Exactions and Taking Under United

Exactions and Taking Under United States Law

When an Exaction Becomes a Taking

The Public Use Element

A Comparison of Takings and Exactions

Exactions

Land Use Restrictions by the Government

Funding of Public Projects through Exactions and Takings

The purpose of this review is to discuss the Exactions and Takings law as it pertains to property owners under the Fifth Amendment to the U.S. Constitution. An exaction is a regulation of private property by the government for a particular government purpose, but that does not constitute a Taking. Exactions have been permitted by the United States Supreme Court when where there is nexus to the regulation and the government purpose, and that regulation does not deny the owner use of her land.

Exactions are controversial area of the law especially if the use by the government involves what is considered private taxation of a public project. On the other hand, the Fifth Amendment to the U.S. Constitution protects the private property of U.S. citizens and residents from taking by the government without just compensation. The text of Fifth Amendment reads, "No person nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation."

To this end, the Fifth Amendment protects citizens and residents of every state to enjoy their property rights freely without substantial governmental intrusion. Still, the Fifth Amendment does not prohibit the government from taking a person's property; the right conveyed by the Fifth Amendment is that if the government takes the property, it must justly compensate the owner for the Taking. What distinguishes a Taking from an exaction depends on many variables and is examined on a case by case basis by the Courts. The factors that the Courts have been most concerned with are the economic, use, and enjoyment rights of the owner.

II. When an Exaction Becomes a Taking

The concept of when government regulation rises to the level of a taking has resulted in copious litigation over the years. The government may make use of private property so long as it compensates the private owner justly for the use. What constitutes a Taking is addressed in the early Supreme Court case of United States v. Causby, 328 U.S. (1946), when the Court found that the restrictions placed on the petitioner's land constituted an easement on the petitioner's land and interfered with his use and enjoyment of his property. Any use by the government must not burden the intended purpose for which the land exists. The government may be permitted to use a portion of the land, but as this use encroaches on the rights of the owner to enjoy his property the use becomes Taking without just compensation. If the government's use involves the use of the airspace surrounding the land, this is also subject to the Takings clause in that a person is entitled to free use of the space surrounding his land and that the government's flying of the plane below a certain altitude is an infringement on the right of the landowner. This decision demonstrates that a taking of private land by the government does not require that the government actually physically enter onto the land or physically confiscate the land. Any use by the government that interferes with the owner's use and enjoyment of the land is sufficient prove a Taking that is entitled to just compensation.

Courts have also ruled that intangible property can be the subject of a Taking and entitled to just compensation. In the case of Ruckelshaus v. Monsanto Co., 467 U.S. 986 (1984), the Court ruled that the appellee's interest in its health, safety, and environmental data represented a cognizable property right as a trade secret under Missouri law, and that property right is protected by the Taking Clause of the Fifth Amendment, and that the data disclosure provisions of the FIFRA

effected a "taking" of property without just compensation. When the regulation by the government, its acquisition, or destruction of the property goes beyond proper what is expected use by the government this will effect in a Taking. What is also considered to amount to a Taking is when the action interferes with reasonable investment-backed expectations such that economic benefit that owner is expected to gain is obstructed. In a case not involving investments, the standard would be measured by whether the government's regulations have exceeded the expectation of their police power and obstructed reasonable use of the property.

Based on these two landmark cases on the Takings Clause, Courts have clearly granted broad protection to the rights of property owners regardless of whether the property is real property or intangible property. The Court discourages governmental interference that goes beyond what is reasonably expected, and especially if the action of the government interferes with the economic right and benefit of the owner through his property.

III. The Public Use Element

Traditionally, courts have construed the "public use" element of the Takings clause liberally. The standard of review that has been applied by the courts in Takings cases is the "Rational Basis" standard.

This principle of the rational basis standard of review regarding the Taking Clause was illustrated in the case of Kelo v. City of New London, 545 U.S. 469 (2005). This case examines the important principles in Exactions and Takings law of public use and public purpose. An important concept is that if an Exaction is for a public purpose, the government will be permitted to exercise its eminent domain powers. It is the government's burden to demonstrate that the project will benefit the public. Ways that this standard has been met have been through demonstrating that the property will be used for roads, highways, schools, and hospitals. In the Kelo case, the government satisfied this standard in a slightly different way -- by demonstrating that the project had the cumulative effect of benefiting the public. In other words, that the collective benefit of an economic redevelopment project met the standard of public purpose.

