BILL ANALYSIS C.S.S.B. 14 By: Bivins/et al. (Combs/et al.) April 28, 1995 Committee Report (Substituted) BACKGROUND The "takings clause" of the Fifth Amendment of the U.S. Constitution prohibits the governmental taking of private property for public use without just compensation. The Texas Constitution contains a similar provision in Art. 1, Sec. 17. A government can take private property in two ways: (1) by exercising its power of eminent domain through a process known as condemnation; or (2) by applying laws or regulations that are overly confiscatory or restrictive of the owner's use of his property. In addressing the "taking" issue, courts must balance legitimate public goals with fundamental rights. Courts are currently limited to applying broad constitutional language to specific factual situations. In Texas, governmental entities are not required to evaluate the effect of their administrative and regulatory actions on constitutionally-protected property rights. Also, there is no statutory cause of action for private property owners who believe governmental actions have resulted in a reduction in the market value of their property. To date, 12 states have passed private property rights laws: Arizona, Delaware, Idaho, Indiana, Mississippi, Missouri, North Carolina, Tennessee, Utah, Virginia, Washington and West Virginia. Recently, the U.S. House of Representatives passed House Resolution 925 which requires the federal government to compensate private property owners for the effects of certain regulatory restrictions. PURPOSE As proposed, the bill sets forth regulations regarding state governmental or political subdivision actions regarding private real property. RULEMAKING AUTHORITY It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency or institution, but in SECTION 1, Subchapter C, the bill does direct the attorney general to prepare guidelines to assist governmental entities in identifying actions that may result in a taking. SECTION BY SECTION ANALYSIS SECTION 1 Amends Subtitle A, Title 10, Government Code, by adding Chapter 2007, as follows: CHAPTER 2007. GOVERNMENTAL ACTION AFFECTING PRIVATE PROPERTY RIGHTS SUBCHAPTER A. GENERAL PROVISIONS Sec. 2007.001. SHORT TITLE: Private Real Property Rights Preservation Act. Sec. 2007.002 DEFINITIONS. Defines "governmental entity", "market value", "owner", "private real property", and "taking." "Taking" is defined as: (A) a governmental action that affects private property in a manner that requires compensation under the United States Constitution or Section 17 or 19, Article I, of the Texas Constitution; or (B) a governmental action taken or the enforcement of a governmental action taken on or after September 1, 1995, that affects private real property in a manner that restricts or limits a right to private real property that would otherwise exist in the absence of the governmental action, and is the cause of a reduction in the market value of the affected private real property of at least 25 percent. Sec. 2007.003. APPLICABILITY. (a) Applies this chapter only to the adoption or issuance of an ordinance, rule, or similar measure; a governmental action (action) that imposes a physical invasion, dedication, or exaction of private real property (property); and certain actions by a municipality that have effect in the municipality's extraterritorial jurisdiction. (b) Sets forth actions to which this chapter does not apply. Sec. 2007.004. WAIVER OF GOVERNMENTAL IMMUNITY; PERMISSION TO SUE. (a) Provides that sovereign immunity of a political subdivision to suit and liability is waived and abolished. (b) Provides that sovereign immunity of a state agency to liability is waived and abolished, but immunity to suit for compensation of a state agency is reserved and must be granted by legislative resolution. (c) Provides that sovereign immunity to suit is waived and abolished in relation to a state agency for: (1) the determination of whether an action is a taking in a final decision or order, or appeal thereof, issued in a contested case; (2) the invalidation of an action in a final decision or order, or appeal thereof, issued in a contested case; and (3) the invalidation of an action for failure to prepare a takings impact assessment. (d) States that a person is not authorized to execute a judgment against property of the state or a governmental entity. Sec. 2007.005. ALTERNATIVE DISPUTE RESOLUTION. Applies Chapter 154, Civil Practice and Remedies Code, to a suit filed under this chapter. Sec. 2007.006. CUMULATIVE REMEDIES. (a) Provides that the provisions of this chapter are not exclusive, and that the remedies are in addition to other procedures provided by law. (b) Prohibits a person from recovering under this chapter and also under another law or in an action at common law for the same economic loss. SUBCHAPTER B. ACTION TO DETERMINE TAKING Sec. 2007.021. SUIT AGAINST POLITICAL SUBDIVISION. (a) Authorizes a property owner to bring suit under this subchapter to determine whether an action of a political subdivision results in a taking, and prescribes the court in which the suit must be filed. (b) Provides for a two-year statute of limitations. Sec. 2007.022. ENTITLEMENT TO COMPENSATION FROM POLITICAL SUBDIVISION. (a) Provides that the determination of a taking is a question of fact. (b) Provides that if a taking is found by the trier of fact, then the property owner is entitled to compensation as provided by this subchapter. Sec. 2007.023. JUDGMENT AGAINST POLITICAL SUBDIVISION. States that a judgment in favor of a property owner shall: (1) establish the amount of compensation owed; (2) order the political subdivision to certify whether all compensation has been paid; and (3) enjoin the political subdivision from enforcing the action against the property owner until the