Commentary from a practical perspective
page includes posts from May 26-June 1, 2002 in the usual reverse order. Each week's
postings on the home page are perma-linked to these pages.
June 1, 2002
My wife and I went to see Attack of the Clones last night.
For once, we shared the same opinion about a moviewildly uneven overall, painfully wooden dialogue, characters that were hard to care about, but great special effects.
The weird part of the experience occurred just as the movie finished.
When we saw Spider-Man on its opening weekend, the crowd erupted into cheers and applause as soon as the end credits started rolling.
This time, the audience was as somber and quiet as when we watched In the Bedroom last summer.
That kind of reaction was perfectly understandable for the searing emotions displayed so well in Sissy Spaceks compelling drama. However, I doubt that the almost gloomy attitude we observed last night was the result George Lucas intended.
May 31, 2002
The financial blogger-guru at More Than Zero Sum (MTZ) asked for a little help on a condemnation case that was the subject of a WSJ editorial.
The city council of Cypress, California voted to condemn a 17.9 acre parcel of land previously and carefully cobbled together by a nondenominational Christian church called Cottonwood. The church bought the land to relocate from its currently undersized building. According to the WSJ and a related website MTZ pointed to, the town intends to turn over the condemned property to Costco, a big-box retail outlet.
As quoted by MTZ, the WSJ editorial objects to the proposed taking, in part because the city councils alleged reason for condemning the property is that
MTZ agrees, and also says:
Given that I represent a government entity that uses the power of eminent domain frequently, one might expect that I would support the Cypress city councils decision.
One would be wrong, if the only reason for the city's move is as quoted in the WSJ editorial.
Otherwise, MTZ is right to be pessimistic about the congregations eventual chances to build its new church on this parcel.
The Takings Clause in the U.S. and comparable state constitutional provisions require two fundamental conditions for the exercise of the power of eminent domain: payment of just compensation, and a public purpose for the acquisition.
The public purpose requirement is not met merely by setting out a few facts or claims in the city ordinance calling for the condemnation. Any legislative declaration of the public purpose to be served by the acquisition is subject to court review. Nonetheless, that review is extremely limited, as described in a U.S. Supreme Court case, National R.R. Passenger Corp. v. Boston & Me. Corp., 503 U.S. 407 (1992):
Rationality, of course, is sometimes in the eye of the beholder.
From the limited facts Ive read about this case, I dont believe a court would uphold the taking based on the notion that the property needs to be kept in private tax-paying hands. Thats among the weakest excuses Ive ever read for using eminent domain authority. The city faces the same risk with any parcel bought by a tax-exempt entity, and I don't believe a court would uphold a taking on that slim basis.
Nonetheless, most *redevelopment* proposals that include a condemnation element are upheld. For example, if the churchs land is in a currently blighted area, and the city can refer to a pre-existing area-wide plan for industrial and business uses, condemning the parcel as a linchpin piece for the entire plan would most likely be determined as meeting a public purpose.
MTZs other point, about zoning and land use policy relative to eminent domain, is a bit misplaced.
For just compensation purposes, the property must be appraised at its "highest and best use." The potential uses to which a parcel can be put under either existing or even potential zoning are a critical element of the appraisal process in establishing this value. In fact, the possible rezoning of a parcel is one of the ways that property owners can increase the perceived value of their land from its existing use.
For example, a single family residence on land actually zoned commercial will nearly always command a higher dollar award from a compensation jury than the same home sitting on property zoned for residential uses only. However, if the same parcel is currently zoned residential, but the surrounding area is trending toward commercial uses, then the property owners appraisers and attorneys will argue for a higher award, and usually be successful.
For Cottonwoods sake, I hope the city relies solely upon the potential tax consequences to support its condemnation action. That bogus excuse offers the best hope for the new church to be built on the land it already owns. If the city can support a revitalization or similar justification, however, then I believe that Cottonwood will be forced into a new exodus.
There is, of course, the possibility that the WSJ may not have its facts completely in order. For an intriguing, nuanced view from the informed perspective of a resident of Cypress, see Ann Salisbury's post.
May 30, 2002
As a government attorney who deals with 11th Amendment issues on a fairly regular basis, I also have a few quick thoughts about this decision.
First, I believe Justice Thomas missed his chance in one respect.
The opinion for the 5-4 majority carefully notes that in the setting in which the 11th Amendment was adopted, no one could have predicted the rise of the modern administrative state, with alphabet-soup entities exercising vast quasi-judicial authority. The opinion also cites prior case law for its statement that the boundaries of state sovereign immunity are not delimited by the literal text of the 11th Amendment:
(Emphasis added.) Personally, I think it would have been fun if the FMC majority opinion also cited Justice Douglass Griswold right-of-privacy opinion as additional analogous authority:
Gotta love those penumbras and emanations, especially when the usual proponents of such interpretive guidance are stressing the actual language of the 11th Amendment, as occurred in the dissent in this case.
Sauce for the goose moments are usually pretty rare in Supreme Court opinions, so one must appreciate them when they appear.
Second, the practical consequences of the decision should be fairly minor, at least from a big picture perspective:
As also noted in Footnote 19,
In other words, watch what the FMC does, now that its been told how to do its job with respect to state-run ports and similar sovereign entities.
The FMC will have its chances. The trend in maritime matters continues to lead toward more state-run port authorities, as the cost of operating these critical intermodal facilities becomes too much for cities or private entities to bear.
As alleged in this case, for example, if the South Carolina Authority illegally discriminates among cruise lines in providing port access, the FMC can certainly do something about it.
The Feds just wont be able to shield themselves from potential criticism while carrying out their responsibilities, by claiming theyre only acting as referees in a fundamentally private dispute. The potentially unpleasant prospect of dealing with such criticism makes me think that was the unstated reason for pressing the issue in the first place.