A distinction does exist between what is public use and whether the land is used for a public purpose. A public purpose is akin to an economic development program, such as when a government regulation seeks to give the public a clear view of the beach, or a regulation that permit's the government to destroy infectious trees that pose a threat to the safety of the community. In each of these scenarios, the regulation is akin to an Exaction and does not amount to a Taking because of the public purpose element.

Public use, on the other hand, is regulating property for the use of the public and not necessarily for a public purpose. It involves the government regulating the land to be used by the public. This scenario is akin to the scenario of private taxation for public use illustrated in Nollan v. California Coastal Commission, 483 U.S. 825 (1987) and Dolan v. City of Tagard, 512 U.S. 374 (1994), supra. The Court has rarely upheld this type of regulation unless the government demonstrates a legitimate purpose that does not deprive the owner of the value of her land.

With the Kelo decision, the Court expanded the definition of public purpose. A public purpose does not only mean something such as for the purpose of a highway or to build a government building, but the use of the government can be considered for the effect that it will have as a whole for the community. If this combined effect will benefit the entire community then a finding of a public purpose is likely. However, the Court in the Kelo case did address the two situations were the government would be prohibited from taking private land "for a public purpose." The first scenario is if the government seizes the private land to give it to another private citizen and the second scenario is where the government takes the land under the pretext of a public purpose then conveys it to another private citizen. Neither of these takings would satisfy the public purpose requirement.

IV. Taking v. Regulation

While the government must compensate the owner of the property for a Taking of property for public use, the government is not obliged to compensate the owner for a regulation or exaction of the property. This lies within the police powers of the state. The line between what a regulation is vs. what is a taking is sometimes not distinguishable. It is a question as to the degree of the government interference with the property and the extent as to which the owner is not permitted to enjoy or make use of the property. The general rule for what constitutes a Taking is that a Taking occurs when there is an actual appropriation or obstruction of a person's property or a permanent physical invasion by the government. Under the umbrella of this general rule, a taking can occur in a variety of circumstances.

The case of Loretto v. Teleprompter Manhattan CATV Corp. 455 U.S. 904 (1982), illustrates one of the scenarios of a taking. The Court did not require a physical intrusion by the government here, but the placement of items was sufficient for a Taking without just compensation. The character and manner of the governmental intrusion is just as important as the intrusion itself. Also, the principle of regulating private property for a public purpose is demonstrated in the Loretto case. An owner will not be required to use her property to host a project that is for a public purpose without requiring just compensation by the government.

In Loretto, a New York statute requires that a landlord permit cable companies to install cable television equipment on his property and cannot demand payment from the cable company in excess of the fees established fee of $1.00. The appellant owned a five story building and learned that the cable company had installed extensive wiring in the building. Included in this wiring were cables that served other property owner's buildings.

The statute represents a Taking entitling the landlord to just compensation under the Fifth Amendment. When the character of the government's intrusion is a permanent physical occupation on the owner's land, the action represents a Taking to the extent of the occupation, regardless of whether the occupation serves an important public benefit or only minimally intrudes on the owner's property.

This is especially true when the government occupies private property and it interferes with the owner's right to use, enjoy, and benefit from his property. The owner, in this case, may have no control over the timing, extent of, or nature of the invasion. To this end, the installation of the cable wires satisfied the minimal occupation test in that the presence of boxes, wires, plates, bolts, and screws to the appellant's building was sufficient permanent occupation warranting a Taking.

The Court with this ruling broadened the meaning of a Taking. A narrow reading of the law would lead one to conclude that a physical occupation of the property is necessary to constitute a taking, however, in the Loretto case, the Court ruled otherwise. The statute is interpreted broadly in not requiring a literal physical intrusion of the land, and only requiring that physical invasion of the property by the government with objects or items for a permanent period of time is sufficient to establish a Taking. The Court in its ruling, established the principle that the owner's ability to use and enjoy her land is what is at issue and compensable rather than the type of intrusion. Additionally, the Court did not permit the perceived benefit to the public that occurs from the installation of cable wiring to outweigh the owner's right to use and enjoy her property.

Also addressed was the issue of what type of governmental intrusion constitutes a Taking in the case of Hodel v. Irving, 481 U.S. 704 (1987). In Hodel, Congress enacted the Indian Land Consolidation Act of 1983, which provided that no undivided fractional interest in Indian lands held in trust by the United States shall pass by intestacy or devise, but shall escheat to the tribe provided that the land holds a certain monetary value. No provision was made to compensate owners who lost land pursuant to the Act. Appellees are members of the Oglala Souix Tribe are either heirs or devisees of individuals who died prior to the implementation of the Act and therefore owned a fractional interest in land that is now subject to the Act.

