From our Nov. 20 print issue: Prop. 207 passes. Who's to blame?

Ballot initiative Proposition 207 wins big

Sold as eminent domain fix, property rights measure; preservation now to face tougher challenges

By David Tell, Messenger Editor
© 2006, Quicksilver Publishing Group. All rights reserved.

Amid all the Election Day results that thrill some and depress others, one outcome that ought to be of particular concern for preservation advocates and neighborhood activists is the resounding success at the polls of Proposition 207. Billed as a “property rights” measure and marketed as a response to last year’s “Kelo” decision by the U.S. Supreme Court affirming the transfer of private property to another private owner under an economic redevelopment rationale, the citizens initiative was one of several similar measures placed on the ballot in states around the country.
In Arizona, where eminent domain has been in the news and on the legislative agenda over several years recently, the measure apparently resonated with concerns of many residents, and passed by a wide margin.
As is often the case, however, among the provisions in the measure are some that go beyond the stated aim of eminent domain reform. Of particular concern to many is the fact that the proposition provides for private lawsuits against governments by property owners who might seek to prove that a land use change applied to their property has reduced its value. Some are concerned that this will open a floodgate of expensive litigation against municipalities in particular, leading to the hamstringing of efforts to protect and preserve neighborhoods and structures, and leading to greater caution by governments in pursuing some types of land use planning and protective zoning.
The Protect Arizona Taxpayers Coalition was one group formed by concerned individuals and environmental, preservation, government and neighborhood organizations to attempt to get the word out and defeat Prop 207. In the aftermath of the election, players from that anti-207 coalition are expressing their regrets about the outcome, and in some cases questioning why they were unable to mobilize more voters in opposition to the “property rights” juggernaut.
Paul Barnes, a respected activist who heads the Neighborhoods Coalition of Greater Phoenix, was centrally involved in the anti-207 effort. In talking about the vote’s outcome, Barnes sounded frustrated that the hard work to fight the initiative seemed to have had so little impact. He is also concerned about a process for getting measures on the ballot in the state that—not exclusively to this case—allows out-of-state interests to come in and create new political and economic conditions that they themselves do not necessarily have to live under.
“Obviously, I was disappointed with the results,” Barnes said. “As to what I think it will mean near-term: I’m concerned about its effect on the ability to pass new historic overlay districts, neighborhood special district plans—as well as on this urban form planning.”
“Urban form planning” is a new approach being used elsewhere and currently being considered in Phoenix that elevates design considerations in urban land use planning.
“I think it’s going to have a serious negative impact on neighborhood preservation efforts,” Barnes added. “Perhaps most alarming of all is the fact that you can have an out-of-state group come in and basically buy an initiative—get it on the ballot with out-of-state funds—and be successful with what even the Republic said was a very misleading campaign of what was involved. They used the Trojan horse of eminent domain to cover up the real issue, which was land use planning and the whole legislative takings issue. Their advertising was misleading on television as well as on radio. I think that’s very unfortunate.”
Barnes went on to express some views that he emphasized were exclusively his own, rather than in his role as part of any organization.
“Personally, I think some of the responsibility for having this situation has to rest with the League of Arizona Cities and Towns, as well as the city of Phoenix,” he said. “This past legislative session, I think it would have been much better for them to have worked out a satisfactory solution on eminent domain, rather than taking the ‘higher ground’ that they did, which gave Howard Rich and people of that persuasion an excuse to conjure up this ballot statement.”
Howard Rich is a wealthy New York resident who supported efforts to place similar property rights initiatives on the ballot in a number of states this year.
Ken Strobeck, executive director of the Arizona League of Cities and Towns, deflected Barnes’ finger-pointing. Strobeck said hindsight is 20/20 and admittedly, there are always things you wish you might have done. However, “We worked through the entire session on 19 different eminent domain bills. We had a piece of legislation that we proposed that we think was a very good compromise, but that tried to answer concerns of people who thought eminent domain is out of control,” Strobeck said. “The Legislature did not even give that bill a hearing. Howard Rich paid $14 million for this kind of initiative to be run in 11 different states; this was a measure the was going to come down the tracks [no matter what else happened]. Whatever did pass was not going to be enough.”
