Analysis of the Provisions of Proposal 4

The analysis of eminent domain law appearing above provides guidelines for takings that are more respectful of meaningful legal and societal considerations. In that light, the discussion below reviews the various elements of Proposal 4 and relates them to the general principles set forth above.

Compensation for Principal Residences

The first of Proposal 4’s provisions would provide compensation of at least 125 percent in any case in which eminent domain is used to take someone’s principal residence. This appears to be an attempt to compensate homeowners for the subjective value they place on their homes. This multiplier would apply only to the owner’s principal residence, presumably because a principal residence is the one most likely to be valued by people for subjective reasons.

Under current law, when a principal residence is taken, the owner receives the "fair market value," which is an effort to arrive at an objective measurement of value based on appraisals and on comparative properties. Not surprisingly, many owners treasure their home for personal reasons; for instance, the owners may have raised their children there. Obviously, it is difficult to arrive at an objective value for such subjective factors.

Setting a price is therefore difficult. A true price requires an agreement between a willing buyer and a willing seller. However, by definition, a takings case involves no willing seller. Thus, arriving at a "price" for a property in an eminent domain case is at least in part a supposition.

The choice of a minimum of 125 percent of fair market value does not authoritatively solve the problem of setting a price where there is an unwilling seller. At the same time, there is in fact no universal solution to the problem of balancing the cost of a taking to taxpayers and the subjective value homeowners place on their homes.

If this provision of Proposal 4 were to be placed in one of the two strains of eminent domain law discussed above, it would tend toward the Hathcock strain, which is more concerned with individual rights. The current methodology, by focusing on a "market price" (which, after all, does not exist in a forced transfer), is closer to the point of view of the government, since it does not attempt to include the subjective value placed on the home. Proposal 4 shifts the balance towards a concern for the individual by requiring that a multiplier of 125 percent or more be applied to account in part (or perhaps entirely) for the subjective value the owner places on the home.

Prohibiting Kelo-Style Takings

In Michigan, takings for the purpose of economic development or an increase in tax revenue are currently prohibited due to the Michigan Supreme Court’s 2004 ruling in Wayne County v. Hathcock, which construed the current version of Article 10, Section 2, of the Michigan Constitution. Proposal 4 would explicitly write this prohibition in the Michigan Constitution.

The current language of Article 10, Section 2, does not expressly discuss whether economic development takings are proper. Remember, in 1981, that same constitutional language was the foundation for the Poletown decision, which had held (before being overruled in Hathcock) that economic development takings were proper.

Since the general language of the current version of Article 10, Section 2, had led to diametrically opposed court rulings (Poletown and Hathcock), the Hathcock result would be made explicit by Proposal 4. This would prevent future courts from overruling Hathcock and holding that economic development takings were permissible.

Quite obviously, this provision is more in line with the Hathcock strain, since it in essence adopts the central holding of Hathcock. Specifically, Proposal 4 would significantly reduce the number of instances in which the government could use eminent domain to transfer property from one private owner to another. This shows a greater respect for individual rights by removing economic development as a public-use claim, since the foundation for such a claim is easy for legislators and planning commissions to produce.

Categories of Acceptable Public Uses

As discussed above under "The Provisions of Proposal 4," the proposal would incorporate in the Michigan Constitution the state courts’ current understanding of the permissible categories that allow land seized in a taking to be transferred to another private party. This understanding was set forth in the Hathcock ruling, which enumerated three acceptable categories of such takings.

The first of these categories, "public necessity of the extreme sort otherwise impracticable," involves such things as railroads, canals and other point-to-point transportation and infrastructure. In such instances, both the practical difficulties of gaining ownership of long, contiguous parcels of land or water and the societal benefits of the infrastructure are held to be sufficient grounds for allowing a modification of the original understanding that takings should be primarily for a public, not private, use. By incorporating such instances in the Michigan Constitution, Proposal 4 would continue to allow government takings for such infrastructure.

The second of the categories involves takings "when the private entity remains accountable to the public in its use of that property," such as railroads or petroleum pipelines that are owned privately but subject to heavy government regulation. Proposal 4 would permit takings of this kind, also.

Some have questioned the need for eminent domain even in these more traditional instances.[81] Proposal 4 would have little practical effect on their argument. Both categories will remain acceptable under the law whether or not the voters approve Proposal 4, since longstanding precedent supports both categories, and since both Hathcock (the current controlling interpretation of the present version of Article 10, Section 2) and the proposal itself (which would amend Article 10, Section 2) accept these two categories.

The third category, "property selected on the basis of ‘facts of independent public significance,’" essentially concerns only takings to eradicate blight. This topic is discussed in several sections below, because Proposal 4 contains several provisions dealing specifically with blight takings. Proposal 4 retains the category of blight takings, but would modify the manner in which they are conducted.

With this provision, Proposal 4 is again incorporating the Hathcock strain into the constitution. It would explicitly accept the pre-Poletown categories of permissible takings that existed in 1963, when the Michigan Constitution was ratified.

Burden of Proof

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). It would change the current procedure by making the government prove that a taking is proper (the current law is that an owner must show that a taking is improper).

As will be discussed in the next section, blight takings can become an alternative method for achieving economic development ends. Thus, Proposal 4’s heightened standard for the eradication of blight would help prevent potential future abuse.

As discussed earlier, the Kelo strain of decisions almost always defer to a government’s assertion that a taking is for a public use, while under the Hathcock strain, the courts have a more significant role. In Hathcock itself, the Michigan Supreme Court rejected the concept of deference to legislative deliberations and redevelopment plans, but it did not set forth a clear standard of review. This provision of Proposal 4 requires that the courts play a strong role in making a public-use determination. It also provides clear standards to assist the courts in making these determinations. The proposal would therefore make it more difficult for "Ritz-Carltons," "megastores" and "factions" to achieve their ends at the expense of less powerful individuals and minorities since any potential taking would now be subject to a meaningful judicial review with clear standards of proof.

