Five Reasons Why the `Contract' Doesn't Protect Property Rights

PROTECTING property rights is a core promise in the Republican Contract With America. It is also central to the Constitution, which guarantees that private property may not be taken for public use without just compensation. Unfortunately, the House is considering property rights legislation that has nothing to do with constitutional guarantees.

The Job Creation and Wage Enhancement Act (H.R. 9) would require the US Treasury to pay property owners if they experience a 10 percent or greater reduction in their property values resulting from either a federal limitation on property use, or a state or local limitation based on federal law. Congress is always free to give away taxpayers' money; but it should not do so on the pretext that it is merely implementing a cherished constitutional right.

Consider five problems in H.R. 9:

* Ten percent is not the constitutional standard. The Supreme Court has repeatedly held that owners seeking compensation for regulation of private uses - as opposed to the outright taking of property for public use - are entitled to cash payments only if most of their property's value has been destroyed by the regulation. Compensation is intended to adjust broad regulatory burdens that simply fall too heavily on a particular property owner - such as the South Carolina man vindicated by the Supreme Court in 1992 when his beachfront lot was rendered worthless by coastal zone legislation.

But property owners, like other members of society, are not exempt from bearing any costs. ``Government could hardly go on if to some extent values incident to property could not be diminished without paying for every change in the general law,'' wrote Justice Oliver Wendell Holmes in the 1922 case that established the constitutional basis for compensation. A federal court explained more recently that government action that simply denies an owner ``an opportunity to exploit more lucratively a particular use'' is not unconstitutional.

THE proposed 10-percent threshold for federal payments in the bill overthrows the constitutional standard, replacing it with a subsidy to land speculators. For example, suppose that a developer buys wetland property announcing that it will build condominiums, but the federal government issues a permit only for the development of houses. Under H.R. 9 the owner would be paid with taxpayer funds for the difference, even if both uses would be highly profitable.

Thus, the bill actually provides a powerful incentive for land developers to propose the most highly damaging uses of property in order to receive payments in exchange for more responsible use. There is no such reward for responsible land users who begin with a viable proposal.

* The bill requires federal taxpayers to pay for the behavior of state and local agencies. While federal agencies cannot direct state and local decisions, the bill does open the federal treasury to unlimited liability for state and local government actions. For example, a state pollution-control agency in Massachusetts might deny a permit to a proposed waste incinerator, claiming federal standards. Even though the federal government cannot compel the state to issue the permit, the disappointed permit applicant would obtain a cash payment from taxpayers who include mostly residents of other states.

* The bill subverts the appropriations process. It directs the heads of federal agencies to ``transfer'' or ``reprogram'' funds ``notwithstanding any other law'' in order to pay the newly authorized property rights claims without increased agency appropriations. By placing property rights claimants ahead of all other interests, the bill allows unelected bureaucrats to cancel or cut federal programs or projects voted on by Congress - construction, education, and health.

* Taxpayers will be required to pay enterprises not to pollute. Several years ago the federal Environmental Protection Agency restricted the discharge of pollution from gold mines into streams. Virtually all mines rapidly complied with the limitation, but one Alaska mine filed suit claiming that if it had to cease polluting, it would become unprofitable. The mine owners sought payment for the ``regulatory taking'' of the gold.

The case settled out of court with no federal payment; the operators had to comply. If the new bill had been in effect, however, taxpayers would have been required to pay these scofflaw operators. The bill excuses government payments if use would otherwise violate state or local law, constitute a nuisance under state law, or present an imminent danger as determined by the president. But federal pollution laws were enacted precisely because not all pollution is unlawful or a ``nuisance'' under state and local law. Under H.R. 9, polluters will line up for cash payments.

* The bill provides no way to correct mistakes. It provides for binding arbitration of claims by the American Arbitration Association, with no judicial review. While a simplified claims procedure is desirable, H.R. 9 has nonlawyer, nongovernmental arbitrators making unreviewable decisions. They will decide what property uses violate state or local laws, what constitutes a nuisance, and how much taxpayer money should be disbursed.

Establishing new financial entitlements is a poor use of the new Congress's mandate. The Constitution itself is a better Contract With America. The Opinion/Essay Page welcomes manuscripts. Authors of articles we accept will be notified by telephone. Authors of articles not accepted will be notified by postcard. Send manuscripts by mail to Opinions/Essays, One Norway Street, Boston, MA 02115, by fax to 617 -450-2317, or by Internet E-mail to OPED@RACHEL.CSPS.COM.