Category: Public Comments and Testimony

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Economy Public Comments and Testimony RailRunner Tax and Budget

Paul Gessing’s Testimony on Free Market Criminal Justice Reforms

Testimony Before Courts, Corrections, and Justice Interim Committee
Friday, August 23rd, 9am, Room 322

Rep. Gail Chasey, Co-Chair
Sen. Richard C. Martinez, Co-Chair

Introduction

Good morning Madame and Mr. Co-Chair, members of the Committee. My name is Paul Gessing, I’m President of the Rio Grande Foundation, New Mexico’s free market public research institute or think tank. We’re based in Albuquerque, NM. Thank you for inviting me to participate in this hearing.

I’ll be the first to admit that I am not an expert on criminal justice issues. That said, criminal justice issues are by definition economic issues. New Mexico’s economic policies are the bread and butter issues of my organization. Criminal justice policies impact the economy in three major ways:

1. Direct spending on the criminal justice system including everything from police to prisons;

2. Foregone revenues including everything from potential taxes paid (or not paid) by those who are incarcerated or unable to find work due to their criminal records to the economic potential to tax drugs like marijuana;

3. Lost economic growth due to crime/inadequate public safety.

While I don’t consider myself an expert on criminal justice issues, I am one of the original signatories of the Right on Crime statement of principles. This statement has now received support from 54 conservative leaders across the nation.

The basic premise is that the traditional “lock em up” mentality that has historically dominated conservative thinking on crime is too expensive and lacking in effectiveness to continue without a serious re-evaluation of the goals, tactics, and fiscal implications of our criminal justice policies.

Background

To be clear, New Mexico is historically not a state that has followed conservative criminal justice policies. Incarceration rates, for example, are far lower here than they are in most surrounding states. That does not mean that New Mexico policymakers are doing everything right or as cost-effectively as possible, it just means that “lock em up” has not been the criminal justice model in New Mexico as it has been in Texas, for example. That also doesn’t mean that policymakers in our state can’t learn something from what other states are doing on criminal justice issues.

Let’s start with some data. I have provided the Committee with a regional breakdown of the 2012 Peace Index which is put together by an organization called Vision of Humanity. The most notable aspect of this data for New Mexico is the high rates of homicides and violent crime (and relatively low rates of incarceration, lower than any state in the region besides Utah).

The crime problem in New Mexico is not limited to violent crime. According to 2011 data from the FBI’s Uniform Crime Reports, New Mexico has relatively high rates of property crime relative to the rest of the region. Notably, the entire southwest region has relatively high rates of most crimes.

Personally, as a resident of Albuquerque’s West Side, I can attest to the fact that crime can be a blot on life in New Mexico. Having lived for 8.5 years in Washington, DC and its inner-suburbs with no problems, I have witnessed a drive by shooting in my neighborhood and our car has been broken into as well. One of my former employees, Paige McKenzie was beaten within an inch of her life on the side of a road in Bernalillo.

My family and I love New Mexico and can’t see moving, but more timid souls might have simply left. This is lost talent and lost economic activity for our businesses and our economy. Worse, those people tell their friends and put their message on social media. Word spreads.

But I’m not here to say we need to spend more money on criminal justice or even that hiring more police is the answer. Rather, I think we need to re-deploy resources to improve our justice system in ways that keep violent offenders behind bars, rehabilitate those who can be rehabilitated, keep those who are not real threats in the workforce and involved with their families, and reduce contact with the criminal justice system among those who have no need to be involved in it at all.

There are some specific ways to reduce crime and/or reduce the costs of criminal justice at the same time. These have been outlined in Rio Grande Foundation policy papers including the 2009 “Criminal Justice Policy in New Mexico: Keys to Controlling Costs and Protecting Public Safety” and an opinion piece “Reforms can cut costs, improve public safety.”

1. Drug Courts: New Mexico has 853 inmates incarcerated for drug possession.

Drug courts are a proven alternative to incarceration for low level drug offenders. Drug courts offer intensive judicial oversight of offenders combined with mandatory drug testing and escalating sanctions for failure to comply. According to the National Association of Drug Court Professionals, the average recidivism rate for those who complete drug court is between 4 percent and 29 percent, in contrast to 48 percent for those who do not participate in a drug court program. Similarly, the General Accounting Office reported recidivism reductions of 10 to 30 percentage points below the comparison group.

