III. A Strategy for Reform in Michigan

It is a fundamental tenet of our system of government that the legislative and executive branches can provide greater protections to individual liberties than are understood by the courts to be protected in existing law. Protections by the courts form only a floor. It is increasingly becoming recognized that the judiciary, in Michigan and the United States at large, has abdicated its responsibility by setting that floor far below its intended level in relation to property rights. The legislature and executive now have the responsibility of remedying this situation and ensuring that private property rights once again receive the respect they deserve in a free society.

All three branches of government, as well as the people, have a role to play in the protection of private property from illegitimate takings. Each single effort is important to advancing a defense for property owners against the power of the government. A full combination of efforts within and among each branch, however, is the best approach for returning to, and maintaining, what Madison called the only “just government” — one which exists to protect property.

Section I of this study identifies the failures of the judiciary. Ensuring legitimate protections at this level is the most direct method for achieving reform. As previously mentioned, however, judicial interpretation is the one area over which the people have the least direct control. In future elections and appointments, the people should scrutinize their choices and secure onto the bench judges who accept a role as arbiters of the original intent of the constitutional framework and its takings clause. Judicial philosophy is often unpredictable, therefore this method is the least powerful one for instituting change.

Judicial interpretation can be controlled, however, by providing clearer laws for interpretation which will limit the judiciary’s power to ignore private property rights. Constitutional and statutory revisions to the current takings law must be adhered to in future court decisions, thus providing greater controls on the judiciary’s opportunities to stray from the Founding principles.

A constitutional amendment of Article X, Section 2, which provides a clearer enunciation of private property rights protections will embed such protections in the supreme law of Michigan. Establishing a constitutional remedy provides a greater degree of permanency than any other reform effort, though it is probably the most difficult to implement.

To combat the courts’ unwillingness to compensate partial or regulatory takings, language should be added to Michigan’s current takings clause [See Table 2]. One revision would alter the clause to read the property shall not be “taken or damaged” without just compensation.[76] Including “damaged” will make restrictions on uses of property compensable. Although property is not actually transferred to the state in regulatory takings, the bundle of rights inherent in property is damaged by restrictions on its use.

Another alternative is to revise the clause to read property shall not be “taken, in whole or in part,” thus ensuring that partial takings are compensable under the constitution. Similarly, a separate section could be added to explicitly deal with regulatory takings and deprivations of uses of property. Language to prevent deprivations of property uses without compensation will ensure that individual property owners are not forced to bear the full cost of a regulation or action intended to benefit all of society.

The Florida legislature introduced a joint resolution in January of 1995 which proposed an amendment to their constitution with similar language to address the issue of regulatory takings.[77] The resolution was withdrawn two months later. The legislature proceeded, however, to pass one of the most comprehensive property rights protection acts to date.[78]

Given the rigors of amending the constitution, the Michigan legislature might pursue legislation leading to comprehensive statutory protections of private property rights.[79] The scope of this legislation could go far beyond that of Michigan H.B. 4433 which merely mandates that the attorney general establish takings impact assessment guidelines in relation to two departments. Comprehensive legislation could address the need to broaden the definition of takings, ease the process by which aggrieved property owners may be compensated, and require governmental officials to analyze the impact of their law making and regulatory actions [See Appendix B].

Any comprehensive measure must limit all governmental entities — legislative and executive; state and local.[80] Municipalities have the power to “take” only by delegation from the legislature.[81] The legislature, therefore, may condition that power. The entire gamut of governmental authorities have abused their authority in relation to private property. Only an act which limits the authority of the entire structure will afford the guarantees property owners deserve under a just government.

The first priority should be to expand the scope of a compensable taking beyond that understood by the current judicial structure. Any governmental action that results in either a physical occupation of property, in whole or in part, provides the basis for the definition of a “taking,” and is primarily consistent with the current judicial interpretation of the takings clause. In addition to this, the legislature should deem as a taking any action which results in a non negligible reduction in the value of an owner’s property.[82]

This eliminates the confusion involved in determining what parcel is to be examined for takings purposes. Currently, if 10 acres of a 100-acre area are rendered undevelopable by a regulation, the judge must determine whether the 10 acres or the 100 acres is the relevant parcel. If he chooses the 10 acres, there is a 100 percent limitation on use and the owner will be compensated. If he chooses the 100 acres, there is only a 10 percent taking and the owner is not guaranteed compensation because only a portion of his land has been limited. When the standard is that any non-negligible effect on property constitutes a taking, no matter which parcel is deemed relevant, the owner is guaranteed compensation for the entire value of the affected property — the value of the 10 acres and any incidental loss to the remaining 90 acres.

This definition of taking will also combat the current judicial opinion that a taking has not occurred unless all economically viable uses are destroyed by a governmental restriction on the use of property. Clearly, property owners should not face a loss in value to their property without compensation. Property cannot be separated from its worth and the expectations placed on such property by its owner. For this reason, value should be attached both to the property and to its uses. Any deprivation in a previously legitimate use of property, in whole or in part, should be deemed a taking. The value of the use will then figure into the determination of the amount of compensation. Legislation passed without an expansion of the scope of compensable takings will fail to remedy the current failures in judicial interpretation that currently leave many owners helpless when facing governmental actions which affect their property.

