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Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University
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Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Dec 13, 2015

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Page 1: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Measure 37 and the Economic Illusions of Takings

William Jaeger

Department of Agricultural and Resource EconomicsOregon State University

Page 2: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Measure 37 as passed in 2004

• If enactment/enforcement of a land use regulation has the effect of reducing a property’s value: – Government must pay compensation– Or waive the offending regulation

• Determining if a land use regulation has reduced a property’s value imposes an enormous burden on government.

Page 3: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Hypothetical Illustration used by Oregonians In Action in state Supreme Court brief

$2500 $1500 $500

Before (Regulation enacted) After

Regulated land (use A only)

Unregulated land (use B)

Page 4: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Hypothetical Illustration -- more plausible version

$2500 $1500 $500

Before (Regulation enacted) After

Regulated land (use A only)

Unregulated land (use B)

Page 5: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Hypothetical Illustration -- another plausible version

$2500 $1500 $500

Before (Regulation enacted) After

Regulated land (use A only)

Unregulated land (use B)

Page 6: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Hypothetical Illustration – one more plausible version

$2500 $1500 $500

Before (Regulation enacted) After

Regulated land (use A only)

Unregulated land (use B)

Page 7: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Hypothetical Illustration – more alternatives

$2500 $1500 $500

Before (Regulation enacted) After

Regulated land (use A only)

Unregulated land (use B)

Page 8: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Two practical alternatives:

#1: “Single Exemption” (removal from one property only)

• Estimates windfall gains not reduction in value

• Will always be positive• Will greatly exaggerate “reductions in value”

Page 9: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 10: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Taking Portland claims at face value:

If you removed these regulations: • Developed area grows to 3.6 times current size

• 650,000 new acres are developed

• New developed land bought at $40,000/acre

• Total new land value: $26 billion

Page 11: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Alternative method:

#2 “Before-and-After” (compare value before with value after)

• Based on valid economic reasoning• Will produce “correct result” most of the time• Will produce incorrect result in some cases

• Solution? -- “Just-before and just-after”

Page 12: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

“Our planning system lowers the value of private property in Oregon by $5.4 billion a year.”

– Oregonians in Action, 2004

Over 25 years, that would add up to

losses of $5000/acre

Surely that would be observable in data

on land values in Oregon!

Page 13: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Empirical Study

• Samples of vacant parcels of land – in three Oregon counties, two Washington counties

• Traced land values back in time to before land use regulations (1970-2002)

• Compared trends for regulated, unregulated lands within counties, between states

Page 14: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 15: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 16: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 17: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 18: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 19: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 20: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.
Page 21: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Figure 14. Growth in Median Agricultural Land values, Baker and Kittitas counties

0

1000

2000

3000

4000

5000

6000

1974 1979 1984 1989 1994 2000

Year

Val

ue p

er a

cre

(200

5 do

llar

s)

Baker

Kittitas

Page 22: Measure 37 and the Economic Illusions of Takings William Jaeger Department of Agricultural and Resource Economics Oregon State University.

Summary• The “single exemption” approach to Measure 37 is not a

valid way to determine “reduction in value.” It will indicate a reduction in value even if none has occurred.

• This same “single exemption” way of thinking may be the reason many landowners believe they have been harmed.

• Data on land value trends to not support the claims that Oregon’s land use system has systematically reduced the value of lands subject to these regulations.

• Oregon’s land use system, has however, created many tempting opportunities for “windfall” gains for those who can secure waivers.