http://www.azcentral.com/news/articles/0221eminent-domain0221.html

Rift over eminent domain Measures could prompt zoning battles; voters may get say in the fall

Robbie Sherwood The Arizona Republic Feb. 21, 2006 12:00 AM

Lawmakers are out to stop city governments from forcing private-property owners to sell their land so the governments can hand it over to developers in the name of economic progress. And they are in a hurry, poised to put the fast-tracked measure on the November ballot as early as this week.

Backed by Republican legislative leaders and written by public-interest lawyers who have won high-profile property rights cases, the twin House and Senate measures would ask voters to rein in abuses by city governments that use the redevelopment practice known as eminent domain. There are more than a dozen bills moving through the Legislature to reform eminent domain, but the referendum incorporates many of the same ideas, including making cities pay owners more than fair market value for their properties.

But Valley mayors such as Phoenix's Phil Gordon and Tempe's Hugh Hallman are raising red flags. They say one portion of the recently introduced measure goes far beyond eminent-domain cases and would spark lawsuits against cities for any zoning decisions that might affect property values. The mayors and the Arizona League of Cities and Towns hope to negotiate changes to the measure before it goes for a floor vote in the House and Senate.

"It's a litigation bonanza, and it will stop business," Gordon said of the twin House and Senate measures.

Gordon and Hallman warned that if voters pass the measure, it will open city councils to lawsuits not just for eminent-domain cases but for any zoning decision that affects a person's property, with taxpayers compensating for the loss. Not only that, taxpayers would be on the hook if a council didn't take an action that could have improved a person's property value.

So, if a resident wants to turn his house into a gas station and City Hall says no, he can sue and get compensated for the value of the lost hypothetical business, Gordon said. Or, if City Hall does allow the pumps to flow, then his neighbors can sue and get paid for their declining property values.

Hallman, an attorney, supports many of the proposed reforms but said the city zoning process will end if the measure becomes law.

"Do we really want to allow topless bars next to schools and churches?" Hallman said. "Because all it takes is a smart lawyer and a good economist, and any zoning change can be subject to a lawsuit over diminution of value."

The referendum's authors said critics are misreading the measure and over-reacting.

Tim Keller, executive director of the Arizona Institute for Justice, a public-interest law firm that has handled several cases, drafted the measure. Keller said the only property owners who would be eligible to sue under the new law are those directly being rezoned.

"They're totally wrong on that," Keller said of Gordon's and Hallman's criticisms. "The change has to happen on your property in order for there to be a cause of action."

Keller added, "Take the recent Trump Towers case in the Biltmore area. The city changed zoning to allow the towers to be built (before undoing the decision). All the surrounding landowners said it would affect their property values. But this measure wouldn't apply to them because the zoning change didn't affect their properties."

But Phoenix lobbyist Karen Peters said there is nothing in the bill's language that limits lawsuits to only those property owners who are the subject of a zoning change. If neighboring owners lose property value, they can sue City Hall, too.

One of the measure's most powerful sponsors, Senate Majority Leader Tim Bee, said he and other top Republican lawmakers will meet with city leaders to address their concerns. But Bee said he remains committed to helping property owners who lose the value of their homes due to city actions.

"What I'm trying to address is a situation where government lowers the value of a person's property by a zoning ordinance," said Bee, R-Tucson. "If that decision takes away the value, then the property owners should be compensated for that."

Bee defended moving both versions of the measure at the same time, speeding the process, because eminent-domain reform is considered one of the top GOP issues of the legislative session.

Property rights is also a hot issue with voters. Legislatures nationwide are pushing bills to slow use of eminent domain. The Institute for Justice won a high-profile case in Mesa three years ago when it stopped city officials from trying to seize Bailey's Brake Shop to make way for a hardware store.

But the so-called regulatory takings aspect of the bill, where zoning decisions can spark lawsuits if property values drop, is modeled after Oregon's Measure 37, which voters approved in 2004.

That controversial new law has been tied up in the state's Supreme Court since a judge ruled it unconstitutional last year.

Ken Strobeck, recently appointed executive director of the Arizona League of Cities and Towns, urged lawmakers to steer clear of a Measure 37 copycat.

"Regulatory taking is a can of worms that will never be resolved," Strobeck said. "It's a whole new dimension that should not be included in this bill."


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