The Center for Public Integrity

Proposition 90, California’s eminent-domain and takings initiative, could cost taxpayers billions of dollars a year, the state’s former legislative analyst says in a new report commissioned by the Coalition To Protect California, a group that was formed in June to oppose the proposition.

“Proposition 90 would affect the cost of government activities in a wide range of important policy areas,” the 73-page report, co-authored by William Hamm, California’s nonpartisan legislative analyst from 1977 to 1986, concludes. “Assuming that California governments continue to acquire land and regulate as they have in the past, the costs imposed on taxpayers by Proposition 90 would amount to billions of dollars annually.”

Hamm and co-author Bret Dickey work for LECG, a consulting firm in Emeryville, California, with 36 offices around the world. Hamm and Dickey say that there are two main reasons for the initiative’s potentially huge price tag.

First, they write, the measure would require state and local governments to compensate property owners for laws or regulations — other than those affecting health or safety — that could diminish property values. Efforts to safeguard the environment, protect workers and consumers, or control inappropriate development, they say, could lead to substantial payouts.

Second, they write, the initiative would “significantly increase the amount that government and state-regulated, investor-owned utilities are required to pay owners when their property is acquired through eminent domain for public uses such as roads, schools, hospitals, airports, utility transmission lines, and power plants.” In some cases, they argue, landowners could even get more than the fair market value of their property.

On October 29, 2004, less than a week before Election Day, Oregon Territory, a weekly program on Oregon Public Radio, devoted its half-hour long broadcast to Measure 37.

Following an overview by reporter Rob Manning, guest host Morgan Holm moderated a discussion and debate between David Hunnicutt of Oregonians in Action and the Family Farm Preservation PAC, the chief backers of the ballot initiative, and Henry Richmond of 1000 Friends of Oregon and the “No on 37” effort.

After Measure 37’s passage, Oregon Territory devoted its December 3, 2004, program to a follow-up examination of its likely impact. Host Christy George interviewed Manning, land-use lawyer Ed Sullivan, and Laurie Craghead, assistant legal counsel of Deschutes County.

Listen to the October 29, 2004 broadcast
Listen to the December 3, 2004 broadcast

Audio courtesy of Oregon Public Radio.

A group chaired by New Yorker Howard Rich continues to pour money into Arizona and has now put more than $1 million behind Proposition 207, an eminent-domain and regulatory-takings ballot initiative.

Records filed with the Arizona Secretary of State show that Chicago-based Americans for Limited Government gave $100,000 to the Arizona HomeOwners Protection Effort (HOPE) on September 21 and $125,000 on October 2.

As of October 2, Americans for Limited Government and another Rich-led organization, the Fund for Democracy, had given Arizona HOPE a total of more than $1.15 million, accounting for more than 99 percent of all contributions to the Arizona group.

“What it says is, this is not something that was generated by Arizonans,” says Sandy Bahr, the conservation outreach director in Arizona for the Sierra Club, which opposes Proposition 207. “It’s being pushed by Howard Rich and Americans for Limited Government and other entities. It’s not like Arizonans said, ‘Oh, we need this law.’”

Lori Klein, the executive director of Arizona HOPE, says that there is nothing nefarious or surprising about the hefty out-of-state donations.

“Many businesspeople [in Arizona] were afraid to contribute to us, even though they believe in property rights, because of the draconian retaliation they would experience from the cities,” Klein says. “Government is just so entrenched in the private affairs of the business on one level or another — through regulation or licensing or zoning — that the guys with money don’t want to go up against the powers that be.”

Rich, who has not responded to interview requests from the Center for Public Integrity, isn’t the mysterious figure that some make him out to be, Klein says.

The Idaho group that’s pushing Proposition 2 is being kept afloat by large infusions of cash from out-of-state organizations controlled by Howard Rich, a wealthy political activist in New York.

Records released yesterday by the Idaho Secretary of State’s office show that This House is MY Home, the chief proponent of Proposition 2, received $75,000 of its $76,764 in contributions from June 3 to September 30, 2006, from America at its Best, a Rich-funded organization.

Internal Revenue Service records show that America at its Best operates from a residential address in Fairfax, Virginia, a suburb of Washington, D.C., but the organization’s Idaho filings list its address as a post office box in Kalispell, Montana.

