor of Statutes)
• 117.027 Condemnation for Blight Mitigation and Contamination Remediation (Laws,
2006 c.214)
Minnesota Rules Chapter 1245, State-Owned Real Property (Minnesota Revisor of
Statutes)
Eminent Domain in Minnesota, A Synopsis (MN Department of Administration)
http://www.condemnation-law.com/main/eminent-domain-process/minnesota-eminent-domain-process
Eminent domain in Minnesota
Traditionally eminent domain has been used to acquire land for such public uses as
roads, public buildings, and parks
Eminent domain in Minnesota
Traditionally eminent domain has been used to acquire land for such public uses as
roads, public buildings, and parks
In recent years, eminent domain has been used for economic development purposes
or as a tool for redeveloping blighted areas
Eminent domain in Minnesota
Traditionally eminent domain has been used to acquire land for such public uses as
roads, public buildings, and parks
In recent years, eminent domain has been used for economic development purposes
or as a tool for redeveloping blighted areas
In some instances, rather than acquiring land for a specific public works project, local
governments have been taking land from one private owner and giving it to another
private owner, reasoning that the new development will be economically beneficial
to the residents of the community, even if it is a private development
Eminent domain in Minnesota
Traditionally eminent domain has been used to acquire land for such public uses as
roads, public buildings, and parks
In recent years, eminent domain has been used for economic development purposes
or as a tool for redeveloping blighted areas
In some instances, rather than acquiring land for a specific public works project, local
governments have been taking land from one private owner and giving it to another
private owner, reasoning that the new development will be economically beneficial
to the residents of the community, even if it is a private development
The issue of whether such public benefits can be considered a public use under the
federal Takings Clause was at the center of the Kelo v. City of New London U.S.
Supreme Court decision in June 2005. The court ruled that the city of New
London's economic development plan qualified as a public use within the meaning
of the Takings Clause
Eminent domain in Minnesota
Concern over this ruling - and especially the interpretation of the phrase "public use" led to calls for clarification of Minnesota's existing statutory law regarding eminent
domain
The 2006 Minnesota Legislature responded by passing Laws of Minnesota 2006,
chapter 214
The act states that "eminent domain may only be used for a public use or public
purpose", and further clarifies that the "public benefits of economic development,
including an increase in tax base, tax revenues, employment, or general economic
health, do not by themselves constitute a public use or public purpose"
Other issues addressed by the legislation – condemnation for blight mitigation or
contamination remediation, local government public hearing requirements, and
compensation procedures
Minnesota Supreme Court
The Housing and Redevelopment Authority of the City of Richfield
v. Walser Auto Sales, Inc. et. al. (2001)
Preceded the decisions in the Kelo case – even before the CT Supreme Court hearing
in 2002
Concerned the validity of the public purpose for a condemnation used by the city to
acquire real property owned by Walser
The Hennepin County District Court granted the City the petition and Walser objected
In court the parties disagreed on whether the property in question was "blighted"
Walser argued that the District Court erred in its ruling finding a valid public purpose
In particular controversy surrounding the method city consultants used to calculate the
percentage of blight in the area
Minnesota Supreme Court
The Housing and Redevelopment Authority of the City of Richfield
v. Walser Auto Sales, Inc. et. al.
