Fact Pack

The takings or property rights issue is basically a debate over how the courts should interpret, and legislatures should apply, constitutional provisions related to government takings of property. The debate is based on the Takings Clause of the Fifth Amendment of the U.S. Constitution, which states: “nor shall private property be taken for public use, without just compensation.” State constitutions include similarly worded provisions, which have generally been interpreted to require that a regulation eliminate “all economically beneficial uses of the property” before compensation is due. Some state legislatures, however, are attempting to significantly expand this interpretation to include compensation for any diminution in value to property.

The Takings Clause was originally adopted to guarantee payment of compensation when the government directly appropriates private property; that is, when government officials take formal title to private property or physically seize it. The Takings Clause was not originally intended to apply to restrictions on the use of property. As stated by Supreme Court Justice Antonio Scalia in a recent case, “early constitutional theorists did not believe the Takings Clause embraced regulations of property at all.”

The courts have generally found that a regulation of the use of property will result in a taking when the restriction eliminates all or essentially all of the property’s economic value – in the U.S. Supreme Court’s terminology, when a regulation eliminates “all economically beneficial use.” However, even when a restriction goes this far, the Court has said that regulation will not result in a taking if it simply parallels “background principles” of state “property” or “nuisance” law. In other words, if an owner lacks the right to use property under state property law, or if the activity would result in a common law nuisance, then even a regulation prohibiting the economic use of property will not result in a taking.

Economic Impacts of Takings Legislation

Studies of proposed takings measures have looked at the potential fiscal impacts.(1)

• At the national level, the Office of Management and Budget estimated that the financial burdens imposed on U.S. taxpayers by the takings provisions in the “Omnibus Property Rights Act of 1995,” could amount to $4 billion annually.
• In New Mexico, a study estimated that a 1993 takings bill might impose a financial burden of between $2.6 and $8.8 million annually on the budget of the New Mexico Department of Game and Fish.
• An October 2000 report analyzing the fiscal impacts of a takings measure on state and local government in Oregon found that the measure, if interpreted to require the city of Portland to pay to enforce its urban growth boundary, could cost the city over $3 billion annually.
• A 1995 study of takings legislation in New Hampshire estimated that the pending bill would have imposed between $2 million and $8 million on local governments annually.
• A 1995 study conducted on behalf of the New Hampshire Wildlife Federation and the National Wildlife Federation sought to determine the financial impact of proposed takings bills in three New Hampshire communities. The study found that takings payments would consume anywhere from 21 percent to 118 percent of each community's total annual budget. The study concluded that proposed takings legislation in the state of New Hampshire would lead to “unmanageable costs.”(2)
• Another study, conducted by the University of Washington, estimated that takings legislation passed by the Washington Legislature (but since repealed by voters) would have cost as much as $11 billion. An August 2000 study by the economic consulting firm, ECO Northwest, evaluated Oregon Ballot Measure 7 and concluded that the cost of enforcing just 5 of the 90 types of regulations identified as covered by Measure 7 would exceed $8.7 billion under conservative analysis.(2)