Proposition 98 is an initiative that would amend Article I, Section 19 of the California Constitution, which governs eminent domain. Its sweeping provisions apply to all governmental agencies in the state and would affect much more than the power of eminent domain. It would become law upon voter approval by a simple majority.

In November 2006, California voters rejected Proposition 90, which would have significantly limited the government’s ability to take private property through eminent domain and restricted government’s power to regulate for the public’s health, safety, and welfare. While differing from Proposition 90 in a number of respects, Proposition 98 would also combine restrictions on eminent domain with even harsher limitations on the ability of government to enact laws and regulations to serve the public.

The Background, Proposal, and Fiscal Effects sections are from the analysis in the ballot pamphlet by the Legislative Analyst’s Office.

BACKGROUND

Government Actions to Take Property — “Eminent Domain”

Every year, California state and local governments buy hundreds of millions of dollars of property from private owners. Government uses most of this property for purposes such as roads, schools and public utilities. In other cases, government buys property for different purposes, such as to transfer it to:

1. Private owners to develop new businesses or
2. Nonprofit organizations to provide affordable housing

Most of the time, government buys property from willing sellers. Sometimes, however, property owners do not want to sell their property or do not agree on a sales price. In these cases, California law allows government to take property from a private owner provided that government:

• Uses the property for a “public use” (a term that has been broadly interpreted to mean a variety of public purposes) and
• Pays the property owner “just compensation” (generally, the property’s fair market value) and relocation costs (including some business losses).

This government power to take property for a public use is called “eminent domain.”

Eminent Domain Challenges. Property owners are not required to accept the amount of compensation government offers. Instead, they may make a counter offer or challenge the amount in court. Under the State Constitution, property owners are entitled to have the amount of compensation determined by a jury. While property owners also may challenge government’s right to take a property, these challenges are more difficult. In part, this is because courts give significant weight to government’s findings and perspectives when ruling on disputes as to whether an eminent domain action is for public use.

Programs to Promote Affordable Housing

Rent Control. Over a dozen California cities have some form of rent control law. These cities include Los Angeles, San Francisco, Oakland, Berkeley, Santa Monica and San Jose. In addition, about 100 cities and counties have laws limiting the rent mobile home park owners may charge people who lease space in their park. Altogether, about one million California households live in rent-controlled apartments or mobile home parks. While the provisions of these rent control laws vary, they typically restrict the amount of money by which a landlord (or park owner) may increase a tenant’s rent each year. If a tenant moves out of a housing unit or mobile home park, property owners may reset rents to market rates. Once the unit or space is rented again, however, rent control laws restrict the rate of future rent increases.

Other Housing Programs and Laws. About one-third of California cities and counties have laws referred to as “inclusionary housing.” These laws (which can be mandatory or voluntary in nature) have the goal of providing lower-cost housing units in new developments. Mandatory inclusionary laws require developers to construct affordable housing on part of their land or contribute funds to develop such housing. Voluntary laws offer developers incentives to provide affordable housing. (For example, a city might permit a developer to build an increased number of housing units if some of them are affordable to lower-income households.) In addition, many California cities have ordinances requiring apartment owners to provide relocation benefits to tenants if they convert their property into condominiums.

PROPOSAL

This measure amends the State Constitution to:

1. Constrain state and local governments’ authority to take private property and
2. Phase out rent control

The measure also might constrain government’s authority to implement certain other programs and laws, such as mandatory inclusionary housing programs and tenant relocation benefits. The measure’s provisions apply to all governmental agencies.

Taking Property

The measure prohibits government from taking ownership of property to transfer it to a private party — such as a person, business, or nonprofit organization. In addition, government could not take property to use it for:

1. A purpose substantially similar to how the private owner used it (such as a public operation of a water or electricity delivery system formerly owned by a private company) or
2. The purpose of consuming its natural resources (such as its oil or minerals).

These restrictions on government’s authority to take property also would apply to cases when government transfers the right to use or occupy property (but does not take ownership of it). None of these restrictions would apply, however, if government was addressing a public nuisance or criminal activity or as a part of a state of emergency declared by the Governor.

Under the measure, government could continue to take property for facilities that it would own and use, such as new schools, roads, parks, and public facilities. Government could not take property for one purpose, however, and then use it for a different purpose unless it offered to sell the property back to its previous owner.

Property Owner Challenges. If a property owner challenged government’s authority to use eminent domain, the measure directs the court to exercise its independent judgment and not defer to the findings of the government agency. In addition, property owners could challenge government's right to take the property even if they accepted funds that government deposited as part of an accelerated eminent domain action.

