Proposed Constitutional Amendment Would Bolster Property Rights

On June 24, the North Carolina Senate proposed three new amendments to the North Carolina Constitution, all included in House Bill 3. One of these would create additional protections for property rights by increasing the burden on government entities seeking to take property using eminent domain.

The proposed Article I § 38 of the North Carolina Constitution would read as follows:

“Private property shall not be taken by eminent domain except for a public use. Just compensation shall be paid and shall be determined by a jury at the request of any party.”

The amendment would fall within Section I of the State Constitution, which contains North Carolina’s “Declaration of Rights.” Existing amendments include protections for rights such as equal protection, freedom of speech, religious liberty, and due process of law.

“Eminent domain” refers to the power of a government to seize private property for public use, so long as the government provides just compensation to the property’s owner. North Carolina case law currently allows a government actor to take property via eminent domain only if the use is both for a “public use” and will result in a “public benefit.” In Tucker v. City of Kannapolis, the North Carolina Court of Appeals summarized these two distinct requirements:

Our Supreme Court has held that courts must consider whether a proposed condemnation satisfies two separate tests: a public use test and a public benefit test.
“Under the “public use test,” the dispositive determination is “whether the general public has a right to a definite use of the property sought to be condemned.” The “public’s right to use, not the public’s actual use” is the key factor in making the required determination. Under the “public benefit test,” the dispositive determination is “whether some benefit accrues to the public as a result of the desired condemnation.” If the proposed condemnation would “contribute to the general welfare and prosperity of the public at large” and if that contribution cannot readily be furnished without the aid of governmental power, then the public benefit test is satisfied.” Tucker v. City of Kannapolis, 159 N.C. App. 174, 178, 582 S.E.2d 697, 699-700 (2003)(internal citations omitted).

This statement of North Carolina law generally parallels the common law legal tradition, under which private property typically can only be taken for a “public use.” Some public uses that might be legitimate include road construction, public buildings, and public parks. These are things that are traditionally constructed by government, and from which everyone derives certain benefits. More indirect public benefits — such as, say, economic development or potential future job creation — traditionally were not a sufficient “public use” to justify the use of eminent domain.

This changed in 2004, when the United States Supreme Court infamously held that “economic development” constituted a legitimate “public use” for which a local government could take private property. In the case of Kelo v. New London, the Court was presented with the question of whether the City of New London, Connecticut could take private property and give it to Pfizer Corporation, under the theory that the pharmaceutical company’s presence in the area would create more local jobs. In other words, could the city take private property for the “public use” of economic development? The Court held that such potential future job creation constituted a sufficient “public use” for the purposes of eminent domain, thus greatly expanding the types of situations where private property could be taken via eminent domain.

The decision was a disaster. The redeveloper of the property was unable to obtain financing, and Pfizer ended up walking away from the project at no cost to itself. That means that people lost their homes so that a private corporation could negotiate for a better deal elsewhere, then walk away. There was near-unanimous condemnation of the decision, and it inspired various efforts to rein in the eminent domain power of governments, from an executive order by President George W. Bush to new state-level protections for private property across the country.

And this is what brings us back to North Carolina, as the Senate’s proposed constitutional amendment to eminent domain has been described as a direct response to the Kelo decision:

Rep. Chuck McGrady, R-Henderson, said the amendment is a response to the notorious “Kelo” case of 2004, in which the U.S. Supreme Court ruled that the town of New London, Conn.’s use of eminent domain to take land to then be sold to a developer met the definition of “public purpose” under the Constitution but said states could set a higher standard.

In addition to limiting the scope of what constitutes a “public use,” the proposed amendment would also allow a party whose property is being taken via eminent domain to have the “just compensation” to be received determined by a jury.

As of this writing, all three proposed amendments, including that on eminent domain, have passed their second reading in the Senate. Since the Senate introduced the constitutional amendments via a committee substitute, they will have to receive final approval from the House. Following that approval, then the proposed amendments would be put to a vote of the People pursuant to Article VIII Section 4 of the North Carolina Constitution.

If the voters at the November general election approve the amendment, it will become effective on January 1, 2017.

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