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Government Regulation
Property Rights

Property rights have received renewed attention in large part because of the Kelo v. City of New London case. In that case, the United States Supreme Court held that the government can seize private property solely for economic development reasons. In other words, if the government can find a better economic use for private property, it can seize it and transfer the property to a private developer. This opinion has sent shockwaves throughout the country. If anything good came out of Kelo, it was putting eminent domain abuse and other property-rights violations (e.g., forced annexation) on policymakers' radar screens.

A Constitutional Amendment is Needed

Eminent domain is the government's power to seize private property for a public use as long as just compensation is provided to the property owner. The Fifth Amendment of the United States Constitution states "Nor shall private property be taken for public use, without just compensation." After Kelo, the term "public use" basically has been deleted from the U.S. Constitution. Below are some frequently asked questions that demonstrate the need for North Carolina to develop a detailed constitutional amendment to protect against economic development takings and other eminent domain abuses.

• Why does North Carolina need a constitutional amendment instead of legislation?

  Even if state statutes protected us from Kelo-type (economic development) takings, a statute can be changed at the whim of political interests. A constitutional amendment is difficult to change and provides the necessary protection. If the U.S. Supreme Court gutted our freedom of speech rights, would we feel comfortable that a state statute protected our freedom of speech? Property rights are fundamental rights that certainly deserve the same type of protection as other rights listed in the Bill of Rights.

• Doesn't North Carolina law already protect us from Kelo-type takings?

  Absolutely not. There are local acts (bills passed by the General Assembly affecting a local community) that specifically allow for economic-development takings. North Carolina has a law that allows the state and local governments to use eminent domain to complete revenue bond projects that are designed to promote economic development.

  This revenue bond provision is a great example of why an express constitutional prohibition on economic-development takings is necessary. It was so buried in the statutes that legislative research staff for the special House eminent domain committee did not find it until a couple of weeks before the committee's interim report was completed. What other provisions are buried in the statutes?

  Most importantly, the state's urban redevelopment law (or "blight" statute) is so broad and subjective that it could allow economic-development takings, if not in name, then in effect. Even a prohibition on economic-development takings may not be enough to protect against the abuse of this law.

• What are the problems with the urban redevelopment law?

  It can allow property that is in pristine condition to be seized because it is in a "blighted area." Instead of focusing on "blighted property," the statute allows the government to seize properties in "blighted areas." In fact, only two-thirds of the property in an area must meet the necessary conditions required for a "blighted area." This means one-third of the property can be perfectly fine.

  Clever map drawing can give the government the property that it wants. For example, if four blocks of property allegedly are "blighted" and two adjacent blocks are well kept, the government can take all six blocks. If a private developer needs those two blocks for his project, maps can be drawn so that the right percentages are met to seize the property.

  The law also allows the government to seize property in areas that are not even called "blighted areas." For example, property can be taken in areas that simply are not doing as well economically as the government would hope. Even worse, the government can seize property that might in the future become blighted or experience economic problems.

Other Eminent Domain Abuses

Economic-development takings are just one way that government can abuse the power of eminent domain. Here is a quick list of other critical abuses that need to be addressed:

• Government simply provides low appraisals on property knowing that most people are unable to challenge the appraisals. Just compensation needs to be "just" and make people "whole."
• Government takes property for a proper public use, but that public-use project falls through — and the government gives the property to an economic developer. Property owners should have a chance to purchase back their property.
• Government seizes property for a public use, and then, to get around the law, leases the property to a private company. North Carolina has first-hand experience with this problem. In Piedmont Triad Airport Authority v. Urbine, the North Carolina Supreme Court held that even though all the seized land was set to be leased to FedEx for a cargo facility, which the public could not use, it was still a proper taking. It did not violate the prohibition that property may not be taken from one private party and provided to another.
• Government takes private property even though prior to taking the property, the reason for taking it ceases to exist. The Triangle Transit Authority (TTA) continues to seize property for a light-rail system that, for all practical purposes, is dead. If there is no clear evidence that a public-use project can go forward, the government should not use eminent domain.

Forced Annexation

In North Carolina, it is too easy for a city to force property owners to become a part of the incorporated municipality. Under state law, individual municipalities can decide to force individuals living outside their boundaries to become a part of their municipality — in some instances, the individuals do not even have to live in an area that is physically adjacent to the municipality.

Cities must be allowed to grow through property annexation, but it should be a decision made by government and individuals desiring to receive the benefits of living in a municipality. If individuals living in a proposed annexed area, through at least a majority vote, want to become part of a city, then there is nothing wrong with annexation.

Annexation power has been abused, however, many times by local politicians seeking to offset their excessive spending by identifying new sources of revenue. Instead of looking internally, politicians annex unincorporated areas because the additional properties will result in more property taxes.

In order to annex an unincorporated area, a city council passes a "resolution of intent." Hearings are required, but a city council is not obligated to change its decision even in the face of significant opposition from the property owners affected.

Individuals living in proposed annexed areas should not be forced to become a part of a city. People often decide to live in unincorporated areas knowing that the level of services and taxes will be less than in a city. This is a conscious choice that should be respected. Forced annexation is no different than a county deciding to force individuals that live in a city to live in an unincorporated area with much fewer services.

Recommendations

1. Pass a constitutional amendment that would, among other things:
   
   — Expressly prohibit the seizure of private property for economic development and for all private uses (except as necessary for common carriers).
   
   — Clearly define "blight" so that only properties that cause a clear health and safety risk can be seized. Property that causes economic harm or might become blighted should never be taken.
   
   — Define just compensation to ensure that individuals are made "whole."
   
   — Require the government to have the burden of proof to demonstrate that (1) a taking is necessary and no reasonable alternatives exist, (2) a taking is legal, and (3) the compensation offered is just.
   
   
2. Stop forced annexation. Allow citizens in the affected area to have a means of stopping the process, such as through a vote. North Carolina already has allowed some communities through local acts to petition the municipality to allow them to vote. This process should exist for all communities in the state. If through a democratic process citizens do not want to be part of a municipality, it is quite simply unethical — and antithetical to our democracy — to compel them to be a part of the municipality.