I. INTRODUCTION

In response to the continuing tension between government regulation and private property rights, the 1993 General Assembly adopted House Joint Resolution No. 624 (Appendix A), calling for the creation of the Joint Subcommittee Studying Governmental Actions Affecting Private Property Rights. The seven-member joint subcommittee was established in 1993 to study Virginia governmental actions which may result in a regulatory taking of private property under current federal or Virginia constitutional law and the need, if any, for legislation to change current law or procedures in response to the findings of this study. Currently, statutory law is silent on the degree of regulation that constitutes regulatory taking. The study was subsequently continued by House Joint Resolution No. 74 (1994) (Appendix B) and House Joint Resolution No. 526 (1995) (Appendix C).

Delegate Glenn R. Croshaw of Virginia Beach served as chairman of the joint subcommittee, with Senator Robert L. Calhoun acting as vice chairman.

II. BACKGROUND

Judicial Decisions

Known as the "takings" clause, the legal basis of a taking claim is the fifth amendment of the U.S. Constitution, which states, "nor shall private property be taken for public use, without just compensation. . ." Also, Article I, § 11, of the Virginia Constitution prohibits the General Assembly from passing any law . . . whereby private property shall be taken or damaged for public uses, without just compensation . . . ."

The critical issue is determining when a taking will trigger a property owner's right to just compensation. When a government actually acquires a property, or physically occupies a property, then it is obvious that a taking has occurred. However, in 1922, the U. S. Supreme Court, for the first time, held that a taking can occur through government regulation which goes too far in restricting the use of one's property. This is referred to as a "regulatory taking." The Supreme Court, over the years, has struggled to define when a regulatory taking occurs, and the Court's taking standards have changed frequently.

In 1978, in Penn Central Transportation Co. v. City of New York, the Supreme Court listed three factors to be considered in determining whether a regulatory taking has occurred: (i) the economic impact of the government action, (ii) the extent to which reasonable investment-backed expectations are disturbed, and (iii) the character of the government action.

In a 1980 case, Agins v. City of Tiburon, the Supreme Court used a two-part analysis to determine whether there had been a taking: (i) whether the challenged regulation substantially advances legitimate state interests and (ii) whether the regulation "denies an owner economically viable use of his land."

Other important takings cases include (i) Nollen v. California Coastal Commission (1987), which held that there must be a nexus between the proposed regulation of the property and the legitimate state interest sought to be advanced, and (ii) First English Evangelical Lutheran Church v. County of Los Angeles (1987), which held that governments must pay compensation not only for a permanent taking of property but also for a temporary taking.

In 1992, the Supreme Court heard the case of Lucas v. South Carolina Coastal Council, where the owner of two beachfront lots was denied the right to develop those lots for residential use by a newly enacted beachfront management act. The owner filed suit claiming a regulatory taking. It was not contested by the government that the regulation left the lots without economic value. The court held that the government must pay compensation where government action has "deprived a landowner of all economically beneficial uses" of the property. However, the court also declared that there would be exceptions to this rule where development could have been prevented under the common law nuisance doctrines of the state, or the denied use is not part of the owner's title to the property.

The Supreme Court did not determine whether these exceptions might apply in this case, but remanded the case back to the South Carolina courts for a final determination as to whether there had been a regulatory taking of Mr. Lucas' property. Last year, the parties reached an out- of-court settlement, with Mr. Lucas receiving a substantial payment from the state.

Most recently, the Supreme Court heard the case of DoIan v. City of Tigard (1994). In this case the city required a landowner to dedicate a portion of her property lying within the flood plain for improvement of the storm drainage system and property adjacent to the flood plain for a bicycle/pedestrian pathway as a condition for a building permit allowing expansion of the landowner's commercial property. Although the court concluded that the city's requirements had a nexus with legitimate public purposes, the court held that (i) the findings relied upon by the city to require the landowner to dedicate a portion of her property in the flood plain as a public greenway did not show the required reasonable relationship necessary to satisfy the requirements of the fifth amendment and (ii) the city failed to meet its burden of demonstrating that the additional number of vehicle and bicycle trips generated by the proposed commercial development was reasonably related to the city's requirement of dedication of a pedestrian/bicycle pathway easement.

The bottom line with this series of takings cases is that there is no firm rule one can rely on to predict how the court will decide a case. The court looks at the regulatory takings issue on a case-by-case basis, and the outcomes of the cases seem to depend a great deal upon the nuances of the facts in each particular case (Appendix D).

