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Who Really Owns
The Strand?

by David Stanowski
11 February 2008


There are three groups who have a stake in how special events are staged in downtown Galveston: residents, City government (including the Park Board), and downtown merchants.

Many residents have a definite opinion on how events should be managed based solely on their personal preferences, because they have no money at risk in the outcome. The City has its own set of criteria such as security, minimizing their expenses, and maximizing earnings for City employees.

Even though the City owns the streets and sidewalks, it is the businesses that line them that make downtown Galveston a desirable location for special events. What is often lost in this process is the fact that the downtown merchants are dependent on the income from these businesses for their livelihood, which should give them the most prominent voice in how these events are staged, because the events have a major impact on how they can operate their businesses.

It is easy for a resident to go downtown, during an event, like the recent Mardi Gras, and draw the conclusion that it was a big success, because they see thousands of people in the streets having fun catching beads. But in what sense are large crowds catching beads an accurate measure of success? Likewise, the City government can point to a lower number of arrests, and/or below-budgeted costs as evidence that the event was a success, but what about the merchants?

Since many business owners see sales drop, during special events, or at the very least, they are not allowed to maximize their profits, due to the way they are currently managed, it is difficult to see how these merchants would rate them as a success. But does anybody care about the impact of special events on downtown businesses? Apparently not, but everyone should care for two reasons.

First, it is just bad manners not to. How would the residents of Galveston like it if some group commandeered the street where they live to stage special events, three or four times a year, and set the terms and conditions of the event without their full consent and approval? In addition, the effect of an event in a residential area would primarily be the inconvenience to everyone’s personal activities; not the loss of income. 

Secondly, the way events have been staged is potentially unlawful! There is a "minor technicality" in the 5th Amendment of the U.S. Constitution called “the Takings Clause”. It says that if the government “takes away” someone's private property, for the good of the community as a whole, the government must compensate them for their loss.

This is most often done, on a permanent basis, through the exercise of Eminent Domain, but if the government interferes with a business owner’s ability to conduct his business, in a manner that allows him to maximize his income, the government must compensate him for his loss! In this case, the government temporarily "takes" the use of downtown property through the processes of "regulation" and "invasion".


In “Private Real Property Rights Protection Act Guidelines” Texas Attorney General Greg Abbott comments on the Texas Takings Statute:

a) The Fifth Amendment to the United States Constitution (the "Takings Clause") provides: "; Nor shall private property be taken for public use, without just compensation." The Takings Clause applies to the states by virtue of the Fourteenth Amendment. 

(b) Article I, 17 of the Texas State Constitution provides as follows:

No person's property shall be taken, damaged or destroyed without adequate compensation being made, unless by the consent of such person; and, when taken, except for the use of the State, such compensation shall be first made, or secured by a deposit of money .

(c) The Act, 2007.002(5)(B), sets forth a new statutory definition of "taking." Essentially, if a governmental entity takes some "action" covered by the Act and that action results in a devaluation of a person's private real property of 25% or more, then the affected party may seek appropriate relief under the Act. Such an action for relief would be predicated on the assumption that the affected real property was the subject of the governmental action.


Furthermore, the State of Texas provides for the need to compile and complete a "Takings Impact Assessment" (TIA) in situations where a Takings action is highly probable.

1.13. Governmental actions undertaken pursuant to these Guidelines that compel the need to promulgate "Takings Impact Assessments" (TIAs) must ensure that information regarding the private real property implications of governmental actions are considered before decisions are made and actions taken. This information and analysis must be accurate, concise, and of high quality. TIAs must concentrate on the truly significant real property issues. No need exists to amass needless detail and meaningless data. The public is entitled to governmental conformance with legislative will, not a mass of unnecessary paperwork. Nevertheless, the public is entitled to more than mere pro forma analyses by the governmental entities covered by the Act. TIAs shall serve as the means of assessing the impact on private real property, rather than justifying decisions already made.

This means that the City of Galveston, Galveston County, the State of Texas, or the Federal government may commandeer the use of downtown Galveston any time that they wish to do so, and for any purpose that they deem to be “in the public interest”, as long as they compensate downtown business owners for any lost revenue. However, as of 23 June 2006, the existence of Executive Order 13406 makes this practice more problematic, and probably unlawful, if a government entity does this on behalf of a private party! 

Sooner or later, some downtown businesses are going to become fed up with the way special events have been staged, and they are going to start demanding "just compensation" for their losses. This will have a negative impact on the City treasury, and local taxpayers, which is why it is time to consider a better alternative.

If special events are managed in such a way that they have the full consent and approval of downtown merchants, then the City, and the taxpayers will no longer face any potential liability under the Takings Clause. This could be accomplished very easily by naming a duly authorized representative of the 
downtown business owners, such as Historic Downtown Galveston Partnership, and let them define how these events should be staged.

If the City finds the terms set by the business owners unacceptable, they still have the right to resort to a Takings action, after first preparing a Takings Impact Assessment to quantify the revenue that will most likely be lost by downtown business owners. Then they can decide if it still makes sense to initiate a Takings Action. In this way, everyone involved will be fully aware and informed that if a special event is staged under the authority of the Takings Clause, downtown merchants will receive just compensation for any losses.

