John Locke Update / Research Brief

Time for the N.C. Senate to Step Up on Eminent Domain

posted on in Law & Regulation, Legal Update
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The Castle Coalition is a national membership organization made up of homeowners and small business owners that want to protect their property from eminent domain abuse. To help its members understand their rights under existing state laws, the organization publishes a 50 State Report Card.  The report card describes the protections provided under each state’s eminent domain law and assigns a grade based on “how hard [it is] for the government to take a person’s home or business and give it to someone else for private gain.”

North Carolina earned a C-, which isn’t a satisfactory grade. Only 18 states do worse.

As explained in the John Locke Foundation’s Freedom in North Carolina report, North Carolina’s failure to adequately protect private property from eminent domain abuse is one of the primary reasons why we languish in the bottom half of states, both nationally and regionally in the “regulatory freedom” category.

An eminent domain reform bill passed by the N.C. House last week would improve our Castle Coalition grade and move us into the top half of states that afford its citizens the most freedom from regulatory burdens.

For readers who aren’t familiar with the phrase, “eminent domain” refers to the government’s power to take private property without the owner’s permission. Throughout most of American history, it was assumed that this power could only be exercised when the property in question was needed by the government for its own use, e.g., roads, military bases, and other public facilities, or for use by a “common carrier,” i.e., a private company like a railroad or utility that is obliged by law to serve the public. Most assumed that these restrictions were implicit in the Takings Clause of the Fifth Amendment to the U.S. Constitution which states, “Nor shall private property be taken for public use without just compensation.” In 2005, however, the U.S. Supreme Court handed down its opinion in Kelo v. City of New London, and the American public was shocked to discover that both of those assumptions were wrong.

The controversy in the Kelo case began when an economic development plan approved by the city of New London, Connecticut authorized a private developer to use eminent domain to take and demolish fifteen well-maintained and well-loved homes and build new offices, parking, and retail stores. Led by Susette Kelo and represented by the Institute for Justice, the homeowners challenged the taking, arguing that, as a transfer from one private party to another, it exceeded the scope of the eminent domain power as defined by the Fifth Amendment.

The case received a great deal of media attention, and public sympathy was overwhelmingly on the side of the homeowners. Nevertheless, when it finally reached the U.S. Supreme Court, the court sided with the city. It held that, while the Takings Clause might forbid transfers from one private party to another “for the purpose of conferring a benefit on a particular private party,” it did not forbid such transfers when they served a “public purpose.” The court declared that the question of whether this or any particular taking actually served a public purpose was not one it should attempt to answer. Instead, it would follow its long-established practice of “affording legislatures broad latitude in determining what public needs justify the use of the takings power.”

In the final paragraph of its opinion the court acknowledged “the hardship that condemnations may entail, notwithstanding the payment of just compensation,” and it invited eminent domain reform at the state level, “We emphasize that nothing in our opinion precludes any State from placing further restrictions on its exercise of the takings power.”

The decision was a bitter defeat for the homeowners, but, in the end, they had the satisfaction of knowing they hadn’t fought in vain. Their fight to defend their homes brought two serious but previously little-known problems to the attention of the American public:

  1. In the name of economic development, state and local governments across the country were using eminent domain to transfer property from ordinary citizens to politically connected developers and industrialists.
  2. The federal courts would do nothing to prevent such transfers.

In response to these revelations, states began to do exactly what the Supreme Court had invited them to do: they began to amend their own statutes and their own constitutions in ways that placed “further restrictions” on the use of eminent domain within their jurisdictions.

The southeastern states did particularly well in this regard. Almost every state in the region has put in place highly effective measures to prevent eminent domain abuse, and the measures put in place by Florida and Virginia are generally considered to the most effective in the entire country.

As the map shows, North Carolina has been an exception to this regional pattern.

North Carolina’s failure to keep up with its neighbors’ eminent domain reform efforts cannot be blamed on the state’s House of Representatives. On the contrary, in the years since Kelo, large, bi-partisan House majorities have approved seven eminent domain reform bills and sent them to the Senate. All House members who have voted in favor of these bills deserve commendation for their commitment to protecting North Carolinians’ property rights, but the handful of individual House members who sponsored these bills are particularly deserving of praise. Representative David Lewis was a primary sponsor of every one of those bills. By the time he retired in 2016, former Representative Paul Stam had been a primary sponsor of six of them, and, in the years since he joined the House in 2010, Representative Chuck McGrady has been a primary sponsor of five. Former Representatives Dan Blue and Ty Harrell, and current Representative Ken Goodman have also been sponsors of multiple eminent domain reform bills.

Despite the exemplary work of that group of House leaders and overwhelming support of the rest of the chamber, the N.C. Senate failed to act on any of the eminent domain reform bills that it received from the House between 2007 and 2017. As a result, North Carolina still has not added suitable restrictions on the use of eminent domain to the North Carolina General Statutes, and it still has not given voters an opportunity to add such restrictions to the North Carolina Constitution.

By submitting yet another eminent domain reform bill this year, the House has given the Senate a chance to make amends, so to speak.  It’s a chance the Senate should seize.

Simply approving the bill would significantly improve North Carolina’s grade on the Castle Coalition’s report card. It would not, however, earn us an A from the Coalition, nor would it would it put us among the states with the least stifling regulatory regimes. To accomplish those things, lawmakers would have to amend the bill to include property rights protections like the ones that make the eminent domain regimes in Florida and Virginia the best in the country. Florida’s eminent domain statute, for example, requires localities to wait 10 years before transferring land taken by eminent domain from one owner to another. Virginia’s constitution places the burden of proving “public use” on the government and defines public use in a way that explicitly excludes economic development. These and other ways of protecting private property are discussed in the Eminent Domain section of the John Locke Foundation’s Policy Guide.

Should lawmakers amend the House bill to include one or more of the protections that have been adopted by Florida and Virginia? Should it simply approve it as it stands? The answers to these questions are a matter of debate. What is not debatable, however, is that the Senate should debate and vote on the bill.

If we truly want to make North Carolina “first in freedom,” we need to do more to protect North Carolina’s property owners from eminent domain abuse. We should be grateful to the members of the General Assembly who have been trying for so long to provide that protection. They’ve given the N.C. Senate an opportunity to made it happen in the current session. I hope it does.

Jon Guze is Senior Fellow in Legal Studies at the John Locke Foundation. Before joining the John Locke Foundation, Jon practiced law in Durham, North Carolina for over 20 years. He received a J.D., with honors, from Duke Law School… ...

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