Regulatory Costs Fairness Act Exposed

The Regulatory Costs Fairness Act was adopted by ALEC's Natural Resources Task Force at the States and Nation Policy Summit on December 9, 2006, approved by the ALEC Board of Directors on January 8, 2007. According to ALEC.org, the Act was re-approved by the Board of Directors on January 28, 2013. (Accessed on 6/24/2015).

CMD's Bill Summary

This "model" legislation attempts to expand the interpretation of the Fifth Amendment's "takings" clause to make taxpayers liable to land owners, including corporations, that claim their property value is diminished by government regulations (such as environmental, zoning, or land use regulations). The U.S. Supreme Court has held that a regulation can be a Taking requiring compensation when it "goes too far," such as when it deprives the property owner of "all economically beneficial uses." This bill would lower the bar for a regulatory taking to basically any reduction in property value, and allow a property owner to demand compensation from taxpayers for that reduction in value. This bill would allow corporations to demand compensation from the government for regulations that affect them (such as pollution laws or zoning laws) and this wishlist legislation would make it difficult to implement regulations that help protect public health and the environment. While the bill would allow small landowners or homeowners the right to demand compensation, it notably exempts from "takings" analysis the placement of energy facilities (clearly benefiting energy companies) that might diminish the rights of citizens who live nearby. Ballot initiatives based on this interpretation of "takings" have been advanced in several Western states in the past decade. Oregon approved Measure 37 in 2004 (which was largely overturned by Measure 49 in 2007), and Arizona approved a similar initiative in 2006. Similar measures that passed in Montana and Nevada were invalidated by courts. Many of the ballot initiatives nationwide were financed by New York libertarian Howie Rich and his group "Americans for Limited Government," among others. See also Property Investment Protection Act, Private Property Protection Act.

ALEC Bill Text

Section 1. Diminution in value; just compensation

A. If the existing rights to use, divide, sell or possess private real property are reduced by the enactment or applicability of any land use law enacted after the date the property is transferred to the owner and such action reduces the fair market value of the property the owner is entitled to just compensation from this state or the political subdivision of this state that enacted the land use law.

B. This section does not apply to land use laws that:

1. Limit or prohibit a use or division of real property for the protection of the public’s health and safety, including rules and regulations relating to fire and building codes, health and sanitation, transportation or traffic control, solid or hazardous waste, and pollution control;

2. Limit or prohibit the use or division of real property commonly and historically recognized as a public nuisance under common law;

3. Are required by federal law;

4. Establish locations for utility facilities;

5. Do not directly regulate an owner’s land; or

6. Were enacted before the effective date of this section.

C. This state or the political subdivision of this state that enacted the land use law has the burden of demonstrating that the land use law is exempt pursuant to subsection B.

D. The owner shall not be required to first submit a land use application to remove, modify, vary or otherwise alter the application of the land use law to the owner’s property as a prerequisite to demanding or receiving just compensation pursuant to this section.

E. If a land use law continues to apply to private real property more than 180 days after the owner of the property makes a written demand in a specific amount for just compensation to this state or the political subdivision of this state that enacted the land use law, the owner has a cause of action for just compensation in a court in the county in which the property is located, unless this state or political subdivision of this state and the owner reach an agreement on the amount of just compensation to be paid, or unless this state or political subdivision of this state amends, repeals, or issues to the landowner a binding waiver of enforcement of the land use law on the owner’s specific parcel.

F. Any demand for landowner relief or any waiver that is granted in lieu of compensation runs with the land.

G. An action for just compensation based on diminution in value must be made or forever barred within three years of the effective date of the land use law, or of the first date the reduction of the existing rights to use, divide, sell or possess property applies to the owner’s parcel, whichever is later.

H. The remedy created by this section is in addition to any other remedy that is provided by the laws and constitution of this state or the United States and is not intended to modify or replace any other remedy.

I. Nothing in this section prohibits this state or any political subdivision of this state from reaching an agreement with a private property owner to waive a claim for diminution in value regarding any proposed action by this state or a political subdivision of this state or action requested by the property owner.

Section 2. Attorney fees and costs

A. A property owner is not liable to this state or any political subdivision of this state for attorney fees or costs in action for diminution in value.

B. A prevailing plaintiff in an action for just compensation that is based on diminution in value pursuant to Section 1 may be awarded costs, expenses and reasonable attorney fees.

Section 3. Definitions

In this article, unless the context otherwise requires:

1. “Fair market value” means the most likely price estimated in terms of money which the land would bring if exposed for sale in the open market, with reasonable time allowed in which to find a purchaser, buying with knowledge of all the uses and purposes to which it is adapted and for which it is capable.

2. “Just compensation” For purposes of an action for diminution in value means the sum of money that is equal to the reduction in fair market value of the property resulting from the enactment of the land use law as of the date of enactment of the land use law.

3. “Land use law” means any statute, rule, ordinance, resolution or law enacted by this state or a political subdivision of this state that regulates the use or division of land or any interest in land or that regulates accepted farming or forestry practices.

4. “Owner” means the holder of fee title to the subject real property.

Section 4. Applicability

If a conflict between this article and any other law arises, this article controls.

Section 5. Severability

If any provision of this act or its application to any person or circumstance is held invalid that invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.

Adopted by the Natural Resources Task Force at the States and Nation Policy Summit on December 9, 2006.

Approved by ALEC Board of Directors on January 8, 2007.