Hotly Debated Land-Use Issue Before High Court

In a major land-use legal fight, the “free marketeers” are taking on the “police-power hawks.”

The brawl is taking place in the U.S. Supreme Court, with the hawks defending the right to public regulation and the marketeers promoting private property and “just compensation.”

On Wednesday, the court heard oral arguments on the case. Not surprisingly, the dispute began over a piece of land in Northern California.

Except for an abandoned drive-in theater nearby, the 44-acre parcel doesn’t look at all controversial. Nevertheless, this vacant Yolo County field is at the center of a hotly debated property rights case being considered by the high court. Its decision will shape real estate development far beyond the borders of the acreage involved.

The property owners--the partnership of MacDonald, Sommer & Frates--contend that Yolo County and the city of Davis rendered their property useless in a zoning action and, consequently, the governmental bodies are liable for their losses. The land owners are suing for financial damages or “just compensation” as it is referred to in legal circles.

Denied by County

The dispute began in 1975 when the property owners first asked the county to approve a subdivision for 159 single-family homes. Although the land was already zoned residential, the county objected to the proposed development. With the city of Davis at its side, Yolo County denied the proposal on the grounds that the housing development was inconsistent with the county’s plan for “sound and orderly” growth.

Unhappy with the decision, the landowners unsuccessfully went to Superior Court, and later, the state Supreme Court, for relief; they claimed county regulations were creating a public benefit at their expense. The California courts upheld state law that disallows “just compensation” payments.

In the appeal to the U.S. Supreme Court, the case rests on one simple sentence in the Fifth Amendment of the Constitution: “Private property shall not be taken for public use except upon just compensation.”

The property owners are accusing the county of “taking” their property through regulation and, therefore, violating the Fifth Amendment. The county argues it has the right to plan, and that there has been no violation of the Constitution.

Seek Just Compensation

Underlying the controversy are two conflicting--yet equally strong--California values: growth and no growth. On the one hand, many California communities have taken a sophisticated and aggressive approach to protecting the environment and controlling development. At the same time, pressures for development are very strong in the state.

“A lot of builders are affected by local zoning regulations that effectively destroy the use of their land; they are entitled to a just compensation remedy,” says William Ethier of the National Assn. of Home Builders.

Environmentalists see it differently. “People have the right to own and use property but not necessarily change the use,” says a report soon to be published by a conservation group, People for Open Space (POS). “It’s a privilege, not a right, to change the use of land.”

The divergent opinions of Gov. George Deukmejian and Atty. Gen. John Van DeKamp illustrate how polarized many Californians are in their thinking on private property rights and “just compensation.”

Governor to Write

Standing up for the property rights position, “the governor supports ‘just compensation’ when property owners have been deprived of use by government regulation,” says Vance Ray, legal adviser to the governor.

Van De Kamp “will file a brief in support of Yolo County because of his concern over the ability of local government to plan and modify land-use plans,” according to Jan Stevens, deputy attorney general. “When you find a local regulation unworkable or unfair, the government agency should be given the choice of purchasing the land or invalidating the regulation.”

The Yolo case is not the first time that the U.S. Supreme Court has considered a matter involving “just compensation.” In the last six years, it heard three similar cases--two from California. But the court dismissed each on technical grounds.

In one instance, the court ruled local regulations must be “final enough” to measure before awarding damages. In another case, the court said a city ordinance that changed the zoning to low density on a parcel of land in Tiburon had not resulted in any economic loss to the owners.

Waiting for Right Case

Nevertheless, the court has not flatly turned back the notion of “just compensation.” The court’s obliqueness on the issue--along with other signals from members of the court--has given environmentalists, some cities and counties reasons to fret and has given property rights advocates hope.

“Justice (William F.) Brennan filed a dissenting opinion in the last case where he made it perfectly clear that ‘just compensation’ was worthy of the court’s consideration,” says Ethier of the home builders. “They (the Supreme Court) are just waiting for a case that works on technical grounds.” According to Ethier, Yolo County is the one they have been waiting for, and his developer constituents “couldn’t be happier.”

But to a Stanford law professor and environmental attorney, Robert Girard, the court’s interest in this case is bad news: “The Fifth Amendment was not intended to reach this sort of thing. . . . The court should not meddle in things that aren’t their business.” Girard is also concerned about the outcome: “I am afraid they are committed to the idea that a local regulation can result in a taking of property.”

Whatever the outcome, the dispute over private property and public regulation--a debate that emanated from California--will not end when the U.S. Supreme Court hands down its ruling. Nevertheless, there are implications for Californians. Consequently, special interest groups, lawyers and politicians are making widely varying claims about the probable impacts of a ruling.

Anticipated Consequence

If the court denies the land owners’ appeal, property rights advocates are convinced cities and counties will be carelessly unfair to landowners and developers. “After the Agins decision (a previous Supreme Court case where the ‘just compensation’ argument was turned away by the court) cities and counties went wild, down-zoning land; they didn’t think they had to pay,” says Joe Gugemetti, president of American Land Alliance, a group that defends private property rights.

On the other hand, environmentalists argue that a favorable ruling for the landowners would be so costly for cities that environmental protection would be compromised. “In the face of such a ruling, local government officials would enact meaningless and milquetoast regulations out of concern about liability and the effects on their budget,” says Clem Shute, a San Francisco environmental attorney.

It may be a good time to look for a remedy that doesn’t involve tireless litigation--a compromise that accommodates property owners and environmentalists.

A land-use legal expert and UC Berkeley professor, Rich Cowart, believes there are opportunities for middle ground. “Those on the inside of the line (where development is allowed) gain from the regulation and those on the outside (where development is not allowed) lose. Maybe the winners should be helping to compensate the losers,” he says.

Don’t Pay for Benefits

“For example, if the government builds a sewage treatment plant next door and you lose value, you go to the government for relief, but if they build a highway near your property, causing your property values to go up, you don’t go to the government and offer to pay them for the benefit. Maybe you should.”

An urban-planning guru, the late Donald Hagman, called the idea “windfalls for the wipeouts.”

This theory of fairness has been turned into regulation in a handful of cities in the form of transfer development rights (TDRs). When a municipality prohibits development on a piece of property, the owner earns development rights that can be sold to someone else who wants to develop in an area that is planned for development.

But TDRs don’t completely please either environmentalists or the housing industry. “It is only a politically expedient approach; it grants rights where rights don’t exist,” says Larry Orman of People for Open Space. Some real estate developers oppose it because it penalizes the person who wants to build.

Creating Land Trusts

Another alternative calls for creating land trusts where owners can sell or donate their land for open space to a nonprofit trust. It is working on a voluntary level, but the trusts become unrealistic on a large scale when development rewards are great.

Other compromises also have problems. State legislation sponsored last year attempted to provide a formula for awarding “just compensation.” Against a storm of protest, it died in a legislative committee.

For now, there appear to be very few workable alternatives to the schism over property rights and public land-use regulation. And in the final analysis, even a major Supreme Court decision won’t cure California’s schizophrenia on the issue of growth.