A 2006 California study found drug courts cost less than $3,000 per participant, far cheaper than prison.12 New Mexico has 35 drug courts in 25 of 33 counties, which have processed 9,500 offenders since 1994. The recidivism rate of New Mexico drug courts is 11.9 percent. A New Mexico Sentencing Commission study of the Bernalillo County Metropolitan DWI Drug Court found graduates were one-third as likely to recidivate as comparable offenders who did not participate in the drug court.13 As recommended in the June 2008 report by Governor Bill Richardson’s Task Force on Prison Reform, New Mexico can benefit further from the expansion of drug courts.

If we assume that half of these drug possession offenders should not be eligible for diversion from prison because they had large quantities of drugs that are associated with dealing or have too many prior offenses, New Mexico could still save $13.2 million based on the state’s $31,000 annual per-prisoner cost of incarceration.

2. Another source of potentially significant savings lies in diverting from prison probationers and parolees who are revoked for technical violations of their supervision, not new offenses. In 2008, there were 413 such revocations to prison. Instead, New Mexico could use a graduated sanctions matrix that relies more on intermediate sanctions such as curfews, electronic monitoring, supervised work crews, and short periods of incarceration in county jails. If this diverted just half of this pool of offenders, it would save $6.4 million.

3. Law Enforcement Assisted Diversion (LEAD), otherwise known as pre-booking diversion:

Law Enforcement Assisted Diversion identifies low-level drug offenders for whom probable cause exists for an arrest and redirects them from jail and prosecution by immediately providing linkages to treatment and social supports including harm reduction and intensive case management. By diverting eligible individuals to services, LEAD is committed to improving public safety and public order, and reducing the criminal behavior of people who participate in the program.

4. Research has proven that treatment is effective. In Arizona which also implemented this policy more than a decade ago, a study by the Arizona Supreme Court found that 77 percent of drug offenders got clean as a result of the treatment. The national Drug Abuse Treatment Outcome Survey of 10,000 participants found that residential treatment resulted in a 50 percent reduction in drug use and 61 percent reduction in crime while outpatient treatment resulted in a 50 percent reduction in drug use and 37 percent reduction in crime. Dr. Nora Volkow, Director of the National Institute on Drug Abuse (NIDA), stated, “Research findings show unequivocally that drug treatment works and that this is true even for individuals who enter treatment under legal mandate.”

Performance-Based Probation Funding: In December 2008, Arizona implemented performance-based probation funding. Under this incentive-based approach which has not been adopted in New Mexico, probation departments receive a share of the state’s savings from less incarceration when they reduce their revocations to prison without increasing probationers’ convictions for new offenses. The probation departments are required to reinvest the additional funds in victim services, substance abuse treatment, and strategies to improve community supervision and reduce recidivism.

Unlike Arizona, New Mexico has one unified, statewide probation and parole department. The Pew Center on the States Public Safety Performance Project recommends that a performance based probation funding system appropriate 30 percent of savings from a reduced revocation rate to the department and an additional 5 percent if the department demonstrates improvement in employment, drug test results, and victim restitution collection. Although results of Arizona’s measure are not yet available, Ohio adopted a somewhat similar funding policy called RECLAIM

(Reasoned and Equitable Community and Local Alternative to Incarceration of Minors) that gives money to counties that treat juveniles who would otherwise be incarcerated and deducts funds for low-risk juveniles who are sent to state facilities. The policy has been highly successful, as the recidivism rate for moderate risk youth placed through RECLAIM was 22 percent, compared with a
54 percent rate for such offenders in state lockups.

5. New Mexico can also join 36 other states by implementing a policy to release geriatric inmates who are no longer a danger to the public. Such inmates are even more expensive to incarcerate due to health care costs.

Based on Oklahoma’s experience, 17 infirm New Mexico inmates could be released every year on geriatric parole with savings of $844,594, which assumes a higher $50,000 incarceration cost per year that is supported by research on geriatric inmate medical costs. Geriatric inmates have a recidivism rate of less than five percent and not a single participant in Oklahoma’s model program has committed a new offense.

6. Finally, more halfway houses would provide an alternative for the 130 inmates who have been paroled but \await release because they lack housing. A halfway house costs only $25 a day, while prison is $85 a day. Assuming 120 days of time at a halfway house instead of prison, this policy would save $936,000.

