The Provisions of Proposal 4

On Nov. 7, 2006, Michigan voters will be asked to consider Proposal 4, a state constitutional amendment that would alter the law regarding eminent domain, which is the legal theory by which the government can take private property for certain public uses if the government pays just compensation. The proposed amendment was drafted by the Michigan Legislature in the wake of the U.S. Supreme Court’s widely criticized ruling in the 2005 case Kelo v. New London. The measure was placed on the ballot by a vote of 106-0 in the Michigan House and 31-6 in the Michigan Senate. Proposal 4 would amend the constitution if a majority of electors vote for it, and it would become effective 45 days after the 2006 general election.[1]

There are provisions about eminent domain in both the federal and Michigan constitutions. The federal provision appears in the Fifth Amendment, which states, "(N)or shall private property be taken for public use, without just compensation."† As will be discussed under the heading "Kelo v. New London" on Page 6, the Kelo ruling held there were few limits on the use of eminent domain under the Fifth Amendment, meaning that any further limits would have to be developed under state law.

The state provision on eminent domain appears in Article 10, Section 2, of the Michigan Constitution:

"Private property shall not be taken for public use without just compensation therefor being first made or secured in a manner prescribed by law. Compensation shall be determined in proceedings in a court of record."[2]

Proposal 4 would change Article 10, Section 2, to read:

"Private property shall not be taken for public use without just compensation therefore being first made or secured in a manner prescribed by law. If private property consisting of an individual’s principal residence is taken for public use, the amount of compensation made and determined for that taking shall be not less than 125% of that property’s fair market value, in addition to any other reimbursement allowed by law. Compensation shall be determined in proceedings in a court of record.

"‘Public use’ does not include the taking of private property for transfer to a private entity for the purpose of economic development or enhancement of tax revenues. Private property otherwise may be taken for reasons of public use as that term is understood on the effective date of the amendment to this constitution that added this paragraph.

"In a condemnation action, the burden of proof is on the condemning authority to demonstrate, by the preponderance of the evidence, that the taking of a private property is for a public use, unless the condemnation action involves a taking for the eradication of blight, in which case the burden of proof is on the condemning authority to demonstrate, by clear and convincing evidence, that the taking of that property is for a public use.

"Any existing right, grant, or benefit afforded to property owners as of November 1, 2005, whether provided by this section, by statute, or otherwise, shall be preserved and shall not be abrogated or impaired by the constitutional amendment that added this paragraph."

If enacted, Proposal 4 would narrow the scope of permissible government takings. A 2004 Michigan Supreme Court case, Wayne County v. Hathcock,[3] altered Michigan takings law by prohibiting the use of eminent domain in the pursuit of economic development. Proposal 4 not only incorporates that decision, but would put additional limits on government takings.

The features of Proposal 4 are addressed below in the order in which they appear in the proposal.

The Fifth Amendment did not originally affect the use of eminent domain by state governments. Eventually, after the passage of the 14th Amendment, the Fifth Amendment’s limitations on takings were held to apply against state takings as well. This evolution is discussed below.

125 Percent Compensation for Principal Residences

Proposal 4 would provide a homeowner with at least 125 percent of the fair market value of their property whenever that property serves as their "principal residence." Most Michigan citizens will be familiar with the concept of a "principal residence," since they receive a tax break for their principal residence on the state property taxes, but essentially the term refers to the home a resident lives in for the majority of the year.[4] As in the current law of eminent domain, a jury would determine the fair market value the government would need to pay to a property owner for a taking.‡

"Regulatory takings," in which property owners lose part or all of their property’s value because of a new government regulation, could still be decided without a jury.

Prohibiting Takings for Economic Development or Revenue Enhancement

Proposal 4 would place an explicit prohibition in the Michigan Constitution on any government takings for the purpose of economic development or the enhancement of tax revenue. Economic development and enhancement of tax revenue are two of the justifications cited by the city of New London, Conn., in the Kelo taking. Those rationales were also cited by the Michigan Supreme Court in the 1981 Poletown Neighborhood Council v. Detroit decision,[5] which allowed an entire community to be taken and converted into an auto plant. The legal rationale behind the Poletown ruling has since has been overturned.

Incorporating Current Categories of Acceptable Public Uses

Proposal 4 states, "Private property otherwise may be taken for reasons of public use as that term is understood on the effective date of the amendment to this constitution that added this paragraph." In effect, this language accepts the three currently recognized categories of public use that allow Michigan government to transfer property from one private party to another. These categories were identified in the Michigan Supreme Court’s 2004 Wayne County v. Hathcock decision.

The court called the first of these categories "public necessity of the extreme sort otherwise impracticable."[6] These "public necessities" involve infrastructure like railroads, canals and other point-to-point transportation. The court held that the second category involved takings "when the private entity remains accountable to the public in its use of that property," such as petroleum pipelines, which may be privately owned but remain heavily regulated by the government.[7] The third category, which the court labeled "property … selected on the basis of ‘facts of independent public significance,’" basically involves takings to eradicate blight.[8]

Under Proposal 4, these three "public-use" categories would become the only ones through which Michigan governments could constitutionally use eminent domain to convey property from one private party to another.

Shifting and Raising the Burden of Proof

The fourth feature is a shift in which party has the burden of proof. Under current statutory law, the owner has the burden to show that the use of eminent domain is improper. When challenging whether the taking is for a public use, the owner can prevail only if he or she can show that there was fraud, an error of law or an abuse of discretion in the government’s decision.[9]

Proposal 4 would change this procedure by placing the burden on the government to show that a taking is appropriate. In most cases, Proposal 4 would require that the existence of a public use be demonstrated by a "preponderance of evidence," meaning slightly more than 50 percent of the evidence. Where the purported public use is the eradication of blight, however, the proposal would require the government to prove the existence of blight by "clear and convincing evidence," which is more than a preponderance of evidence, but less than the evidence required for proof "beyond a reasonable doubt," the standard for criminal convictions.

Judging Blight Property by Property

Proposal 4’s fifth feature requires that blight be determined on a property-by-property basis. Under federal law, when government officials claim that they are eradicating blight, they may take an entire neighborhood, even if numerous properties within that area are not themselves blighted. Typically, the entire area is then turned over to a developer, who tears down any existing structures and builds something new.

Proposal 4 would limit the properties that the government can take to only those that are in and of themselves blighted. Proposal 4 would thus prevent a government from easily obtaining an entire area with the intent to hand it over to a developer.

Maintaining Current Statutory Rights

The last feature of Proposal 4 would prevent the diminution or removal of any statutory protections that existed for owners as of November 1, 2005 (a date near the final ratification of the amendment within the Michigan Legislature).