Property Owner Compensation. The measure contains provisions that would increase the amount of compensation provided to property owners. For example, property owners would be entitled to reimbursement for all business relocation costs, which could exceed the maximum amounts specified under current law. In addition, property owners would be entitled to compensation for their attorney costs if the property owner was successful in an eminent domain challenge.

Rent Control

The measure generally prohibits government from limiting the price property owners may charge others to purchase, occupy, or use their land or buildings. This provision would affect local rent control measures. Specifically, government could not enact new rent control measures, and any rent control measure enacted after January 1, 2007 would end. Other rent control measures (those enacted before January 1, 2007) would be phased out on a unit-by-unit basis after an apartment unit or mobile home park space is vacated. Once a tenant left an apartment or mobile home space, property owners could charge market rate rents, and that apartment unit or mobile home space would not be subject to rent control again.

Other Government Laws and Programs

The measure appears to limit government’s authority to impose restrictions on the “ownership, occupancy, or use of property” if the restrictions were imposed “in order to transfer an economic benefit” from one property owner to other private persons. The range of government laws and programs that would be affected by these provisions is not clear and would be determined by the courts. Given the wording of the measure, however, programs such as mandatory inclusionary housing and condominiums conversion relocation benefits might be prohibited.

Related Measure on Ballot. This ballot contains two measures related to eminent domain: Proposition 98 (this measure) and Proposition 99. If this measure were approved by more votes than Proposition 99, the provisions of Proposition 99 probably would not take effect.

FISCAL EFFECTS

Eminent Domain Changes

Much of the property state and local government acquires is bought from willing sellers or is taken by eminent domain for purposes that would still be allowed under the measure. In these cases, government could continue to acquire these properties, but might need to pay somewhat more for them. This is because the measure increases the amount of compensation provided for properties taken by eminent domain and willing sellers are likely to demand similar increased amounts.

In some cases, the measure would prevent government from taking property by eminent domain. This reduced ability to take property could apply to many government plans for redevelopment, affordable housing, and public ownership of water or electric utility services. As a result of this reduced authority to take property, government might (1) buy fewer properties and have lower costs or (2) offer property owners more to purchase their properties and thus have higher costs.

The net fiscal effect of these potential changes in the number and price of properties acquired cannot be determined. Overall, we estimate that many governments would have net increased costs to acquire property, but that the net statewide fiscal effect probably would not be significant.

Other Changes

It is difficult to estimate the fiscal impact of the measure’s phase out of rent control and limitation of other programs that transfer economic benefits from property owners to private parties. In response to these provisions, governments might choose to change their policies in ways that do not increase their costs. For example, a government might repeal a mandatory inclusionary housing ordinance and not enact a replacement policy, or repeal the ordinance and enact land-use regulations that encourage the construction of lower-cost housing.

In other cases, conforming to the measure’s provisions could result in new costs. For example, a government could respond to the elimination of rent control by creating publicly funded programs to subsidize affordable housing. Given the uncertainty regarding some of the measure’s provisions, some governments might be unaware that their policies conflicted with the measure’s provisions and be required to pay damages to property owners.

The fiscal effect on state and local governments associated with these changes in rent control and other policies is not possible to determine, but there probably would be increased costs to many governments. The net statewide fiscal effect, however, probably would not be significant.

LEAGUE POSITIONS AND DISCUSSION

The League of Women Voters of California (LWVC), the League of Women Voters of the United States (LWVUS), and most local Leagues have numerous positions supporting the regulation of land use, measures to protect natural resources and control pollution, provision of affordable housing, transportation infrastructure and schools, and so forth. Proposition 98 would undermine and in many cases prohibit the future protection of these resources and provision of government services.

The LWVUS Resource Management position, which promotes resource conservation, stewardship and long-range planning, with the responsibility for managing natural resources shared by all levels of government, has been used to oppose Congressional efforts to pass “takings” legislation designed to seriously undermine environmental protections in the name of private property rights.

The LWVC Housing position supports the provision of affordable housing for all Californians and includes support for the use of dedicated redevelopment set-aside funds for low and moderate-income housing, the use of density bonuses and inclusionary zoning, protection of the rights of both tenants and landlords, and removal of barriers that inhibit the construction of low and moderate income housing.

Examples of LWVC Natural Resources positions that would be negated or made redundant by this proposition follow:

The LWVC Agriculture position supports policies that recognize the need to preserve agricultural land for the economic and physical well-being of California and the nation. Appropriate agricultural land should be identified and its long term protection should be based on regulatory and incentive programs that include comprehensive planning, zoning measures, and other conservation techniques.