Both the City and the downtown merchants would also be well advised to invite Galveston residents to comment on how they would prefer to see these events staged, and consider this public input before any final decisions are made. If potential customers are unhappy with the plans for an event, they are unlikely to spend much money when the time comes.

Only after all of us who live in Galveston remember and acknowledge that downtown buildings and businesses are privately owned can events be staged so that they respect the property rights of the merchants, which will then allow a truly accurate assessment of whether an event is successful, from all points of view.


References:

U.S. Constitution, 5th Amendment

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, 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.


Executive Order 13406

It is the policy of the United States to protect the rights of Americans to their private property, including by limiting the taking of private property by the Federal Government to situations in which the taking is for public use, with just compensation, and for the purpose of benefiting the general public and not merely for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken.


The Takings Clause of the Fifth Amendment is one of the few provisions of the Bill of Rights that has been given a broader interpretation under the Burger and Rehnquist courts than under the Warren Court.  It is a clause near and dear to the heart of free market conservatives.

Only certain types of takings cases present serious interpretive questions. It is clear that when the government physically seizes property (as for a highway or a park, for example) that it will have to pay just compensation. It is also clear that serious, sustained physical invasions of property (as in the case of low overflying aircraft, for example) require payment of compensation equal to the difference between the market value before and after the invasion. The difficult cases are generally those where government regulations, enacted to secure some sort of public benefit, fall disproportionately on some property owners and cause significant dimunition of property value.

The Court has had a difficult time articulating a test to determine when a regulation becomes a taking. It has said there is "no set formula" and that courts "must look to the particular circumstances of the case." The Court has identified some relevant factors to consider: the economic impact of the regulation, the degree to which the regulation interferes with investor-
backed expectations, and the character of the government action. Still, as our cases suggest, there is a lot of room for argument as to how these various factors should be weighed.


from University of Missouri at Kansas City School of Law


''When . . . [the] power [of eminent domain] is exercised it can only be done by giving the party whose property is taken or whose use and enjoyment of such property is interfered with, full and adequate compensation, not excessive or exorbitant, but just compensation.'' Backus v. Fort Street Union Depot Co., 169 U.S. 557, 573 , 575 (1898).


The issue whether one's property has been ''taken'' with the consequent requirement of just compensation can hardly arise when government institutes condemnation proceedings directed to it. Where, however, physical damage results to property because of government action, or where regulatory action limits activity on the property or otherwise deprives it of value, whether there has been a taking in the Fifth Amendment sense becomes critical.


A later formulation was that ''property is taken in the constitutional sense when inroads are made upon an owner's use of it to an extent that, as between private parties, a servitude has been acquired either by agreement or in course of time.'' 242 United States v. Dickinson, 331 U.S. 745, 748 (1947).


It was thus held that the government had imposed a servitude for which it must compensate the owner on land adjoining its fort when it repeatedly fired the guns at the fort across the land and had established a fire control service there. In two major cases, the Court held that the lessees or operators of airports were required to compensate the owners of adjacent land when the noise, glare, and fear of injury occasioned by the low altitude overflights during takeoffs and landings made the land unfit for the use to which the owners had applied it. Eventually, the term ''inverse condemnation'' came to be used to refer to such cases where the government has not instituted formal condemnation proceedings, but instead the property owner has sued for just compensation, claiming that governmental action or regulation has ''taken'' his property.


... but the Court in 1922 established as a general principle that ''if regulation goes too far it will be recognized as a taking.'' Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). See also Lucas v. South Carolina Coastal Council, 112 S. Ct. 2886, 2895 (1992) (a regulation that deprives a property owner of all beneficial use of his property requires compensation, unless the owner's proposed use is one prohibited by background principles of property or nuisance law existing at the time the property was acquired).


A 'taking' may more readily be found when the interference with property can be characterized as a physical invasion by government than when interference arises from some public program adjusting the benefits and burdens of economic life to promote the common good.''  


''... no subsequent action by the government can relieve it of the duty to provide compensation for the period during which the taking was effective.'' 


... the Court frequently reminds us, is to vitalize the Fifth Amendment's protection against government ''forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole.'' Armstrong v. United States, 364 U.S. 40, 49 (1960). For other incantations of this fairness principle, see Penn Central, 438 U.S. at 123-24; and Andrus v. Allard, 444 U.S. 51, 65 (1979). 


Thus a taking may be found if the effect of regulation is enrichment of the government itself rather than adjustment of the benefits and burdens of economic life in promotion of the public good. Webb's Fabulous Pharmacies v. Beckwith, 449 U.S. 155 (1980) (government retained the interest derived from funds it required to be deposited with the clerk of the county court as a precondition to certain suits; the interest earned was not reasonably related to the costs of using the courts, since a separate statute required payment for the clerk's services). By contrast, a charge for governmental services ''not so clearly excessive as to belie [its] purported character as [a] user fee'' does not qualify as a taking. United States v. Sperry Corp., 493 U.S. 52, 62 (1989). 

from Find Law


Takings: Private Property and the Power of Eminent Domain

Cato Institute

Public Eye

Kelo v. City of New London

Western Seafood v. City of Freeport, Texas

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