date the political subdivision certifies that all compensation has been paid. Sec. 2007.024. ADMINISTRATIVE PROCEEDING AGAINST STATE AGENCY. Authorizes a property owner to file a contested case with a state agency to determine whether an action of a state agency results in a taking, provides for a 180-day statute of limitations, and establishes that a contested case under this section is subject to Chapter 2001. Sec. 2007.025. ENTITLEMENT TO REMEDY AGAINST A STATE AGENCY. (a) States that the determination of a taking is a question of fact. (b) Provides that if the trier of fact in a contested case finds that the action of a state agency is a taking under this chapter, then the property owner is entitled to, and the state agency is liable for: (1) invalidation of the governmental action; or (2) compensation for a taking as provided by this subchapter. Sec. 2007.026. FINAL DECISION OR ORDER AND APPEAL. (a) States that a final decision issued under Section 2007.024 shall order the agency to rescind the action as applied to the property owner, except as provided by Subsection (c). (b) Provides that a property owner may recover compensation under Section 2007.025(b)(2) only if waiver of immunity to suit for compensation is granted by the legislature, and also provides that the compensation may be paid only from an express appropriation. (c) States that if the legislature has waived sovereign immunity to suit for compensation, then the final decision or order shall: (1) establish the amount of compensation owed; (2) order the state agency to certify whether all compensation has been paid; and (3) enjoin the state agency from enforcing the action against the property owner until the date the political subdivision certifies that all compensation has been paid. (d) Provides for judicial review of a decision or order in a contested case. Sec. 2007.027. COMPENSATION AND COSTS. Outlines the compensation and costs recoverable by a prevailing property owner including the determination of market value, the compensation for temporary takings, and the award of court costs and attorney's fees. SUBCHAPTER C. REQUIREMENTS FOR PROPOSED GOVERNMENTAL ACTION Sec. 2007.041. GUIDELINES. (a) Requires the attorney general to prepare guidelines to assist governmental entities in identifying and evaluating governmental actions that may result in a taking. (b) Requires the attorney general to file the guidelines with the secretary of state for publication in the Texas Register. (c) Requires the attorney general to review the guidelines annually and revise them to ensure consistency with legislative actions and judicial decisions of the U.S. Supreme Court and the supreme court of this state. (d) Authorizes a person to make comments to the attorney general concerning the guidelines. Requires the attorney general to consider the comments in the annual review process. (e) Provides that material provided to the attorney general is public information. Sec. 2007.042. PUBLIC NOTICE. (a) Requires a political subdivision that proposes to engage in an action that may result in a taking to provide at least 30 days' notice of its intent by providing a notice published in a newspaper published in the county in which the property is located. Requires the political subdivision to publish a notice in an adjacent county if a newspaper of general circulation is not published in that county. Requires the political subdivision to include in the notice a copy of the takings impact assessment that was prepared by the political subdivision. (b) Requires a state agency that proposes to engage in a governmental action that may result in a taking to: (1) provide notice as required by Section 2001.023; and (2) file with the secretary of state for publication in the Texas Register a copy of the takings impact assessment that was prepared by the agency as required by this subchapter. Sec. 2007.043. TAKINGS IMPACT ASSESSMENT. (a) Requires a governmental entity to prepare a written takings impact assessment ("assessment") that complies with the evaluation guidelines developed by the attorney general before the governmental entity provides public notice. (b) Provides that a political subdivision is not required to prepare an assessment for an action taken that is reasonably taken to fulfill an obligation mandated by state law but must prepare instead a statement describing the mandate and citing the statute or rule under which the mandate is imposed. (c) Sets forth requirements for the assessment, which include describing the purpose of the proposed action, determining whether the action will constitute a taking, and describing reasonable alternatives for the action. (d) Provides that an assessment prepared under this section is public information. Sec. 2007.044. SUIT TO INVALIDATE GOVERNMENTAL ACTION. (a) Provides that an action requiring an assessment is void if an assessment is not prepared. Authorizes a property owner affected by an action taken without the preparation of an assessment to bring suit for a declaration of the invalidity of the action. (b) Requires the suit to be filed in a court described by Section 2007.023(a). (c) Requires the court to award attorney's fees and court costs to a property owner who prevails in an action under this section. Sec. 2007.045. STATE AGENCY RULEMAKING. Requires a state agency that proposes to adopt a rule that may result in a taking as indicated by the assessment to update the assessment if the rule is not adopted within 180 days after the notice is given. SECTION 2 Amends Section 2002.011, Government Code, relating to the Texas Register, to make conforming changes. SECTION 3 Amends Subchapter B, Chapter 23, Tax Code, by adding Section 23.11, as follows: Sec. 23.11. GOVERNMENTAL ACTION THAT CONSTITUTES TAKING. Requires the effect of an action