The Act effectuated a Taking of the Appellee's property without just compensation. It was found that the government's impact of the Act on the owner's property interests, the nature of the government's intrusion, and the impact of the Statute on the benefits of the heirs and devisees of the land could be substantial. Even though the heirs and the devisees of the land could enjoy a benefit during their lifetime, the right to devise the land to their heirs was infringed on by the regulation. Furthermore, the character of the Act is significantly intrusive as it represents a restraint on the alienation of property which has always been a tenet of the American system of property ownership.

The Hodel case presents another example as to when a Taking can occur without physical governmental occupation or intrusion on property. The Act of a lawmaking by the government is sufficient governmental intrusion to establish a Taking without just compensation. The Court, just as it did in the Loretto case, focused on the loss that the heirs or devisees of the land will suffer as a result of the Act. This case is significant in that the Court further broadens the owner's rights to be free from governmental intrusion. Whereas in previous cases addressed in this review, the Court held that a Taking occurred at least in part based on some type of physical invasion by the government. In Hodel the Court upheld a Taking without a finding of a literal physical intrusion. However, the argument to be made is that the Act in itself, while not a physical intrusion, is nonetheless an intrusion on the rights of the heirs and devisees of the land.

Yet another illustration where the Court has illustrated what governmental actions constitute a Taking without just compensation is the case of Kaiser Aetna v. United States, 444 U.S. 164 (1980). In this case, the petitioner was the owner of a piece of property that contained a pond. He developed the pond, private property, into a marina and connected it to an adjacent bay. The Army Corp of Engineers had previously advised the petitioners that they were not required to have permits for operations. Petitioners as a result made developments and improvements that allowed boats to have access to and from the bay which they had developed. The suit was filed pursuant to section 10 of the Rivers and Harbors Navigation Act

The government could not regulate the petitioner's private property by requiring in them to open their pond to the public. This would amount to effectuating its eminent domain powers without paying the owner just compensation for what would then be a Taking under the Fifth Amendment. The pond falls within the definition of "navigable waters" and is therefore subject to U.S. jurisdiction however, when juxtaposed with the Takings Clause of the Fifth Amendment, Congress does not have the jurisdiction to regulate what is private property to the level of what constitutes a Taking. Congress has the right to regulate the petitioner's marina, but that the level of regulation would need to be examined for whether it constitutes a Taking. The level of regulation that the government imposed here on the petitioner's property by requiring that the petitioners give the public a right to access goes beyond a general regulation and amounts to a Taking.

The Kaiser case presents another example of how the Court has defined a Taking in favor of the owner. The Court here could have decided in favor of the government under the line of reasoning that because the plaintiff had altered the initial state of his private property by making it navigable and flowing into waters that were open to the public, it should therefore be open to the public. This decision and reasoning would not have been surprising because the owner had altered the initial state of his property and gave it a characteristic that it did not exist before. Nonetheless, the Court gave the owner the benefit of the doubt, protecting his private interest from excessive governmental regulation.

As this line of cases illustrate, the Court has traditionally required actual appropriation or physical invasion by the government in order to find a Taking by the government without just compensation. Still, the Court has interpreted the property owner's rights very broadly in relation to governmental intrusion. The Court has been concerned with the interference on the property owner's ability to use and enjoy her property rather than measuring and requiring a specific degree of physical intrusion by the government. Just as the Court ruled in the Hodel, case, it limited how the government can enact a law or regulation regarding one's property, and did not require a permanent physical intrusion to rule that a Taking had occurred.

V. Exactions Not Arising to a Taking

An Exaction is a government regulation on property that does not amount to a Taking. The Court has held that the government can regulate property without compensating the owner if the regulation advances a legitimate state interest and does not deny the owner economically viable use of his land.

As we have seen in this review, the Supreme Court has been liberal towards the owner of property in determining whether the action of the government amount to a Taking without just compensation. However, in a number of circumstances, the Court has ruled that the regulations of the government did not amount to a Taking. One of these circumstances is when the Court reasons that the situation constitutes an emergency situation.