Doing well by doing goodwith your money
On occasion, government can find ways to do a good thing, while also enhancing the prospects for improving a political partys chances at the ballot box.
Neither Democrats nor Republicans are at all averse to taking advantage of these opportunities when they can.
Todays environmental news is a good example:
The arrangement is in two parts. The federal government will settle an outstanding lawsuit and purchase nine oil and gas leases near Pensacola for $115 million, for which no Congressional approval is necessary. The second half, a $120 million agreement to purchase Everglades-area drilling rights from the family that owns them, will require Congress to agree.
Florida Governor Jeb Bushs admission that this package deal did not conflict with his personal interest was refreshingly blunt:
I like the fact that the Federal government is not simply trying to prevent drilling in the Everglades on the cheap, through some kind of regulatory ruse. At least in this situation, the Bush Administration recognizes that if you really want to engage in effective preservation activities, you should have the checkbook handy.
Peter Huber, the author of Hard Green, should be pleased.
A new tax incentive?
As discussed in a prior post or two, the State of Delaware is joining many other state governments in searching for additional tax revenue. The latest ideas center upon an increase in the cigarette tax and a possible change in the states take from the slots business.
The editorial about realty transfer taxes in todays News-Journal, Delawares primary statewide newspaper, could provide a spark of inspiration for another handy source of funds. Without changing the amount collected, Delaware could add to the states coffers and make an additional policy point at the same time.
Realty transfer taxes are a form of sales tax, limited to routine real property transactions. The tax is paid at settlement as the property changes ownership, and in Delaware it is set at 3% of the sales price.
Delaware receives half of the transfer tax revenue, projected to total $39.2 million for its share this year.
The other half is distributed to the states cities and counties, the two primary forms of local government. If the property is within a city, the transfer tax goes to the municipality. If its outside an incorporated area, then the money goes to the county.
The local governments were required to enact their own legislation formally creating their half of the tax before they could collect it. In that respect its not quite the same as the old revenue-sharing models, in that the state forced the local governments to risk a political consequence of adopting the new source of funds. As it turned out, it wasnt too risky.
This year, Sussex Countys take from the transfer tax will essentially match the money generated from its extremely low general property tax system. The annual budget letter from the County Administrator noted:
The letter also commented that next years county property tax should total a nearly equal amount ($8.7 million), and that Sussex Countys total proposed operating budget was just over $32 million.
The dovetailing of these two county revenues is a first. It also spurred the News-Journal to return to a related topic in todays editorial, arguing that its way past time to do a general reassessment of the countys property tax base.
The editorial writers reminded their readers that 7 years ago the State offered to pay the initial cost of reassessment, then projected at $15 million statewide. The suggestion quickly went nowhere.
None of the three counties use an up-to-date set of property values, but Sussex County is the worst of the bunch.
The really odd coincidence is that the News-Journal's position is the same one I've been advocating. That doesn't happen too often.
If the current State legislature is serious about finding new money, they could change the revenue-sharing element of the transfer tax. It wouldnt alter the amount collected, but it would certainly grab the counties attention.
For example, the transfer tax split could be reset such that Sussex County only receives the portion that would be collected if the property value at the time of the transfer matched the Countys 1974 assessment value.
In other words, the transfer tax would continue to be set at 3% of the transaction price. The county would simply be limited to the tax generated if the price was set in 1974 dollars.
If we assume the same $8.9 million collected by the County last year was collected in 2001, using the handy inflation calculator produces a reduced transfer tax for the County of $2.32 million. The State would pocket the $6.58 million difference.
Whenever the counties updated their assessment year, the transfer tax revenue stream would also be updated.
A reform along these lines could provide a truly intriguing incentive to modernize the property tax system.
There's nothing like a budget crunch to set the policy wonk's mind racing.
We moved again
This weekend brought vivid proof to us that we moved again.
Actually, we didnt literally relocate our home. The 100,000 tourists now filling the streets, beaches, and bays in and around Lewes and Rehoboth Beach just makes it feel that way.
Im not sure about the actual number of visitors. The state tourism office will probably issue a press release on Tuesday or Wednesday, touting the enormously successful start to the official summer season. Judging from Saturdays experience, however, the number of beachgoers this year has to be close to a record.
Even though weve lived here now for almost 14 years, the sudden impact of the tourist crush can still surprise us. It usually takes a weekend to become acclimated to the changes in lifestyle required to navigate ones way in a very different, very crowded environment.
We had 7 p.m. dinner reservations with two other couples at our friends restaurant, a very popular eatery. Our house is literally 3 ½ miles from its doorstep, and we left at 6:45.
Not very realistic, as it turned out. After several fruitless trips up and down Rehoboth Avenue and several side streets, my wife left the car and hurried to the restaurant, while I continued the search for a parking spot. I finally found one four blocks away, and made it to our seat only 25 minutes late.
A few Saturday nights ago we could have parked directly in front of the place.
Im not complaining. If it werent for the summer hordes and the money they leave behind, Rehoboth simply wouldnt have as much going for it the rest of the year.
Just takes a little getting used to, is all.
Come to the Rehoboth Boardwalk later this summer. You will see some folks with no trace of sunburn, light tans, and a certain stunned look on their faces at the sight of a six-deep line for a snow cone. You can safely assume theyre probably locals who hadnt been downtown for a while.
Official small print disclaimer: This is, after all, a personal web site. Any opinions or comments I express here are my own, and don't necessarily reflect the official position of my work as a government attorney or any of my clients.
That fact may become obvious later on, but it needs to be said here anyway.
© Frederick H. Schranck 2002