The LWVC Land Use position states that citizens must have a meaningful participation in land use planning and regulation. Further, local land use planning should be utilized as a means to determine how local communities should change and develop. . . . Land use decisions should relate to and protect the overall quality of the environment. Local government should plan for the preservation of open space and provide for adequate parks and recreation.

The LWVC Water position supports the management and development of water resources in ways that are beneficial to the environment.

Finally, the goal of the LWVC, as stated in its Visions, Beliefs, and Intentions, is “to empower citizens to shape better communities . . .”

Discussion

In 2005 the United States Supreme Court ruled (Kelo v. City of New London ) that the use of eminent domain to transfer land from one private owner to another to further economic development within a redevelopment area qualified as a permissible “public use” under the Takings Clause of the Fifth Amendment to the U.S. Constitution.

In addition to the power of eminent domain, government under its police power has authority to regulate land use and adopt many kinds of laws and regulations affecting private property. For example, government requirements can reduce the value of private property through laws limiting development on a homeowner’s property, requiring industries to change their operations to reduce pollution, or restricting apartment rents. In general, that authority can be implemented without compensation to owners of private property as long as some viable economic use of the property remains. Leaving a property owner without an economic use is referred to as a “taking.”

Proposition 98 was developed in response to the failure of Proposition 90 on the November 2006 ballot. (Although the proponents of Proposition 90 claimed it was about reform of eminent domain, it contained far-reaching provisions that would have allowed claims for payment whenever regulations resulted in economic impacts to property owners, at huge cost to state and local governments.)

The key statement that Proposition 98 would add to Section 19 of Article I of the California Constitution (which deals with eminent domain) is that “Private property may not be taken or damaged for private use.” However, in addition to limiting the use of eminent domain for private uses, the measure contains provisions of dramatically wide scope that would work against the common good. These provisions are not immediately apparent to the general public, as they are hidden in a definitional subsection of the initiative.

Renters would be affected by two of those provisions. One is the way the proposition defines “taken.” Under that definition, “limiting the price a private owner may charge another person to purchase, occupy or use his or her real property” would be prohibited. Thus, Proposition 98 would expressly invalidate future rent control ordinances. (The proposition provides that the rent charged to tenants who live in rent-controlled apartments or mobile homes would not be affected, but when those tenants move out, rent control on those units would no longer be allowed.)

The proposition also states that “private use” includes the regulation of the ownership, occupancy, or use of private property “in order to transfer an economic benefit” from a property owner to other private persons. This provision would gut a number of laws and ordinances that protect all renters. For example, landlords could not be required to give 60 days’ notice before terminating a lease because such a law would transfer an economic benefit (continued use of the property) from one private party (the landlord) to another (the renter). Similarly, regulating the return of rental deposits has an economic effect on the landlord to the benefit of the tenant and would not be allowed.

This definition of “private use” within Proposition 98 is sweeping. Its prohibition on regulations that transfer an economic benefit from a property owner to other persons could also restrict a host of environmental and land use regulations, since nearly all regulation provides an economic benefit to some private person and/or an economic burden to others. Environmental and land use regulations that would be jeopardized by the passage of Proposition 98 include:

• regulation of greenhouse gas emissions, as well as other laws to limit global climate change and protect communities from its effects
• regulations that protect coastal areas, forest land, farm land, and ranch land, as well as cultural and historic sites
• “smart growth” regulations designed to promote compact, walkable, and transit-oriented communities that combine residential and commercial land uses
• ordinary zoning regulations, such as restrictions on the development of polluting industry, adult businesses, and certain types of commercial enterprises.

Another section of the proposition’s definition of “private use” would prohibit the use of eminent domain when the use is for the same or a substantially similar use as that made by the current owner. This could thwart the use of eminent domain to protect the environment by the purchase and preservation of open space, wetlands, species habitat, or resource lands (such as agricultural, forest, or ranch lands).

Proposition 98’s definition of “private use” also includes “transfer of ownership, occupancy or use of private property or associated property rights to a public agency for the consumption of natural resources.” This could prohibit the use of eminent domain to acquire land and water rights needed to construct or expand projects for the storage and delivery of water for irrigation, domestic, commercial and industrial purposes. As development continues, it will be necessary for government to acquire rights-of-way for new pipelines and canals to deliver water to new developments and businesses. Discussions continue concerning the possible need for surface water storage projects, for groundwater storage, or for a Delta conveyance system. Projects to conserve and protect the quality of our water resources and the species that rely on these water systems could likewise be jeopardized.

Proposition 98 has even more dramatic restrictions on land use and environmental regulations than Proposition 90 did, and does not even provide an exemption for those regulations intended to protect the public health and safety.