Federal Legislation

Private property rights legislation has been a popular topic during the current congressional debate of environmental legislation. However, although many bills related to property rights have been introduced, they have not been successful. Furthermore, President Clinton has stated that he will veto any legislation that he believes would undermine the protection of clean air and water or weaken toxic waste standards.

Sen. Robert Dole (R-Kan.), the Senate majority leader, is a supporter of property rights legislation. In 1994 he introduced a bill (S. 177) that would have prohibited any federal regulation from becoming effective unless the U.S. Attorney General certified that it complied with procedures that assess a regulation's potential for taking private property and seek to minimize such takings where possible. The bill failed. In 1995, Sen. Dole introduced a bill (S. 605) which would require the federal government to compensate property owners if government action reduces the value of their property by at least one-third.

The House of Representatives passed several bills related to property rights in 1995. H.R. 9 would require the federal government to compensate a property owner whose use of any portion of that property has been limited by agency action under a specific regulation that diminishes the fair market value of that portion by 20 percent or more. The bill would also require federal agencies to prepare regulatory impact analyses for proposed rules that are likely to have an annual impact on the economy of at least $50 million. Also, the bill would require federal agencies to prepare cost-benefit analyses for such rules. H.R. 925 would require the federal government to compensate private property owners for reductions of at least 20 percent in the value of their property resulting from federal agency action. H.R. 1022 would require federal agencies to perform risk assessments and cost-benefit analyses for proposed major regulations. These bills did not pass the Senate.

Takings Legislation in Other States

Over 30 states have introduced "takings," or private property rights, legislation over the past several years. Most of this legislation was based on President Reagan's Executive Order 12,360 and the implementing Attorney General Guidelines which require that all federal regulations be reviewed in order to assist federal departments and agencies in gauging the takings implications of their actions (Appendix E). Other state legislation would require that the state or localities compensate landowners whenever a regulation reduced the value of the property by more than a certain percent, typically 50 percent.

To date, very few takings legislation efforts have been successful. Most of the legislation which has passed appears to be the takings assessment variety, rather than the compensation type. However, many private property rights advocates are watching to see what Congress does in this area, and it should not be surprising if there are renewed efforts at the state level to duplicate any federal successes.

III. WORK OF THE JOINT SUBCOMMITTEE

At its initial meeting, the joint subcommittee was briefed on the current status of takings law and the types of takings legislation introduced in other states, and received the comments of the various interested parties. The joint subcommittee asked for comments regarding both types of takings legislation introduced in other states: (i) a takings assessment prior to adoption of certain regulations and (ii) landowner compensation when a regulation diminishes property value by a certain percent.

The subcommittee heard from many interested parties during the initial stages of its study. A number of speakers supported the type of legislation being considered by the subcommittee. Among the reasons for such support were (i) the need to clarify legislatively what the courts have declared judicially with regard to takings law, (ii) the feeling that governments do not give appropriate weight to private property rights, (iii) the impact that government regulation has on property values, and (iv) the lack of resources available to most property owners to deal with proposed regulations. Other speakers however, opposed potential takings legislation. Among their objections were (i) the opinion that citizens already have adequate protections under the fifth amendment, (ii) the potential cost of takings legislation, (iii) the possible impact on historic resource ordinances, and (iv) the diminution of local governments' regulatory powers.

Although the first year of the study produced several recommendations, the joint subcommittee decided to continue its examination of private property rights and to monitor changes in takings law arising from federal initiatives and judicial decisions. However, due to continued uncertainty in the federal law, the joint subcommittee did not meet. It was determined that it would be futile to meet while the competing federal proposals are still being debated.

IV. RECOMMENDATIONS

After giving careful consideration to the type of takings legislation which had been introduced in other states and the arguments in favor of such legislation. the joint subcommittee concluded after its initial year of study that it was unnecessary at that time to pursue takings legislation in Virginia. Furthermore, it was felt that the status of takings law in the United States may change significantly due to legislation pending in the U.S. Congress or due to new judicial decisions.

Due to this uncertainty in the direction of takings law, the study was continued for two additional years. However, after a total of three years, it was determined that it would be too speculative to attempt to predict the actions of Congress with regard to private property rights. Therefore, the joint subcommittee made no further recommendations.

V. CONCLUSION

The members of the joint subcommittee heard from, and were assisted by, various members of the public and private sector during the course of its study. The joint subcommittee expresses its gratitude to all those who gave testimony, provided materials or assisted in some other way during the study.