Monday, January 23, 2006

'Property Rights' in James City County

With residential growth apparently becoming a pressing issue in James City County, leaders there are looking for ways to protect the county's rural open space. Which has some landowners worried that they're going to lose out. The Daily Press has a story, which has this quote:
'"Once they tell you what you can and can't do with your land, that's very frightening. We've got the land, and that's all we've got."'
The speaker is a woman named Pam Moore; her family owns a few hundred acres it currently rents to a hunt club. But the government already tells her what she can and can't do with her land.


At 10:11 AM, Blogger Ray Hyde said...

Calling this a property rights issue is wrong, it is a personal rights issue. What is happening here is that the county is requiring landowners to provide a valuable service to the remainder of the community, a service for which they are not getting paid.

The services they provide include preservation of environmental assets, construction and maintenance of the rural viewscapes, and the ability of the government to plan for infrastructure provision in the most compact and cost effective manner. In effect, the county is renting the open space until such time as it is needed for other purposes, and it is paying no rent. It is not a property rights issue, it is a human servitude issue. The government is taking nearly everything except the obligation to pay the taxes.

Any business other than farming has an exit strategy which includes the sale of assets to the highest bidder. By raising the issue that rural open space is valuable and needs to be protected, the county is raising the issue of how much that value is worth.

In the not so distant past the "property rights" to my family farm were defined by the government to include the right to build one house per every three acres. Subsequently, the government reduced those rights from somthing like a hundred to something like 5. This was done to provide a savings to the government, at no cost to themselves, and at no benefit to the farm.

Today, the government recognizes that building rights are valuable property, and it is willing to pay $30,000 apiece for them. The only conclusion you can reach from this is that the government stole the previous building rights that were defined by the government and which it is now willing to pay for.

The government's own duplicity in defining and defending property rights is what has caused the issue.

One of the results of the previous reduction in building rights was that when the family had health problems, some land needed to be sold. Because the building rights had been reduced, far more land needed to be sold than might have been necessary otherwise. The governments own actions created a situation that made the "protection" of rural property more important. Furthermore, the loan value of the property is crucial to farming, and the government has removed that as well.

On the other hand, i also own property in Alexandria, currently zoned at 2 homes per acre. It is likely that before long that zoning may change to ten homes per acre, or more. That will result in a "windfall" for me, with the result that I will be expected to pay something like $30,000 in proffers for the right to exercise my new property rights. If I do that, the provision of those new homes will theoretically take some of the heat off the requirement for land farther out.

But on such small lots those homes will be no where near self sufficient, and they will require still more environmental "services" from the outlying areas.

So in one case the government takes building rights at no cost. In another they are willing to pay for building rights that they then throw away (Try that with any other government purchased asset!). And in the third case they expect you to pay to get and use building rights.

So which is it? Are they "rights" or not? Are they valuable, or not? Is the open space valuable, or not? the answers are all tied together.

According to statements by the Fauquier extension agent, farms in that area might expect to earn $75.00 per acre, before labor and machinery costs. According to the South Carolina Dept. of Agriculture, when land is valued at more than $7000/acre, a farmer is better off to sell it and invest the money in government bonds: he'll earn more money at less risk doing nothing than he will by farming.

But that assumes he can sell the land. With no economic value to it, that is unlikely. I don't see how the government can expect to punish people into continuing farming, even if it is hobby farming.

The government encourages landowners to give away their building rights, by offering tax incentives. Neither those incentives, nor the money offered for purchase is anywhere near the income that could be generated by apreciation and rent on a new structure.

The owner is still stuck with the taxes. those taxes are currently at favorable rates, but there is no guarantee they will stay that way. Considering the governments previous duplicitous nature in this area, there is no reason not to assume that before long there will be cries to remove the tax subsidies afforded to "wealthy landowners".

Facing the eventual loss of the value of the property, or the property itself, giving away an easement isn't the only option. A farmer could simply give the land to Habitat, with the covenant that it be used only for high density, low income housing. He could probably get Habitat to grant a life interest.