The emergency scenario is illustrated in the historical case of Miller v. Schoene, 276 U.S. 272 (1928). In this case, a Virginia law provides for the compulsory cutting down of cedar trees when the trees that, after being tested, are shown to carry a communicable plant disease. The disease constitutes a menace to the health and safety of any apple orchard in the vicinity. The disease when found has characteristics such that the only way to prevent it from spreading to and destroying other cedar trees in the vicinity and their apples is to destroy the infected trees. No compensation is granted in return for the loss of the trees or for the decrease in market value of the property. This Act is consistent with the Due Process Clause of the Fourteenth Amendment because the government does not exceed its powers when permitting the destruction of one class of property to save another class of property which the legislature has determined is of greater value to the public. The loss of the infected trees if destroyed is considerably less than the loss of uninfected trees and their apples and it is in the greater good to destroy the infected trees in order to save non-infected trees and their fruit.

It is important to note in Miller that the Court did not address or rule on the issue of whether the destruction of the trees constituted a Taking without just compensation. It is likely that based on the fact that the government orders the trees to be destroyed -- rather than treated or some other alternative-- the Court would have found that a Taking occurred without just compensation to the owner. This decision departs from the liberal line of reasoning that the Court has shown regarding property owners' rights. The difference here is that the public safety is at issue along with the issue of being able to prevent harm to the public and destruction of property.

When a scenario exists where public safety is a concern the Court will likely craft an exception to its previous Takings rulings. Additionally, when a scenario exists where the destruction of a piece of property by the government will result in saving a more publicly valued piece of property, then the Court is more likely to rule in favor of the government's destruction of the property. However, what this ruling does not address is if the government orders the destruction of a private piece of property to save a more valuable piece of private property. It is likely in this scenario that the government's actions will not be upheld and the Court will find that a destruction of private property in this case as a Taking without just compensation based on its ruling in Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984)

. The determinative factor of the exception here, is the public interest that is at stake. Another illustration of an emergency situation creating an exception to the Takings clause is United States v. Calex, Inc., 344 U.S. 149 (1952) where the Court held that the wartime destruction of private property without just compensation did not entitle the owner to just compensation.

As with all circumstances, there are exceptions to the Takings clause of the Fifth Amendment where the owner is not entitled to just compensation. However, these exceptions are narrowly carved and will require a case by case review by the Court. Based on how the Court has ruled in the past regarding Takings of private property by the government, the Court is not likely to find exceptions where the owner is not entitled to just compensation outside of a health and safety concern or where the destruction of the private will result in a greater benefit to the public. As is the case with many other scenarios, Takings of private property during war time could also form the basis for an exception to the "Just compensation" requirement.

VI. Land Use Restrictions by the Government

By now it has been established that a Taking can occur in a variety of ways -- by a permanent physical occupation of private land by the government, by causing an object or equipment to permanently occupy private land, or by a law or regulation that restricts use and enjoyment of the land. These illustrations relate to an obstruction by the government of the owner's right to physically use his land. However, in many circumstances the Court has held that the government's interference with an owner's economic rights in his land will also amount to a Taking. The case of Lucas v. South Caroling Coastal Council, 505 U.S. 1003 (1992), address this principle.

In the Lucas case, the petitioner was the owner of two beachfront lots which a the time he purchased them were not subject to the state's Beachfront Management Act, which would bar the owner from erecting any permanent habitable structures on the land. Two years later, the government enacted the Act and the petitioner's land became subject to its restrictions. The petitioner, at the time he purchased his land had planned to build beachfront property on the land.

The petitioner sued claiming that the Act "barred him of all economic use of his property and was therefore a Taking under the Fifth Amendment."

Where the state seeks to uphold a regulation that deprives the owner of land of all economically beneficial use, the only exception that would justify not compensating the owner is if the proposed use was not within his initial title. The property owner can expect for his rights to be restricted from time to time by the state's exercise of police power, as long as some value of the land is still enjoyed by the property owner.

The notion that the state may subsequently prohibit all economically valuable use is inconsistent with the Takings clause.

The Court in its ruling was concerned with the state's perceived ability to deprive an owner of all economic benefit of her land. Even in light of the interest that the government had in preserving valuable public resources. This begs the question then as to what makes the difference between Lucas and the Miller case -- where the Court created an exception to preserve the public resource of the cedar trees and apples by permitting the private owner's trees to be destroyed without just compensation. One could argue no difference exists between the two cases as an owner who loses all of her cedar trees without just compensation is losing all of the economic benefit of her property. Suffices to say, the Court changes Justices over time and as a result, changes its perspective over time. The fact that 66 years separate the Miller and Lucas rulings could help explain the perceived inconsistency.

One caveat to consider is when the government's denial of the owner's economic benefit to the land is temporary rather than permanent. In both Miller and Lucas the deprival of economic benefit by the government was permanent. A different issue results if the denial of use is temporary -- the Court will likely find that no Taking has occurred.