You asked for a summary of HR 4128, the “Private Property Rights Protection Act of 2005” (enclosed), recently passed by the U. S. House of Representatives.

SUMMARY

The bill bars states and their political subdivisions from taking property for economic development if the state or subdivision receives federal economic development funds during the fiscal year in which taking occurs. It allows the owner of property taken in violation of this prohibition to sue in state or federal court and places the burden of proof in such suits on the state or subdivision that took the property. If the owner wins the case, the state or subdivision is ineligible for federal economic development assistance for two years, unless it returns the property.

The bill has several other provisions, including a ban on the federal government from using its eminent domain powers for economic development purposes. The bill would take effect October 1, 2006, but would not apply to condemnations pending on that date.

HR 4128

Prohibition on Using Eminent Domain for Economic Development

The bill bars states or their political subdivisions (e. g. , municipalities) from exercising the power of eminent domain over property to be used for economic development or over property that is subsequently used for economic development, if the state or subdivision receives federal economic development funds during the fiscal year in which taking occurs. The bill also prohibits private entities that have been granted eminent domain power by a state or subdivision from exercising it under these circumstances. It appears that the prohibition is not project specific, i. e. , that a state or municipality cannot use federal funds to take a property for a specific economic development project. Rather, under the bill, if a state or subdivision receives federal economic development funds in a given fiscal year (as Connecticut and many municipalities routinely do), it cannot take property for economic development purposes in that year.

Under the bill, economic development means taking private property without the owner’s consent and then conveying or leasing it to a private party (1) for commercial enterprise carried on for profit or (2) to increase tax revenue, the tax base, employment, or general economic health. But, economic development does not include conveying private property (1) to public ownership for such things as a road, hospital, or airport; (2) to an entity that makes the property available to the general public as of right, such as a railroad or a public facility; (3) for use as a road or other right of way open to the public, whether free or toll; or (4) for use as a flood control project, pipeline, aqueduct, or similar uses.

Economic development also does not include:

1. removing harmful land uses, if they pose an immediate threat to public health and safety;

2. leasing property to a private party that occupies an incidental part of public property or a public facility, such as a shop on the ground floor of a public building

3. acquiring abandoned property;

4. clearing defective chains of title;

5. taking private property for use by a public utility; or

6. redeveloping a brownfield site, as defined by federal law.

While the first of these exceptions would allow a state or subdivision to take property to combat blight, it appears to allow such takings under a narrower set of circumstances than is allowed under current Connecticut law. For example, CGS § 8-112a allows a redevelopment agency to take property that is itself not blighted if this is necessary to complete redevelopment in an area that is blighted.

Under the bill, federal economic development funds are those that are distributed to or through states and subdivisions under federal laws that are designed to improve or increase the size of the economies of states or subdivisions. The bill requires the U. S. attorney general to compile a list of the federal laws under which federal economic development funds are distributed, update this list annually, post the list on the Department of Justice’s website, and send it to the governors.

Penalties

Under the bill, a property owner who is harmed by a prohibited taking can file suit in state or federal court. The suit can be filed once the condemnation proceedings conclude. It must be filed within seven years after the property is used for economic development purposes. (It appears that, under this provision, if a property was initially taken and used for a public purpose such as a school, but was later converted to an office building, the former owner could file suit within seven years after the conversion). The property owner can also seek other appropriate relieve through such mechanism as a preliminary injunction or a temporary restraining order.

The bill states that a state is not immune from such suits under the eleventh amendment to the U. S. Constitution, which limits the powers of the federal government with regard to states. In the suit, the defendant (i. e. , the condemning agency) has the burden of showing, by clear and convincing evidence, that the taking is not for economic development. Normally in civil suits the burden of proof is on the plaintiff, who must show that the preponderance of evidence backs his position. If the owner wins the case, he is entitled to reasonable attorney’s fees, including expert fees.

If a state or subdivision violates the prohibition, it is ineligible from receiving any federal economic development funds for the two fiscal years from the final decision in the court case. Federal agencies that distribute such funds have to withhold them during this period. If such funds are distributed during this period, the state or subdivision has to return them or reimburse the federal government for them. The state or subdivision can avoid these penalties by returning the taken property and repairs any property damaged by the taking.

Other Provisions

The bill also:

1. prohibits the federal government and federal authorities from using their eminent domain powers for economic development purposes;

2. prohibits states and subdivisions from using eminent domain over property owned by a religious or nonprofit organization by reason its religious or nonprofit status, subject to the same withholding provisions a described above;

3. requires the U. S. attorney general to provide governors with a copy of the bill and the description of rights it affords property owners and place this information on the Department of Justice’s website;

4. requires the attorney general to report to Congress annually on states and subdivisions that have violated the bill and lost federal funding; and

5. adopts a sense of Congress regarding rural areas, property rights, and takings.

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