Virginia Passes Constitutional Amendment Limiting Eminent Domain

Dispatches from Virginia indicate that the proposed state constitutional amendment, limiting eminent domain takings to cases of genuinely public uses, providing for compensation for lost profits when land housing a business is taken, and providing for compensation for loss of access, passed easily in yesterday’s election by a whopping 76% margin. Jillian Nolin, Results: Amendment to Limit Eminent Domain Passes, Virginia Pilot, Nov. 7, 2012.  Click here.

Follow up. Today, the internet is overflowing with dispatches and comments on these Virginia events. And unsurprisingly, government types have crawled out of the woodwork, lamenting that the cost imposed by the new requirement that condemnees be compensated for losses actually suffered but deemed noncompensable under prior law, will impede the creation of public works in Virginia. This is nonsene for two reasons. First, the cost of public works is what it it is, and cheating condemnees out of the full measure of the just compensation for economic losses actually suffered by them does not reduce that cost — it only shifts some of it to the condemnees. Second, the lamentations asbout the imminent impairment of construction of public works are largely BS. We offer this lesson from California. Back in the 1950s, the California Supreme Court decided People v. Symons, an eminent domain case in which it denied compensation for impairment of access in a partial taking, and in the process lamented that if eminent domain compensation were to be liberalized, “an embargo” on public works would have to be declared. But in 1976, the California Legislature repealed the Symons rule (and liberalized other restrictive compensibility rules — like making loss of business goodwill compensable). So did the fiscal heavens fall? Did an “embargo” on public works have to be declared? Don’t be silly. Of course not.

California is in financial trouble today, not because it is overly generous to condemneess, but because it has been spending money like the proverbial drunken sailor on all sorts of wasteful, hare-brained schemes many of which never got off the ground after wasting tens or even hundreds of millions of dollars. Like $170,000,000 for an airport in the high desert, that had to be shut down because in spite of a hefty subsidy it could not attract sufficient users, or a $210,000,000 Los Angeles “learning center” that was built on a former oil field and could not be used fors intended purpose because of methane seeping from the ground. Etc.

And by the way, when government acquires an entire landholding by eminent domain and pays only “fair market value,” it does not actually pay anything for it (except for transactional costs). It only exchanges one asset (money) for another asset (land) at the latter’s judicially established fair market value. So its balance sheet remained unchanged and often, when the taken land is devoted to higher uses after its taking, the taking actually results in a profit to the government and certainly to the redevelopers or other land reusers when the project is successful. And if it isn’t, it shouldn’t have been pursued in the first place.

Thus, to take an obvious historical example, the TVA made a huge fortune for itself and for the buyers of the electrical powers generated by its hydroelectric dams, when it condemned land for them. And speaking of the TVA, it never paid for some the land it took.

Follow up.  On election day, this constitutional amendment was approved by the electorate by a whopping 76% majority.