SUPPORTERS

Signing the ballot argument for:

Jon Coupal, President, Howard Jarvis Taxpayers Association, Protect Prop 13 Committee

Doug Mosebar, President, California Farm Bureau

Steve L. Caughran, 2007 California Small Business Owner of the Year, National Federation of Independent Business

The rebuttal to the opponents’ argument was signed by Cruz Baca Sembello, Victim of Government Home Taking, City of Baldwin Park; John Revelli, Victim of Government Business Taking, City of Oakland; and Joel Ayala, President, California Hispanic Chambers of Commerce.

opponentS

Signing the ballot argument against:

Jeannine English, California State President, AARP

Janis R. Hirohama, President, League of Women Voters of California

Richard Word, President, California Police Chiefs Association

The rebuttal to the supporters’ argument was signed by Jeannine English, California State President, AARP; Dean Preston, Co-Chair, Coalition to Protect California Renters; and Ken Willis, President, League of California Homeowners.

Other opponents include the California Chamber of Commerce, Western Growers Association, California Teachers Association, National Wildlife Federation, California Professional Firefighters, California League of Conservation Voters, League of California Cities, California School Boards Association, and many more. Individuals who oppose the measure include former Governor of California Pete Wilson, Governor Arnold Schwarzenegger, U.S. Representative George Radanovich, U.S. Senator Dianne Feinstein, and State Treasurer Bill Lockyer.

RESOURCES

Linda Craig, LWVC Advocacy Director, legislation@lwvc.org

Chris Carson, LWVC Government Director, govt@lwvc.org

Julie Rajan, LWVC Social Policy Director, social_policy@lwvc.org

Janet Brennan, LWVC Land Use Legislative Consultant, landuse@lwvc.org

Jack Sullivan, LWVC Water Consultant, water@lwvc.org

Trudy Schafer, LWVC Senior Director for Program, 916-442-7215, Fax 916-442-7362, tschafer@lwvc.org

www.no98yes99.com -- Californians to Stop the Prop 98 Attack on Renters and in Support of Prop 99, the Homeowners Protection Act.

For more information, including fact sheets appropriate to various audiences and sample letters to the editor, go to www.no98yes99.com, Californians to Stop the Prop 98 Attack on Renters and in Support of Prop 99, the Homeowners Protection Act, or www.NoProp98.org, Stop the Landlords’ Hidden Agendas Scheme.

Be sure to read Questions and Answers about Propositions 98 and 99.

The full text of the arguments submitted by proponents and opponents and the full text of the proposition are included in the Voter Information Guide (ballot pamphlet) at http://voterguide.sos.ca.gov/.

SUMMARY POINTS

• Proposition 98 is a deceptive measure that is full of hidden agendas. This poorly-written initiative has far-reaching provisions that are unrelated to eminent domain and will harm, not protect, homeowners and renters. It attacks basic laws that protect renters, our environment and our communities, and jeopardize our water quality and supply.
  
  
• This measure would eliminate rent control and important renter protections such as laws protecting renters against unfair evictions or requiring the fair return of rental deposits. It would have devastating effects on renters, including seniors, widows, veterans and young families.
  
  
• Wealthy apartment landlords and mobile home park owners spent millions to get Proposition 98 on the ballot. More than 80 percent of the funding behind Proposition 98 comes from landlords.
  
  
• Provisions hidden in a definitional section of this proposition would jeopardize zoning and land use regulation that guides orderly development, mitigates environmental impacts of developments, and provides for smart growth. These provisions would gut environmental protections such as laws we need to combat global warming or to protect coastal areas, forestland, farmland, and ranchland, as well as cultural and historic sites.
  
  
• This measure erodes local governments’ ability to address community public health and safety issues.
  
  
• Other hidden provisions would jeopardize the vital ability of government to acquire property for water utility purposes, thus endangering the quality of our drinking water and our ability to secure new sources of water to protect our environment and fuel our economy. That’s why the California Chamber of Commerce, the Association of California Water Agencies, the Western Growers Association and other organizations and individuals including Governor Arnold Schwarzenegger and former Governor Pete Wilson oppose Proposition 98.
  
  
• Proposition 98 would result in frivolous lawsuits and higher taxpayer costs and would hurt our economy.
  
  
• Proposition 98 is opposed by a broad coalition of groups that includes the League of Women Voters of California, AARP, the California Professional Firefighters, the Coalition to Protect California Renters, the California Teachers Association, the Consumer Federation of California, Audubon California, the National Wildlife Federation, and every other major environmental organization.

get involved

Consider sending a letter to the editor of your local newspaper. Please adapt this letter to your own community and check your local paper’s word limit for published letters.

Additional sample letters are available at www.no98yes99.com.