7. Some other reforms would provide long-term benefits by making it more likely that ex-offenders will become productive members of society rather than career criminals going through prison’s revolving door. Currently, 41 percent of New Mexico probationers and parolees are employed. Employed ex-offenders are three times less likely to re-offend. One barrier to employment is that New Mexico employers have been held liable for negligent hiring of employees with questionable backgrounds.

The Urban Institute noted, “The high probability of losing coupled with the magnitude of settlement awards suggest that fear of litigation may substantially deter employers from hiring applicants with criminal history records.” That fear is not without basis. Employers lose 72 percent of negligent hiring cases with an average settlement of more than $1.6 million. New Mexico can address this by immunizing employers from such suits – suits should be permitted for failure to supervise but not merely for hiring an ex-offender.

8. Barriers for Nonviolent Ex-Offenders to Obtain Occupational Licenses: Under the New Mexico Criminal Offender Employment Act, even convictions not directly related to the occupation are grounds for ineligibility. One solution is to allow ex-offenders to obtain provisional licenses that are valid for a shorter period of time and subject to immediate revocation if they commit a new offense, violate a term of probation or parole, or violate a rule of the occupation. Such provisional licenses provide a positive incentive for success while still holding the ex offender accountable.

Texas lawmakers enacted House Bill 963 in 2009 authorizing provisional licenses. The legislation specifies that a provisional license becomes a permanent license after six months if the license holder is in full compliance.

The Rio Grande Foundation has done considerable work on the issue of occupational licenses. While we’d love to see a reduction in their number, scope, and expense, the very least we can do from a criminal justice standpoint is to not throw up additional barriers in front of ex-offenders.

9. Use of Private Facilities. The recent decline in New Mexico’s prison population coupled with the potential of many the proposals outlined here for controlling the demand for prison beds should render the current capacity adequate. However, to the extent new capacity is needed at some point, expanding an existing private prison would be the most economical solution. Private prisons are proven to be less costly to operate.

A Rio Grande Foundation study examined per-prisoner department of corrections budgets across 46 states and found that states with at least 5 percent of their prison population in private prisons spent about $4,804 less per prisoner in 2001 than states without any private prisons.

The study further found that cost savings increase along with the percentage of inmates in private facilities. For example, New Mexico was calculated to save more than $50 million as a result of having 45 percent of its inmates in private prisons. Similarly, a December 2007 study by Vanderbilt University researchers found that states with a higher percentage of inmates in private facilities had lower public prison costs per inmate, suggesting that competition drives efficiencies in state-run prisons.

10. On this point, I want to clarify that the views here are my own and those of the Rio Grande Foundation, not Right on Crime. According to Harvard Economist Jeffrey Miron who visited New Mexico earlier this year, completely legalizing and taxing marijuana would result in total savings/revenue increase of $52 million annually. $33 million of that would come from reduced expenditures. Were New Mexico to tax marijuana at a reasonable rate that maximized profits, it would collect approximately $19 million annually. In essence, we could pay the total operating and infrastructure costs of the RailRunner and have a few million left over for those balloon payments coming down the road.

Barring such an aggressive approach, it is certainly worth considering HB 465 as introduced by Rep. Kane and passed the House during the 2013 legislative session. The Fiscal Impact Report for the bill was inconclusive in terms of cost-savings, but they would seem to be significant.

Conclusion

I have laid out for you 10 points on criminal justice issues that could be considered by those of all political stripes when dealing with criminal justice issues.

Each of these proposals, if adopted, would:

• Reduce direct spending on the criminal justice system including everything from police to prisons;

• Increase potential taxes paid into the system;

• Reduce lost economic growth due to serious crime issues/inadequate public safety.

I hope you’ll carefully consider these ideas and consider them in a bi-partisan manner.

Categories
Energy and Environment Public Comments and Testimony

Testifying Before the Environmental Improvement Board on Haze Regulations

The Environmental Improvement Board has voted to adopt the less-stringent, less-costly haze restrictions on the Four Corners power plant. We applaud this move and hope the EPA is willing to accept the state-level regulations. Nonetheless, during the public testimony period on the issue, I made sure to add the Rio Grande Foundation’s voice in support of the more reasonable haze reduction measures.