Property-by-Property Blight Assessment

Proposal 4 also deals with takings for blight, an area of the law developed in the 20th century in response to perceived difficulties in urban America. When most people think of "blight" they envision such things as dilapidated buildings or rodent-infested properties. However, the many state and local legal definitions of blight are far more broad, vague and easily manipulated.

For example, Michigan’s current blight law defines a "blighted area," in pertinent part, as the following:

"a portion of a municipality, developed or undeveloped, improved or unimproved, with business or residential uses, marked by a demonstrated pattern of deterioration in physical, economic, or social conditions, and characterized by such conditions as functional or economic obsolescence of buildings or the area as a whole, physical deterioration of structures, mixed character and uses of the structures, deterioration in the condition of public facilities or services, or any other similar characteristics which endanger the health, safety, morals, or general welfare of the municipality, and which may include any buildings or improvements not in themselves obsolescent, and any real property, residential or nonresidential, whether improved or unimproved, the acquisition of which is considered necessary for rehabilitation of the area. It is expressly recognized that blight is observable at different stages of severity, and that moderate blight unremedied creates a strong probability that severe blight will follow. Therefore, the conditions that constitute blight are substandard building or facility conditions, improper or inefficient division or arrangement of lots and ownerships and streets and other open spaces, inappropriate to be broadly construed to permit a municipality to make an early identification of problems and to take early remedial action to correct a demonstrated pattern of deterioration and to prevent worsening of blight conditions."[82]

Clearly, such a statute leaves a great deal of latitude to public officials in determining what qualifies as blight. Terms like "economic obsolescence," "mixed character," "morals, or general welfare" and "which may include any buildings or improvements not in themselves obsolescent" are elastic. It is difficult to imagine any property that simply could not fall under this statute.

The Hathcock court held that takings for the eradication of blight were permissible, but did not discuss whether Michigan’s current statutory scheme for the removal of blight was in fact constitutional.

The Ohio Supreme Court, however, recently ruled on an Ohio "deteriorating area" statute similar to Michigan’s blight law. In Norwood v. Horney, discussed above on Page 10, the city of Norwood sought to redevelop a "deteriorating" neighborhood.

Relying in large part on Hathcock and Justice O’Connor’s Kelo dissent, the Ohio Supreme Court unanimously held that economic development takings were improper. Moreover, the court held that the Ohio statute permitting the use of eminent domain to address a "deteriorating area" was unconstitutionally vague:

"In essence, ‘deteriorating area’ is a standardless standard. Rather than affording fair notice to the property owner [that their property might be at risk, it] merely recites a host of subjective factors that invite ad hoc and selective enforcement. ... We must be vigilant in ensuring that so great a power as eminent domain, which historically has been used in areas in which the most marginalized groups lived, is not abused."[83]

Therefore, the Ohio Supreme Court prevented municipalities from casually categorizing communities as "deteriorating areas" — a label that legally empowered the government to use eminent domain for de facto economic development. The Norwood case demonstrates that attempts to cure blight or deterioration can achieve the same ends as takings for economic development when the statute defining blight or deterioration is vague.

This is not merely a theoretical concern. In Michigan, the city of East Lansing has declared a 35-acre tract adjacent to Michigan State University as a "blighted area."[84] Public controversy has accompanied the decision, however, since many argue that none of the individual properties appears to be blighted. Moreover, it is possible that city officials could use the "blight" label to facilitate a taking for economic development that would be otherwise impermissible.

Ultimately, governments that are in actuality seeking to engage in economic development takings could proclaim that they are engaged in blight eradication and achieve the same result, because once the blight is eliminated, the taking entity is legally allowed to convey the property to another private owner. Thus a blighted area can serve the same purpose as an area taken for economic development. This problem is exacerbated where blight laws are open-ended and vague, as they are in Michigan.

Proposal 4 would not amend Michigan’s "blighted area" statute, but constitutional law trumps any inconsistent state law; therefore, the proposal would prevent nonblighted properties from being taken. It would also prevent blight takings that are in their result indistinguishable from economic development takings. Where blight is genuinely the concern, the government’s interest is in removing the blight, not in what replaces it.

The blight provision of Proposal 4 lies within the Hathcock strain. By explicitly limiting blight takings to actually blighted properties, it rejects a central holding of the Berman case. In Berman, the eradication of blight was coupled to the question of what was going to replace it, since a redevelopment plan was the basis for the Supreme Court’s holding that the taking was a public use.

Proposal 4 would decouple the questions of whether a taking is necessary and what would be erected on the taken land. This decoupling protects the individual whose property is not blighted from having his or her property transferred to another private party merely due to the purported transgressions of his or her neighbor. The proposal does not give deference to a developer’s wants or needs; rather, it penalizes only owners whose property has deteriorated to the point that their property interferes with the rights of others.

Current Statutory Rights

Proposal 4 would prevent the Legislature from modifying the statutory protections that currently benefit landowners. Those statutory rights would operate as a floor, and could not be weakened to the benefit of the taking entity and the detriment of the property owner.

This provision is in line with the Hathcock strain in that it as a minimum preserves the property owner’s existing statutory rights. Those rights could only be altered to the property owner’s benefit. Rather than deferring to the Michigan Legislature, this provision takes future decisions about the minimal amount or statutory rights that a property owner has out of the Legislature’s control.