Strobeck didn’t itemize all the areas or items where he believed the League’s proposed legislation better met the concerns of eminent domain reformers, but Barnes said an area the league and its constituents had previously balked at included tightening up the definitions of slum and blight.
But Strobeck said he thought that concern had been fairly addressed. “We agreed to do a property-by-property finding of blight and slum areas,” he said. “That was one of their big pushes, that a finding can’t be block-by-block.”
Strobeck said some outlandish criteria for a finding of blight, such as the existence of curved streets (as has been mentioned in our letters column by downtown resident and eminent domain critic Erick Baer) are relics that are rarely if ever used. “That’s in the original statute that goes back almost 100 years,” he said. “Pull them out in today’s context, you’d go ‘That isn’t blighted.’ —Some of those really obscure provisions, cities don’t hang their hat on things like that. We agreed to leave those things out.”
Strobeck’s rebuttals notwithstanding, Barnes feels negotiators dragged their feet on coming to the table with needed concessions to get a viable eminent domain reform bill. As it was, a bill passed, and Gov. Janet Napolitano nixed it, in her record-setting use of the veto pen. That’s not what bothers Barnes: “The bill that did reach the governor was clearly not acceptable,” he said. However, of the League’s never-considered proposal, “They weren’t early enough with a bill that would be a sufficient compromise to keep everybody happy. Initially they were holding out for too much, and by the time they came around, it was too late,” he said, adding that lack of a timely willingness to tighten up on the definition of slum and blight “was part of it.”
Moreover, “Neither the governor nor the mayor were willing to come out strongly against this [proposition], regrettably. The governor was silent on it,” Barnes lamented. “Schwarzenegger came out against [a similar initiative] in California and it didn’t pass there. I don’t feel we got the support from the people that we needed. It could have made a difference.”
Mayor Phil Gordon’s failure to use his bully pulpit against the proposition is especially culpable, as “the things they want to do downtown are going to be seriously hampered by 207 as it was passed,” Barnes said.
District 6 City Councilman Greg Stanton, who authored an anti-Prop 207 column for this publication last month, also rues the outcome, and while he prefers not to lay blame, he agrees there is responsibility to go around for not adequately educating the voters about the ballot item. And he also gives credit where credit is due.
“Paul and the citizens group that came together did the best job they could on a shoestring budget,” Stanton said. “I think we all learned an important lesson: There should have been a more organized and funded campaign against 207. On a statewide issue, in this day and age, you really need a significant budget. With so many issues on the ballot, there could not be a well-funded effort on all of them.” That said, “There wasn’t a huge amount of intensive outreach” on the anti-207 side,” he said. “The public bodies as a whole really have to do some thinking about this one, everyone needs to look at themselves and say ‘Did we do enough?’—because this passed overwhelmingly.” The measure was approved 65 percent to 35 percent.
“We were never fully able to educate folks on the implications on the ‘diminution of property values’ side of the issue,” Stanton said. “Collectively, for those of us who represent cities and the people, this was not in the best interest of the people I represent, to protect our neighborhoods.” Barnes is one of Stanton’s constituents, living in the Arcadia area, which is full of large-lot homes and has a zoning overlay to protect its character. Some vintage areas of north central Phoenix with historic or other zoning protection are also in Stanton’s district.
Stanton agreed that the proposition was misleadingly marketed, and rode a wave of popular ire over the “Kelo” decision, in which some longtime Connecticut homeowners were displaced to make way for a private development.
