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PLAIN ECONOMIC SENSE
For release May 6, 1999
Column 377
Condemnation of Agricultural Land in Iowa?
By Mark A. Edelman
Extension Public Policy Economist
Iowa State University Extension to Communities
[Editor's Note: Column 377 in this series has been revised and reissued because the analysis contained in the original column was based on a version of House File 476 that did not contain final amendments by the Iowa General Assembly. Because a number of amendments were made near the close of the session, the final version of the enrolled bill was still not available to the public on May 5. However, based on a review of amendments, the final version struck provisions relating to "century farms" and gave authority to local compensation commissions to determine--if requested by the land owner--whether the use of condemnation was necessary for the placement of an industry in the community.]
Recently, the Iowa General Assembly passed HF 476 and sent it to the governor. As of this date, the governor has not signed the bill. This proposal has generated a lot of emotion from agricultural interests concerned about property rights as well as cities and other interests that are concerned about the economic development implications.
What Does HF476 Do? In a nutshell, the bill would limit state and local government use of "condemnation" of agricultural property for "private development purposes." "Public Uses" would remain unaffected.
"Agricultural land" means a tract of 10 acres or more used for the agricultural purposes outlined and not subdivided into parcels of less than 10 acres. "Private Development purposes" means the construction of, or improvement related to, recreational trails, recreational development paid for primarily with private funds, housing and residential development, or commercial or industrial enterprise development.
"Public use" or "public purpose" or "public improvement" does not include the authority to condemn agricultural land for private development purposes unless the owner of the agricultural land consents to the condemnation. An exception may be granted if there is a finding that the project is "necessary for the placement of an industry in the community," as determined by a local compensation commission.
The bill contains provisions that would prohibit cities from including "agricultural land" in certain Tax Increment Financing (TIF) Districts created by cities as "economic development areas," unless the owner agrees to be included.
The proposal also includes several procedural additions and requirements that raise the cost of condemnation proceedings for any agency or unit of government using eminent domain. Finally, the bill requires an agency using condemnation to pay to a previous owner the difference between the price received and the price paid to the previous owner for any part of the condemned parcel that may later be sold to another party in the future.
What Issues Arise? HF476 increases property rights for owners of agricultural land under eminent domain that it does not give to any other class of citizens or property owners. This may raise constitutional questions regarding Article I, Section 6 of the Iowa Constitution, which states, "all laws of a general nature shall have a uniform operation; the general assembly shall not grant to any citizen or class of citizens, privileges or immunities, which, upon the same terms shall not equally belong to all citizens." While Farm Bureau's legal sources have identified case law for concluding the bill is constitutional, other attorneys indicate the issue merits further study. In the final analysis, the Supreme Court's opinion is the one that counts.
Second, no time limit is placed on compensating the previous owner for portions of condemned property sold to a third party. Are the courts to presume the previous owner must be compensated if the price received is higher than originally paid on any part of a condemned parcel that might be sold 10 or 50 years down the road?
Third, agricultural property owners inside city limits may choose to be excluded from certain TIF Districts created by cities as "economic development areas," even though the parcel may be next to existing infrastructure and considered a prime area for development by local planning/land use officials. No other citizens have rights to individually opt out of TIF areas.
Finally, "agricultural property" within the city limits is treated as "agricultural property" outside the city limits for Compensation Commission purposes. Therefore, a majority of four of six Compensation Commission members may represent owners of agricultural property outside of city limits and at the same time impose limits on growth inside city limits, even though the project may be consistent with local long term land use plans approved by city and/or county land use planning processes.
What Are the Impacts on Land Use? If all the legal issues are sorted out, there may be little direct impact on condemnations. Most residential developments are typically done by private sector developers that donít have authority for using eminent domain. Most cities that establish business and industrial parks avoid using condemnation proceedings, if at all possible. In many cases, governmental units are typically willing to pay above market prices for property needed for public purposes to avoid the cost of condemnation.
However, the implied threat and ability to ultimately move to a condemnation proceeding is a consideration that influences government units and owners of strategically located property as they negotiate the amounts willingly offered and willing accepted. As a result, HF476 will likely increase costs for government to acquire property as the property rights are shifted.
Finally, it is not clear that HF476 improves land use planning decisions at the state or local level. Passage of HF476 before other legislation setting forth a comprehensive land use planning process may be counter-productive. On the one hand, conversion of agricultural land may be slowed a little. On the other hand, if owners of a farmland parcel surrounded by residential or industrial development are not willing to sell their property at any price, the enhanced property rights under HF476 will assist the owners in preventing development. In turn, developers and local government may be forced abandon some projects or expend more funds for infrastructure extensions and to acquire land further out. In such cases, this bill may contribute to "leap frog" development and urban sprawl rather than to contribute toward preventing it.
Edelman is a professor of economics and an extension public policy specialist at Iowa State University.
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