In such a case the land would come off the tax rolls, and the county would now be faced with the decision the landowner had previously: what to do with property that produces no income.

At 11:43 AM, Blogger Toomanytaxes said...

We again see a battle between conflicting rights. A rural landowner who cannot develop her land because of regulatory restrictions certainly can argue that she has lost some of her rights. However, nearby neighbors whose commuting time increase by 33%, whose children now go to school in a trailer, or who sees taxes increase to pay for the infrastructure that is needed in the event that the rural landowner can develop her property, can also argue a loss of rights.

How can or should the General Assembly decide whose rights are more important in this instance? In a post-agrarian society, it's hard to argue credibly that dirt always wins. Sheer numbers favor the neighbors, but do we want a government that only counts noses to see which conflicting position wins? Could one argue that developing land in a manner that negatively affects one's neighbors' enjoyment of their land constitutes a nuisance? Is development of land a reasonable use thereof, but only to a point, at which further development becomes unreasonable? If so, where is that point?

Without having facts, it still strikes me that a large part of the problem is the marginal costs for supplementing public infrastructure are so much higher than the embedded costs, such that any development becomes a big cost to existing residents and many businesses. Is there a way for those who want to develop to have an economic reduce those marginal costs?

At 1:29 PM, Blogger Bob Burke said...

I have a difficult time accepting the posture that local government is somehow crossing a threshold that previously was uncrossed. That is simply wrong, and so the arguments that come afterward are irrelevant. I don't even accept the assertion that government should have to 'pay' for some claimed lost value.

At 7:00 PM, Blogger Ray Hyde said...

Surely you can see that buying property rights in one situation, taking them without compensation in another situation, requiring you to pay for them in another situation, and paying for them and then throwing them away, places the government in a compromised ethical position.

The first zoning regulations were passed in 1917. At that point they crossed a boundary, which has been pushed farther ever since. The rights PREVIOSLY DEFINED BY THE GOVERNMENT, for my property, have been reduced twice since then. Each time, I am pushed into a smaller economic corner. Each time it enhances the values of the community and my immediate neighbors in particular.

The idea that my new neighbors have the right to have their future commuting time protected at my expense, is clearly a claim to a new right that never existed previously. (There being no need for it, and the need for it being caused in fact by the new residents.) Nowhere in the law is it stated that you have the right to be the last one in.

Each newcomer that comes in inflicts similar damage to the one before, so to argue that you suffer a loss of rights due to increased taxes the next guy causes is necessarily a claim to new rights that didn't exist previously. Else you would not have the home you now claim is being injured.

Such a step is clearly crossing a boundary previously uncrossed.

It is true, zoning law was originally created to prevent nuisance, and nuisance laws are still on the books, but the laws have long since crossed the boundary from preventing actual damage to your neighbor, to being an instrument of social engineering. Now any resident from the far end of the county can come to a hearing and claim damage "to our open space".

If it is, as you say, a post agrarian economy, then your argument is that there is no economic benefit remaining in a farm. Such a finding would trigger a taking under the law. Put another way, are we Protecting the open space, or is it that we are protecting ourself at our neighbor's expense?

The constitution clearly says that if your property is taken for a public use, you have a right to compensation.

The law recognizes property rights as a "bundle of sticks". Therefore if you take one of my sticks, I should be compensated, but that is not the case. The courts have held that substantially all your sticks must be eliminated before a taking occurs. Environmental groups have interpreted this as a free pass and have openly advocated grabbing all the sticks they can get.

Unfortunately, to prosecute a claim under the Constitution, you must have standing in Federal court. Ordinarily you cannot get that standing over a zoning dispute, and you must first exhaust every other remedy. As a result government bodies have purposely used delaying tactics in such a way that the remedies cannot be exhausted.

The lower courts have held that property is not "taken" until substantially all the sticks have been removed from the bundle, but each time the government takes another stick they have crossed a new threshold.

