Brian Hines
10371 Lake Drive SE • Salem, Oregon 97306 USA • Phone/fax: (503) 371-8892
• www.thehinessight.com
Measure 37 shouldn’t be a guarantee to get rich
(Written version of oral testimony presented to the Joint Committee on Land Use Fairness on Tuesday, February 6, 2007.)
Expectations.
When we moved into our homes, me and my rural neighbors in the south Salem hills never expected that our wells might go dry because of a 217 acre Measure 37 subdivision that the claimant hopes to build on farmland that is designated “groundwater limited.”
We also expected that any changes to the zoning of EFU (exclusive farm use) land would occur through an orderly, fair, and open process. Measure 37 dashed both expectations.
Absent Measure 37, the subdivision proposed by Leroy Laack would need to receive a conditional use permit and have a ten acre minimum lot size. He initially wanted lots averaging two to three acres, even though the property is in an area where water experts say five acres is needed to support a well.
At the moment Marion County is holding Laack to a five acre minimum. That’s good, but the Keep Our Water Safe Committee formed by concerned residents shouldn’t have had to spend $13,000 and countless hours fighting a Measure 37 subdivision that endangers our groundwater.
Leroy Laack also had an expectation: to make lots of money from his property investment. Not to live on that land, not to become our neighbor. But to reap as much profit as possible from his investment.
There’s nothing wrong with making money. But there are no guarantees in investing. It’s risky. Part of that risk involves government decisions that can change the value of an asset. This happens all of the time, with all sorts of investments.
Bond prices rise and fall when the Federal Reserve changes interest rates, or the amount of government borrowing to finance deficits changes. Oil futures are affected by foreign policies affecting the Middle East. Investors in health care stocks have to watch Medicare and Medicaid reimbursement rates.
Here’s a personal example: I owned some limited partnerships prior to passage of the Tax Reform Act of 1986. A financial planner had urged me to buy them for their tax benefits. Those benefits largely disappeared after 1986.
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I didn’t cry, “Unfair! This is a government taking! Rules were changed in the middle of my investment game. Either I should be compensated for the money that I’ve lost, or the Tax Reform Act should be waived for me because I bought my limited partnerships when other tax laws were in effect.”
I never ever thought of this. I realized that investing is risky. Situations change. As they do, the value of an investment rises and falls. If you want a sure return on your money, keep it in a bank account.
I hear talk about Measure 37 restoring “constitutional rights.” Huh? The Constitution doesn’t guarantee that you’ll make money on a real estate investment. It doesn’t guarantee that laws won’t change during the time you own a piece of property. Yet Measure 37 is predicated on the assumption that if the value of property has been reduced by government action, you’re entitled to be compensated.
That’s ridiculous. Most people I’ve talked to about Measure 37 recognize this. They make a distinction between someone whose primary motivation is to live on their land, versus someone whose sole desire is to make money from their land.
A single home on a Measure 37 claim, no problem. A large subdivision on a Measure 37 claim, no way. In between a single home and a subdivision—that’s where the Land Use Fairness Committee will have to strike a balance.
My neighbors and I are very much in favor of SB 505. Philosophically it’s in tune with my basic point: there’s no reason why people who buy property for investment purposes should be protected from government actions that reduce the value of what they own.
Speedily remove restrictions preventing people from building a single home on their land. But put a hold on large subdivisions that are likely to cause irreparable harm to surrounding property owners.
Again, there’s a big difference between wanting to live on land, and wanting to make money from land. Real estate investment shouldn’t get special treatment under Measure 37 compared to other sorts of investments.
Governmental actions and laws affect the value of many kinds of assets. There’s no reason why property owners whose primary aim is to make money from their land should be able to roll back the clock on government decisions they don’t like.
If this is done for real estate investors, why not do it for all investors? I would have loved to be able to have the 1986 Tax Reform Act waived for me because it reduced the value of the limited partnerships that I owned before that law was passed.
Obviously that would have been absurd. Just as obviously, Measure 37 shouldn’t be a guarantee to get rich from a real estate investment.
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