Overbroad Amendment 74 Could Bring Litigation Catastrophe to Colorado

When I first heard about it, I thought the Colorado ballot measure Amendment 74 was a slam-dunk. That government can reduce or destroy the value of your property by prohibiting you from developing it is profoundly unjust (excepting cases where a property use would violate others’ rights). I would welcome well-crafted reforms to prevent (or at least to require government to compensate) such “regulatory takings.” But the stupidly drafted Amendment 74 is a cure far worse than the disease—if interpreted broadly by the courts, it could spell catastrophe for economic activity and governance in Colorado.

Amendment 74 would add a line to Article II, Section 15 of the Colorado Constitution, as indicated in all-caps: “Private property shall not be taken, or damaged, OR REDUCED IN FAIR MARKET VALUE BY GOVERNMENT LAW OR REGULATION for public or private use, without just compensation.”

Notice several things about the wording. The word “or” means that any “government law” is at issue. Does that mean that every municipal ordinance would be considered a “law” or a “regulation”? Presumably so—and certainly enterprising attorneys would argue as much. The measure does not specify that only a new law or regulation can be considered. If any law on the books results in the reduction “in fair market value” of any property, then the provision is in play. And remember here that even the repeal of a law could trigger the measure, because an old law can be repealed only by the passage of a new law.

The crucial flaw with the measure is that it does not distinguish between rights-protecting and rights-violating government actions. Indeed, Amendment 74 would make it almost impossible to pass various free-market reforms in Colorado. Consider three examples of how the measure could be used.

1. Right now Colorado law protects liquor stores against forms of competition from grocery stores. (The restrictions have eased somewhat in recent years.) So if the legislature repealed all such protectionist measures, would that reduce the “fair market value” of liquor stores? Certainly it would. So liquor store owners could sue to force taxpayers to compensate them for this loss. This is a profoundly unjust outcome, because people who go into business with the benefit of unjust protectionist legislation have no right to continue to be so protected.

2. Any changes to zoning rules obviously would affect certain people’s property values. So any change in zoning, including the easing or outright repeal of zoning, could trigger lawsuits under Amendment 74.

3. Currently state law regulates oil and gas production and even dictates the minimum amount of “renewable energy” that consumers must purchase. So a ski company could sue on the grounds that, by allowing oil and gas production, Colorado law reduces the “fair market value” of ski resorts by fostering climate change. And of course if the state further regulates oil and gas production, oil and gas companies can sue on the grounds that their property values are reduced.

In short, Amendment 74 would bring legal chaos to Colorado, with taxpayers picking up most of the tab. Certainly enterprising lawyers could dream up a practically unlimited number of lawsuits under the measure.

True, how the measure is implemented will depend on how the courts interpret it, particularly the phrase “for public or private use.” If the courts interpret “use” very narrowly to mean literal physical use, then the measure would be modest in impact. Even so, there almost certainly would be cases where pro-rights reforms triggered lawsuits. If the courts interpret “use” to mean something like benefit or purpose, then a breathtakingly wide range of legal changes could trigger an avalanche of lawsuits.

What we should expect, then, if the measure passes, is several years (at least) of intense, tax-funded litigation to figure out what Amendment 74 even means in practice. Then, depending on how the courts rule, lawsuits will continue apace, so long as the language remains in place, at a lesser or grater volume.

Of course, we can also reasonably expect the state Supreme Court to interpret the ambiguous measure inconsistently, allowing or blocking lawsuits on barely-concealed political grounds. In short, Amendment 74 openly invites subjective law and the worst sort of “judicial activism.”

Given that Amendment 74 is a profoundly anti-conservative measure, I was surprised to learn that various conservatives, including Douglas Bruce, the Centennial Institute, and the Americhicks, have endorsed it. Thankfully, former Republican legislator Mark Hillman recognizes that the measure is “open-ended” and could allow, for example, “NIMBY activists [to] use this to stall energy development through endless litigation.” (See also critiques by the Gazette and by college professor Kevin Lynch.)

Part of of the confusion surrounding the measure arises from the bad arguments made against it. The main case I’ve heard is that the measure would cost local governments by forcing them to compensate property owners. I have no problem with requiring government entities to compensate property owners when those governments reduce the value of a property by violating the rights of the property owners. The problem with Amendment 74 (to restate) is that it would require governments to compensate property owners even when government passes rights-respecting reforms. That’s a disaster.

Amendment 74 is insanity. Colorado taxpayers should be offended that the backers of the measure are playing such a dangerous game with our state constitution.

October 15 Updates: Gale Norton, former Secretary of the Interior, argues that Amendment 74 would protect property owners. But she does not address the sorts of concerns that I raise.

Some critics say that I’m mistaken in thinking that laws and regulations that exist prior to the passage of Amendment 74 might be at issue. Perhaps they’re right about that. But that point does not affect my other criticisms. Certainly the measure could be used against pro-free-market reforms—the only remaining question is how broadly the measure would apply—and no one has made (or even attempted) a compelling counter-argument.

Another criticism against my position is that “use” means something very narrow. But the entire point of passing protections against “regulatory takings” is that government should not be able to regulate away the value of a property. Literal physical use (by the public) has nothing to do with that goal. So if the courts interpret “use” very narrowly, the measure might not do much—but then it would not do any of the positive things that the supporters of the measure hope that it will do. The upshot is that, to the degree that the measure can be used for good (to protect rights), it can also be used for ill (to violate rights).

The Colorado Sun gathers comments on the measure, for and against, by various people.

Image: ROuge