The legislation should also ensure that just compensation is paid to an aggrieved property owner. Compensation should take into account the amount of reduction in fair market value of the property affected by a governmental action when more than a de minimis reduction occurs. In determining this reduction, however, values attached to specific intended or proposed uses of the property must also go into the calculus of just compensation.[83] To rest the calculus only on the fair market value of the property in its current condition is inherently unjust.[84]

Furthermore, the legislature might limit the scope of allowable takings to only those for true “public uses."[85] A public “use” cannot exist if the public is not actually using the property taken, i.e. where the government does not retain exclusive control over the property or use that has been restricted. This section will remedy the holding in Poletown Neighborhood Council v. City of Detroit which allowed takings of land for essentially private uses. Setting a more stringent standard for evaluating legitimate public uses and returning the power to make such a determination to the judiciary is a vital component for limiting the illegitimate expansion of governmental power.

Additionally, a comprehensive bill could ease the process by which property owners can defend their rights. In today’s system, the costs of bringing suit often makes it extremely difficult for the individual property owner to challenge governmental actions and hold officials accountable. Awarding attorney fees and costs to property owners who prevail in a takings challenge[86] makes it economically reasonable for property owners to defend their rights and removes a formidable barrier to suit that currently insulates governmental entities from legal accountability. The original draft of Michigan’s H.B. 4433 included a provision like this. It was unwisely removed, however, when the bill was revised in committee.

A further barrier to suit is the sovereign immunity power of the state. The legislature should take the position that challenges to governmental actions which affect constitutional rights should never be subject to the state’s permission.[87] Because the judiciary has the power to throw out frivolous lawsuits and ensure that plaintiffs have standing, removal of the permission to sue requirement in relation to takings actions will not eliminate any vital state administrative power.

Another vital element to a comprehensive legislative reform is to require takings impact analyses for all actions at every level of government.[88] The Michigan legislature has moved in this direction with its requirement that the attorney general formulate guidelines for assessment to be followed by the Department of Natural Resources and Department of Environmental Quality in H.B. 4433. It could move beyond this, however, to require such assessments of all governmental entities, including local governments and the legislature itself. Coupling the assessments to an expansion in the definition of takings will ensure that governmental officials have a full understanding of the impact of their decisions. Moreover, the basic requirements of a takings impact assessment can be defined by the legislature. Governmental entities should state the interest which would be furthered by the governmental action, certify that the action is necessary to advance the purpose, assess the impact the action is likely to have on property rights, establish that no alternative means are available for meeting the state interest that may have a lower impact on property, and certify that the benefits of the action actually outweigh the costs.

Included in the assessment process could be notification to property owners likely to be affected by a governmental action and opportunities for those owners to challenge the necessity of the action. Again, the goal should be to allow affected property owners opportunities to avoid long and costly court processes to validate their rights to compensation for, or injunction of, the action.

The legislative branch has the ability to restructure the takings law and thereby restore the status of property rights in Michigan. Reform at this level can affect the passage of laws, promulgation of rules, and enforcement of state policies. Comprehensive legislative reform should receive the highest priority in Michigan’s struggle to protect its citizens.

Finally, if the executive branch prevents itself from actually instituting illegitimate takings, property owners will be spared the harms of governmental actions or can more easily avoid a lengthy court process now necessary to determine their rights when takings occur. The governor should execute an order [See Appendix A] which provides guidelines for executive department actions to ensure that government officials assess the property rights implications of their actions and institute the least intrusive means for meeting any governmental objective, understand that takings is a category much broader than the judicial definition, and respect property owners who may have a legitimate takings claim against an action.

In 1988, President Ronald Reagan issued Executive Order 12,630, “Governmental Actions and Interference With Constitutionally Protected Property Rights,” to control federal executive department actions in this way.[89] The order requires most governmental regulations to undergo takings impact analysis in an effort to avoid enforcing regulations or laws in a manner that would result in unnecessary takings. By establishing budgetary responsibility within each department for compensation awards, each section of the executive is forced to bear fiscal responsibility for their actions.[90] This order has gone mainly unused, especially during the Clinton Administration.[91] Nonetheless, it has formed the basic model for most takings impact assessment legislation in the states and in Congress. It also serves as a good base model for Michigan’s governor to follow in the creation of his own executive order.

President Reagan’s executive order, however, did not attempt to expand the definition of takings to be used by the government in evaluating its actions. A complete executive order in Michigan should recognize that compensable takings occur more often than they would be found to occur in today’s judicial environment[92] This added level of protection will allow the executive order to be almost as protective for property rights as a comprehensively structured property rights statute passed by the legislature.

Michigan’s elected officials have a responsibility to pursue an agenda which seeks to guarantee a higher level of protection for property rights. As each branch moves toward the goals delineated above, a layer of protections will emerge that will ensure that the cost of pursing community interests will be born by the entire community. As Richard Epstein, professor of law at the University of Chicago, stated in Takings, “When the stakes are high, any shift in course has important consequences."[93] Reform must shift the cost of governmental actions so they do not fall disproportionately on individual property owners.