On the other hand, if a newcomer claims that his right to travel freely is restricted on account of new development, well, he has not lost substantially all his sticks. So under current interpretation as applied to his neighbor, he deserves no compensation. Yet he is effectively using the threshold argument against his neighbor while simultaneuosly claiming no threshold has been crossed on his part.

Likewise, suppose he denies his neighbor the right to build based on the argument that he would then have to pay higher taxes to pay to support a school seat occasioned by the new construction. Under current law he has not lost substantially all his property and so he would not be allowed compensation, (the compensation being preventing his neighbor from building). In fact he may be denying a far more substantial part of his neighbor's economic use of the property based on the mere presumption that he would lose a much smaller part of his economic benefit prospectively. He is claiming compensation in advance!

No one would be silly enough to make that argument directly. So what happens is that the claim is made that we have to preserve the open space because it represents a public benefit. If it is a public benefit, then it is a public use, and the owner should be compensated.

That benefit may come to the general public in the form of lower taxes. If that is the case, then they should be willing to share their benefit with the landowner, and that is what the purchase of development rights program does: gives public money back to the landowner in exchange for that public use.

I don't see that either the argument that no new line has been crossed, or the argument that some other right is diminished holds water.

However, TMT is correct in raising the question of what is unreasonable. I live in a way that many people would envy (at least until they actually tried it). That is a benefit to me, therefore it would be wrong of me to claim 100% compensation for being refused the right to build, or having that right reduced. As TMT points out it is a question of degree.

Suppose that the department of antiquities passes a regulation that removes the second to last stick in the bundle, so that I now meet the requirement that substantially all economic use of the property is eliminated. Is the department of antiquities responsible for the entire loss, or just for the last remaining stick they removed? If so, who pays the rest?

The Supreme court has artfully dodged making rulings to more narrowly define what constitutes a taking, but the gist of the rulings they have made is moving generally and glacially in that direction.

More to the point, in Oregon voters have gone to the polls and voted to provide compensation on just this issue - twice, and by overwhelming majority. That happened because a majority of people saw the injustice of what had occured over time.

When the statewide land use laws were passed in Oregon, thirty years ago, it was done so based on the argument that existing landowners should have no expectation that the laws might not change.

Those statewide land use laws were also passed with the explicit agreement that compensation should be paid, however that never happened. When the laws were subsequently modified to allow for compensation, those in favor of strong land use laws screamed bloody murder that the rules were being changed retroactively: the same argument they previously claimed didn't matter.

So there is a timing issue. If you buy property in a area that is zoned for fity acre lots, you really can't complain. But if you bought property that was zoned for three acre lots, that subsequently becomes fifty acre zoning, well, that is a pretty stiff hit.

The county claims that for each home I don't build,I save the county $2100 per year. Under the previous zoning of 56 lots that comes to a savings of $120,000 per year. Under the new zoning, the county is willing to offer me $210,000 to make sure I don't build the remaining 7 homes. This would save the county $14,700 per year. So the county thinks it is worth it to earn the equivalent of 7% in order to prevent those homes being built. What has really happend is that they have prevented me from building 56 homes for the same 210,000 and their rate of return is 50%.

Well, I agree with the county that 7% is fair, but I'm saving them $120,000 a year, not $14,700. If they gave me seven percent, which they think is a fair deal, of what they claim I'm saving them, it would be $8400 per year. That number would be just about enough to cover my farm losses for the year. And it would cost each taxpayer only 7% of what they are saving.

How is that for a win-win? You compensate the losers and you still come out ahead. All based on the county's own figures and declarations.

But here is what the county forgets. That $120,000 dollar annual savings or 14,700 annual savings comes at the cost of several millions of dollars of property value and appreciation on the part of prospective county residents.

I don't think the county's numbers make a bit of sense, but if they do make sense, there is still plenty of room for compensation without hurting anybody.


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