on the market value of property to be taken into consideration by the chief appraiser in determining the market value of the property. SECTION 4 Requires the attorney general to file the guidelines for publication by January 1, 1996. SECTION 5 Requires the comptroller to report to the governor, lieutenant governor, speaker of the house, and attorney general regarding state agency compliance with the assessment procedures and make recommendations for improvements before the 75th Legislature convenes. The report is limited to review of procedural compliance. SECTION 6 (a) Effective date: September 1, 1995. (b) Effective date of Sections 2007.042 and 2007.043: January 1, 1996. SECTION 7 Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE In addition to reordering and renumbering some sections of the measure, the substitute makes substantial changes in the following general areas. Applicability. Both the substitute and the original apply to certain actions by a municipality in its extraterritorial jurisdiction ("ETJ"), but the substitute defines the applicable actions differently. The original bill applies to an action in the ETJ unless the municipality imposes identical requirements throughout the entire municipality and its ETJ, or unless the purpose of the action is to protect a "sole source" aquifer. The substitute applies to an action in a municipality's ETJ if the municipality does not impose identical requirements throughout the entire ETJ. The original bill specifically mentioned enforcement actions in the applicability section of the measure, but the substitute incorporates enforcement actions in the definition of a taking. The substitute does not apply to municipal zoning or actions by a joint airport board. Also, the original bill did not apply to certain actions by the Public Utility Commission of Texas, but this provision was removed in the substitute. Definition of Taking. The substitute defines a taking in terms of a 25 percent reduction in market value whereas the original bill used a figure of 20 percent. Also, the substitute is prospective in that it limits a taking to governmental actions taken on or after September 1, 1995, or the enforcement of governmental actions taken on or after September 1, 1995. Governmental actions include the adoption or issuance of ordinances, rules, orders, regulations or similar measures, or the imposition of an actual physical invasion or dedication. The substitute does not include enforcement of past or existing rules, regulations, or other similar measures. The original bill did apply to the enforcement of existing rules. Waiver of Immunity. The substitute has a more limited waiver of immunity than the original bill. Sovereign immunity of a political subdivision is waived as to suit and liability. Sovereign immunity of a state agency to liability is waived, but immunity to suit for compensation from a state agency is reserved, and a waiver must be granted by legislative resolution. The substitute also specifically states the actions for which sovereign immunity to suit is waived. Administrative Proceeding Against State Agency. The substitute sets up a separate procedure for pursuing a recovery from a state agency as opposed to a political subdivision. The original bill used the same procedure for both, which was to file suit in a district court. The substitute provides for an administrative proceeding in which a property owner may file a contested case to determine if a state agency action is a taking. If a property owner prevails against a state agency, then the owner is entitled to invalidation of the action or compensation for a taking. The substitute provides that the final decision in a contested case shall order the agency to rescind the action as applied to the prevailing property owner. The property owner may recover compensation only if waiver of immunity to suit for compensation is granted. Compensation. The substitute provides that the final judgment awarding compensation in a suit against either a state agency or a political subdivision shall: (1) establish the amount of compensation owed; (2) order the governmental entity to certify whether all compensation owed has been paid; and (3) enjoin the governmental entity from enforcing the action as applied to the prevailing owner until all compensation owed has been paid. The original bill provided that the governmental action would be permanently enjoined if all compensation owed was not paid within 3 years. This provision is not included in the substitute. Also, the original bill provided that the state would be liable for compensation owed as the result of takings by political subdivisions that occurred as the result of compliance with state mandates. This provision is not included in the substitute. Takings Impact Assessments. The original bill provided that a political subdivision must include in its public notice a reasonably specific summary of the takings impact assessment performed for that particular action. The substitute provides that the notice shall include a copy of the takings impact assessment. In SECTION 5 of the bill, the substitute specifically states that the comptroller's report shall be limited to an analysis of the procedural compliance of state agencies with the assessment requirements of the Act. The report is not to include qualitative reviews or evaluations of state agency actions. This was not clear in the original bill. SUMMARY OF COMMITTEE ACTION S.B. 14 was considered by the committee in a formal meeting on April 24, 1995. The committee considered a complete substitute for the bill. The substitute was adopted without objection. The bill was reported favorably as substituted, with the recommendation that it do pass and be printed by a record vote of 8 ayes, 0 nays, 0 pnv, 1 absent.