Records filed with the Nebraska Accountability and Disclosure Commission show that nearly all of America at its Best’s funds come from three Rich-led organizations: Americans for Limited Government, in Chicago; Club for Growth State Action, also in Chicago; and the Fund for Democracy, in New York City. The three organizations have given more than $4 million to America at its Best this year alone.

In the first nine months of this year, This House is MY Home raised $412,000 from Rich-backed organizations and $1,804 from other contributors, including at least eight Idahoans.

When Measure 37 passed handily in Oregon two years ago, property-rights activists throughout the nation were euphoric — and, apparently, eager to push the experiment forward.

Although the full effect of Oregon’s ballot initiative won’t be known for years, property owners in the state have filed thousands of claims under Measure 37, seeking compensation because of regulations they say devalue their land. Lacking the funds to pay these claims, state and county officials have been waiving the rules instead.

The Reason Foundation, a libertarian think tank based in Los Angeles and the publisher of Reason magazine, published a 58-page paper in April 2006 outlining how Measure 37 could be “exported” to other states. The organization’s “how-to guide,” as its news release characterizes it, seems to have met with some success: Four Western states have regulatory takings initiatives similar to Measure 37 on their fall ballots.

“Citizens, activists, and elected officials across the nation can look to Measure 37 as a model for regulatory reform,” the foundation’s guide says, “as they continue the push to protect private property rights from the expanding reach of government and prevent landowners from being forced to bear the hidden costs associated with government regulation.”

The report’s author, Leonard C. Gilroy, a senior policy analyst at the foundation, initially agreed to speak with the Center for Public Integrity, but ultimately did not grant an interview. Gilroy is described on the organization’s Web site as a certified planner who researches “housing, urban growth, privatization, and government reform issues.”

In accordance with the September 19, 2006, order of the Montana Supreme Court, all briefs have been filed inMontanans for Justice v. State. The state’s high court, which is considering an appeal from Montanans in Action and other organizations that it funds, had requested that all the briefs be filed by October 3.

The original ruling by District Judge Dirk M. Sandefur threw Initiative 154, a takings and eminent-domain proposal, off the ballot. Sandefur also rejected two constitutional-amendment initiatives: CI-97, a proposed limit on state spending, and CI-98, a proposal to allow voters to recall state court justices and judges. Sandefur found a “pervasive pattern and practice of fraud and procedural noncompliance” attributable to those who collected the required signatures to put the initiatives on the ballot.

The Montana Supreme Court has not announced whether it will hold oral arguments, how many judges will consider the appeal, or when it will issue its ruling. It is already too late to remove the three initiatives from the printed ballots, but election officials will not tabulate the results unless the high court reverses Sandefur’s decision.

Read the appellants’ opening brief (1.24 MB)

Read the State of Montana’s brief in response (977.62 KB)

Read the plaintiffs’ brief in response (1.32 MB)

On November 7, residents of at least four Western states — Arizona, California, Idaho, and Washington — are to vote on ballot initiatives that critics say would all but paralyze land-use regulation and erode environmental protections.

While they are being pushed by a variety of organizations, the initiatives are all connected to Howard Rich, a wealthy New York real estate investor and libertarian activist. An investigation by the Center for Public Integrity has found that organizations controlled or funded by Rich account for 85 percent of reported pro-initiative contributions in the four states. As of September 21, public records show, these groups had spent nearly $5 million — including more than $3.3 million in California alone.

All the ballot measures would require that property owners whose development plans are constrained by regulations be compensated for the diminished value of their holdings. In three of the four states (the exception being Washington), the initiatives also would restrict government use of eminent domain.

Supporters say the initiatives are a response to a 2005 U.S. Supreme Court decision, Kelo v. City of New London, which held that property could be condemned and turned over to private interests as part of a community redevelopment effort.

“The Kelo decision really was a catalyst that made people across the country realize that property rights are on shaky ground,” says Heather Wilhelm of Americans for Limited Government, a Chicago-based organization that Rich chairs.

But opponents say the measures would throw land-use regulation into turmoil. A property owner whose development plans were stymied by zoning rules, for example, could demand millions of dollars in compensation or a waiver of the rules. Protections for forests, open spaces, and historical sites could be challenged, as could constraints on adult businesses and noise.

Howard Rich’s decision to bankroll more than a half-dozen takings initiatives west of the Mississippi remains something of a mystery: How and why did the wealthy New Yorker decide to spend millions of dollars backing ballot measures in Arizona, Idaho, and other Western states?

In California, at least, the story can now be told. He was invited in.