“Prop 207 led with the issue of private property rights, and if you talk in those terms, it’s a hard issue to overcome. Everybody wants to protect private property rights, and with ‘Kelo,’ Bailey’s, private property rights have been brought to the forefront. Those things are protected. We have one of the most restrictive eminent domain regimes in the country—that’s why we still have Bailey’s Brake Shop; he’ still operating,” Stanton said. But “I don’t think the proposition was fully vetted, people didn’t understand its full impact. The measure’s creation of a cause of action against government for diminution of property values—there are instances when people are reasonably going to ask their government to step in and act on behalf of historic preservation, and [now] it won’t be able to. Once people see down the line, there will be an attempt to revise this measure,” Stanton predicted. “I have the feeling there will be changes made to this law. Historic preservation, special planning districts, are things the public supports.”
In the meantime, though things will be more difficult in those arenas, Stanton predicted.
Asked whether the risk now is that governments will pull back from reasonably regulating land use in some instances; that there could be large payouts from diminution-of-value lawsuits in some cases; or that such suits would hobble the system, Stanton said “All of the above. Whereas the city has a very strong and vibrant HP effort, that will be set back. That doesn’t mean we’re not going to do HP at all, but in the controversial cases, where we do a ‘gut check,’ things might come out differently [than if based on an analysis of the merits],” Stanton said. “The kind of votes where there is significant opposition are the ones in question. The easy votes will still be easy. But because of the cost to the people of this city, the harder cases might give us pause. That’s not a hypothetical.”
Asked whether the current controversies over extending historic overlays in the Encanto-Palmcroft and Oakland historic districts are the kinds of cases that might be affected, Stanton answered cautiously. “I hate to put it in terms of a specific case; the dynamics of each case are different,” he said. But, “When you have HP zoning of an area where the property owner doesn’t want it, that’s exactly the kind of situation at issue” under the newly passed law.
Stanton said ideally, owner support should not weigh heavily in such decisions. “When we analyze HP, the question should be, ‘Is their area historic, is it deserving of the status of being historic?’ Occasionally that means the property owner doesn’t want it,” he said. “But just because of being designated historic, that doesn’t mean you can’t develop your property. There are significant limitations, you may have to wait a year, ponder, think it through ... I’ve never viewed HP as some kind of draconian land use designation; it strikes a balance between the interests of the community as a whole and the property owner.”
But, as a case of another protective zoning move that perhaps wouldn’t happen under Prop 207, the “Warehouse District Overlay, we’d have to think long and hard before we’d do that again,” Stanton said. “Land use is an area where the issues are often very complex, issues are subtle. We’ll take the individual cases, and we work hard on them. In most cases, HP is done in partnership with property owners. Most cases are promoted by people who love preservation, and in most cases, the zoning adds value to a property.”
In the end, “HP was one of the big reasons why I opposed 207, that’s where it may have the most unintended impact,” Stanton said, “Preservation has been a pretty good priority of City Council.”
As important as HP is, the potential effects of 207 go further, Stanton said. “What if we want to upgrade our design standards, for big boxes, for example? Arguably, that’s a restriction on property, that adds a cost to developing that land,” he said But ultimately, “It’s improving the community.”
“From my political position, the Supreme Court was wrong in ‘Kelo.’ That was wrongly decided,” Stanton said. “I don’t think they should have allowed a private taking in the case without blight; I was surprised East Coast states apparently have such loose restrictions on the use of eminent domain.”
But as a regrettable outcome of the measures passed in reaction, “The effects of 207 will be a hotly debated and hotly contested issue in the years to come across the state. This will be a field day for lawyers,” Stanton—a former lawyer himself—concluded.
Strobeck agreed with Barnes and Stanton that the outcome is unfortunate and that the measure was misleadingly sold. “We’re very sorry that it did pass. It’s one of those things: People thought they were voting on eminent domain, heard so much about that, were not aware of all the things stuffed into the measure,” he said. “The regulatory takings provision, that’s going to be litigated for years, will be very costly for all levels of government—and first, for citizens.”
Strobeck confirmed it was the League that sued a few months ago to try to get the initiative knocked off the ballot, for failing to meet a requirement adopted in recent years, that citizen initiatives attempting to create new programs entailing government expenditures identify a funding source to pay for them. For example, Proposition 203, which creates child health and education programs, also adds a new tobacco tax to pay for them.