The Minnesota Court of Appeals affirmed the District Court’s judgment holding the
property was taken for a public purpose
In its opinion, the Supreme Court was evenly divided (3 to 3, with Justice Joan
Ericksen Lancaster taking no part) on the public purpose issue
Thus, the decision of the Court of Appeals stood
As a result, legal uncertainty exists as to whether the condemnation of property for a
public purpose by a municipality will be upheld in the future in cases with
circumstances similar to the Walser case
Eminent Domain Revisited: A Minnesota Case (New York Times Oct 2005)
Minnesota Laws 2006 chapter 214
Set a higher threshold for when public officials can invoke the power of eminent domain,
particularly on the key issue of what constitutes a "blighted" property, and included more
protection and reimbursement for property owners
Minnesota Statutes c117
Web Resources
Re: Strengthening the Ownership of Private Property Act of 2005 (Cato Institute, 2005)
Limits of Urban Redevelopment? Kelo, Walser, and Condemnation in Minnesota
(Bench & Bar, August 2005)
Eminent Domain (Larkin Hoffman, 2005)
Eminent Domain: Public Use (Minnesota House Research, 2006)
Challenging the Big Stick (FedGazette, 2006)
Resource on Eminent Domain (Minnesota House of Representatives, 2007)
The Power of Condemnation
Governments – federal, state, and delegated to local - roads
Corporations – electric utilities – transmission lines
Minnesota Power Plant Siting Act gives electric utility companies the power of eminent
domain for transmission lines and power plant sites - Minnesota Statutes 216E.12
Eminent domain powers
• South East Metro Transmission Line – PUC, Appeals Court
• Powerline: The First Battle of America's Energy War
Railroads
Telephone company
University of Minnesota
Eminent domain in play for Minneapolis’ light rail (Daily Reporter, June 19, 2010)
Metropolitan Council to use eminent domain at former Gillette plant (Minneapolis St
Paul Business Journal), June 28, 2010)
Condemned prosperity (FedGazette, March 2006)
High court to hear Eagan's eminent domain appeal (Star Tribune September 3, 2009)
Target Field (Wikipedia)
Underwater and Drowning? Some Facts about Mortgages that Could Be Targeted by
Eminent Domain (Federal Reserve Bank of New York, Feb 2013)
Confiscation
Alien Property Custodian
The Work of the Alien Property Custodian
Savings and loan crisis
Congress deregulated the thrift industry*
• the Depository Institutions Deregulation and Monetary Control Act of 1980
• the Garn–St. Germain Depository Institutions Act of 1982
Allowed thrifts to offer a wider array of savings products (including adjustable rate
mortgages) but also significantly expanded their lending authority and reduced
supervision, which invited fraud
*A savings and loan or "thrift" is a financial institution that accepts savings deposits and
makes mortgage, car and other personal loans to individual
Savings and loan crisis
These changes were intended to allow S&Ls to "grow" out of their problems, and as
such represented the first time that the government explicitly sought to increase
S&L profits as opposed to promoting housing and homeownership
Other changes in thrift oversight included authorizing the use of more lenient
accounting rules to report their financial condition, and the elimination of restrictions
on the minimum numbers of S&L stockholders.
Such policies, combined with an overall decline in regulatory oversight would later be
cited as factors in the collapse of the thrift industry
747 out of the 3,234 savings and loan associations in the United States failed
"As of December 31, 1995, RTC estimated that the total cost for resolving the 747
failed institutions was $87.9 billion"
The remainder of the bailout was paid for by charges on saving and loan accounts
The Resolution Trust Corporation (RTC)
U.S. government-owned asset management company established in 1989 by
the Financial Institutions Reform Recovery and Enforcement Act
•
charged with liquidating assets, primarily real estate and related assets - mortgage
loans - possessed by savings and loan associations (S&Ls) that had been declared
insolvent by the Office of Thrift Supervision
Between 1989 and mid-1995, the Resolution Trust Corporation closed or otherwise
resolved 747 thrifts with total assets of $394 billion
The Resolution Trust Corporation (RTC)
In 1995 its duties were transferred to the Savings Association Insurance Fund (SAIF) of
the Federal Deposit Insurance Corporation (FDIC)
In 2006 the SAIF and its sister fund for banks – the bank insurance fund – also
administered by the FDIC, were combined to form the Deposit Insurance Fund
under the provisions of the Federal Deposit Insurance Reform Act of 2005
The Resolution Funding Corporation (REFCORP) still exists to support the debt
obligations it created for these functions
Resolution Trust Corporation (Wikipedia)
The Resolution Trust Corporation and Congress, 1989-1993 (FDIC)
Politics and Policy: The Creation of the Resolution Trust Corporation (FDIC)
American Indian lands