Kevin Spillane of Sacramento-based Protect Our Homes Coalition, which got Proposition 90 on the ballot, says that California Assemblywoman Mimi Walters, a Republican from Orange County who serves as the organization’s honorary chair, asked Rich to contribute to the initiative drive after legislation she authored died in committee earlier this year.

“When her legislation failed, she approached Howie Rich about providing seed money for the initiative campaign,” Spillane said in an interview with the Center for Public Integrity. “He helped to do that by generating money, raising money from different sources to help get it qualified on the ballot.” Organizations that Rich heads or finances have so far come through with more than $3.3 million.

Neither Rich nor Walters responded to the Center’s repeated requests for interviews.

Walters’s unsuccessful legislation was a response to the U.S. Supreme Court’s decision last year in Kelo v. City of New London, which held that government could condemn private property and turn it over to private interests for the public good. Her legislation would have prohibited local governments, school districts, and commissions from using eminent domain in this way.

Proposition 90 would not only limit the use of eminent domain but also require property owners to be compensated for regulations that could diminish the value of their land. Still, Spillane argues, the dire warnings about the proposed constitutional amendment are nothing more than hyperbole. “Our biggest obstacle is, frankly, voter confusion and misinformation,” he says.

While New Yorker Howard Rich has emerged as the chief financier of anti-takings ballot initiatives in the West, the California effort also has received substantial support from Howard Fieldstead Ahmanson, Jr., a wealthy Christian fundamentalist who lives in Orange County.

According to records filed with the California Secretary of State, Ahmanson’s Fieldstead & Company gave $200,000 on April 6 to the Protect Our Homes Coalition, the committee pushing the passage of Proposition 90, which would restrict the use of eminent domain and require state and local governments to compensate owners of property devalued by regulation.

Ahmanson, 56, is the son of the late Howard Ahmanson, Sr., the founder of Home Savings of America, which was the nation’s largest thrift before its acquisition in 1998 by Washington Mutual.

In e-mailed responses to questions posed by the Center for Public Integrity, Ahmanson explained why he supports Proposition 90.

“I was there when they tried to run the [Orange County] Rescue Mission out of Santa Ana in the late 1970s,” he wrote. “Ever since then, I have had a passion for churches ministering to the poor (the poor can be defined as ‘blight’ inherently and therefore removed) and for the property rights of people without access to the levers of power.”

Ahmanson went on to say: “Oregon, of all places, instituted a regulatory compensation law [in 2004] and the world didn’t come to an end there. I’m not happy that regulatory compensation is bundled into the same proposition [in California] as eminent-domain reform, but I still don’t think it would be a bad thing.”

Asked by the Center if he’s ever had any contact with Howard Rich, Ahmanson replied, “I have never met him or spoken to him.”

Ahmanson, whose personal fortune reportedly exceeds $500 million, has supported a number of far-right organizations over the years. Among them:

The California Coastal Commission, which regulates construction and other activities along the state’s 840-mile coastline, was created by ballot initiative in 1972.

Now, 34 years later, the commission’s executive director fears that another initiative — Proposition 90 — could be the powerful agency’s undoing.

“I think it has the potential,” Peter Douglas says, “to be devastating.”

Proposition 90 is one of four ballot measures in Western states conceived by property-rights activists seeking to quash what they describe as eminent-domain abuse and oppressive land-use regulation. It would require compensation for “government actions that result in substantial economic loss to private property,” such as building restrictions. 
The Protect Our Homes Coalition, the organization behind Proposition 90, says it would merely “reaffirm private property rights” in the aftermath of a U.S. Supreme Court decision, Kelo v. City of New London, which expanded government powers of condemnation.

But Douglas brands Proposition 90 “a wolf in sheep’s clothing,” saying that its real aim is to “cripple state and local agencies’ ability to protect community values and the environment by imposing unrealistic restrictions on their ability to regulate land for the benefit of the public.”

How might things change if California voters approve Proposition 90 on November 7?

Example: The Pebble Beach Company — whose owners include actor-director Clint Eastwood, golf legend Arnold Palmer, and former Major League Baseball commissioner Peter Ueberroth, now the chairman of the United States Olympic Committee — wants to build a golf course, an equestrian center, a hotel, and luxury homes in Monterey County, near Carmel. The Coastal Commission has fought the project in its current incarnation, contending that it would lead to the destruction of some 17,000 rare Monterey pines and cause other environmental damage. The project is on hold.