“We analyzed the measure from a whole bunch of different angles, and our attorneys decided that was the strongest angle, that it did not have a funding source identified,” Strobeck said. “Voters passed an initiative [with that provision] two years ago, but that requirement only applied to state government, not to counties or cities.
“We got a ruling from Superior Court; it said ‘You’re right, it probably is unconstitutional. But they declined to invalidate it, saying ‘That would be getting into the substance of the measure.’ It came down to a question of ‘ripeness,’” he said.
Strobeck said he doesn’t know whether that legal challenge will now be renewed. “We haven’t made a final decision,” he said. “We did look at the Supreme Court decision yesterday [Nov. 10] upholding that decision. They also threw out the finding that it was clearly unconstitutional.”
Strobeck said the measure isn’t invalid for having multiple subjects, as that only applies to proposed constitutional amendments. But interestingly, that issue has some relevance to the rejection of the legal challenge to 207, based on the courts’ insistence it was premature to invalidate it reading it for problems of substance, rather than form. “Our attorneys have said using the Supreme Court standard that they put in yesterday, even a ‘multiple subject’ lawsuit would have to be a post-election challenge, as it would require the court to read the essence of the measure.”
But given the latest ruling, to fight the initiative now, “We would have to bring a new suit,” he said.
As for Phoenix’s outlook, “I have a meeting set with the Law Department to find what implications are,” city HP Officer Barbara Stocklin said. “Clearly there will be implications for the HP office and our programs.”
According to Larry Felix, an attorney in the city’s Law Department, “I was at several meetings about this” during the campaign season, and city staff “were saying they expected lawsuits to be filed.”
Felix said he isn’t the specialist in this area and that City Attorney Gary Verburg or Deputy City Attorney Bill Bock would probably be part of meetings such as the one with Stocklin, as well as city staff attorney Margaret Wilson, who specializes in zoning.
In the meantime, “There’s quite a bit of work the city is involved in, on the consequences the city will have to live with,” due to 207’s passage, Felix said. In Oregon, where a similar statute has been in effect a couple of years, “there has been $7 billion in claims,” Felix said. He wasn’t confendent of the magnitude, but if it is that large, it’s probably because there, “the law was retroactive.” Here, as far as he can tell, it is not.
Also looking more widely, a Wall Street Journal editorial (Nov. 11-12 edition) commented that “three states that rejected similar measures—California, Washington and Idaho—did so in part because proponents overreached politically by insisting that landowners should be compensated when government regulations diminish their property values. Opponents were able to portray this as a threat to state budgets and fiscal prudence.”
As for the Protect Arizona Taxpayers Coalition, it released a statement following the passage of Prop 207:
“If the initiative process is to remain viable and retain its integrity we must ensure that our rights as voters cannot be auctioned off to the highest out-of-state bidder. Close to $1.5 million was spent by special interests from outside of Arizona to put Prop 207 on the ballot and mount a deceptive campaign designed to trick the voters into voting yes. The organizations that bankrolled this initiative are all connected to Howard Rich, a wealthy real estate speculator from New York.
“Now that we’ve given Howard Rich a foot in the door he will most assuredly be back with even more extreme measures.
“Proposition 207 will result in serious consequences for the state of Arizona and could have a devastating affect on our quality of life and our ability to enact laws that protect our neighborhoods and communities. Under the guise of addressing eminent domain, Prop 207 goes far beyond. It includes an extremely confusing and deceptive measure that forces taxpayers to pay land speculators for unrealized profits caused by community planning restrictions or waive the restrictions for them.
“We must now pull together as a state to figure out a way to right this wrong, and commit ourselves to remaining vigilant in the future so that we cannot be fooled again.”
On a broader note, does the change in political winds nationally signify a resolve against “getting fooled again?” Maybe, maybe not: “Meet the new boss, same as the old boss.” (Coincidentally, The Who are now touring to promote their first new album in decades.)