 

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Public Comments and Testimony Research

New Poll Shows New Mexicans Support Expanded Initiative and Referendum

The Rio Grande Foundation and Citizens in Charge Foundation, a national voter rights group focused on the ballot initiative and referendum process, have released a new poll of New Mexico voters on the issue of giving voters in the state greater ability to directly vote on issues in state elections. Read the full story here.

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Rio Grande Foundation President Paul Gessing’s Remarks to New Mexico’s Environmental Improvement Board

On March 1, 2010, the unelected Environmental Improvement Board held a public comment session during which citizens were able to offer their comments to the Board on a proposal to limit carbon emissions in New Mexico to 25% below 1990 levels. Comments were limited to three minutes. I used my three minutes to demand recusal of three EIB members due to self-evident conflicts of interest.

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Public Comments and Testimony Tax and Budget

Testimony before the New Mexico Legislature on the Taxpayer Protection Act

The following testimony was delivered before the Legislative Finance Committee of the New Mexico Legislature on September 26, 2007:

Good morning and thank you for the opportunity to discuss the Taxpayer Protection Act and the idea of tax and spending limits in New Mexico with you. Most of you are familiar with the Rio Grande Foundation, but for those of you who are not, we are New Mexico’s free market think tank.

We research and write on a wide array of public policy issues from the perspective of limiting government at both the state and local levels here in New Mexico. We do not come to this position randomly or simply to fill a niche, but because thousands of years of experience and hundreds of years of study and analysis going back at least to the time of Adam Smith have shown that governments, and by extension elected officials, are less efficient at allocating scarce resources than are the individuals who earned the money in the first place.

Put another way, there are only four different ways in which items are bought and sold and limited resources are allocated:

1.      You purchase for yourself. This is widely recognized to be the most efficient because no one knows better than you what you want and since you are paying for the item, there are strong incentives not to go over-budget;

2.      You purchase an item for someone else. Under this type of arrangement, the purchaser is able to maintain cost control, but has inadequate information about what the other party wants. As anyone who has ever purchased a Christmas or birthday present knows, figuring out what people want is a challenge!

3.      Someone else purchases what they want and you pay for it. Under such a plan, the person making the purchase will probably get what they want, but may not have the regard for price they otherwise would.

4.      An individual purchases something for someone else with someone else’s money. Under these circumstances, an individual or group of individuals is buying something for someone whose exact needs they are unaware of and with money that they have fewer incentives to be cautious with. This is the least efficient model and it also happens to describe the way in which government operates.

While we all like to think that each of us are as responsible with the resources of others as we are with our own, the fact is that even when done with the best of intentions, this is not always possible. That is why the Rio Grande Foundation’s philosophy is that when possible, individuals should maintain control over the resources they produce.

This is why the Taxpayer Protection Act is so important for New Mexico. The Act would amend New Mexico’s constitution to limit spending growth to 3.6 percent plus the rate of population growth in the state. In the event of a surplus, 60 percent of the unspent revenue would be deposited in the severance tax permanent fund with the other 40 percent returned to New Mexicans in the form of a rebate.

According to Rio Grande Foundation research, if it had been in place since FY 1989, the Taxpayer Protection Act would have resulted in $660 million being refunded to the taxpayers and an additional $990 million being deposited in the state’s permanent fund. Better still from a governance perspective, rather than growing in fits and starts with the economy as a whole and volatile oil and gas revenues, New Mexico’s budget would have grown at a steady but sustainable rate over the years.

I know that many of you are concerned about Colorado and its supposedly negative experience with its Taxpayers’ Bill of Rights and I will address that later in my testimony, but first I want to assure you that you are not alone in considering spending limits. According to the National Conference of State Legislators, 30 states operate under some kind of tax or expenditure limitation. [1] In 16 of the states that demand a supermajority – that is greater than a 50% plus 1  vote of the legislature in order to raise taxes – vote requirements range from two-thirds to three-quarters of each legislative body.

States that require a supermajority to raise any or all taxes include: Arizona, Arkansas, California, Colorado, Delaware, Florida, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Nevada, Oklahoma, Oregon, South Dakota, and Washington.

The 14 states that limit taxes and spending primarily by means other than a supermajority use a wide variety of tools to achieve varying levels of tax and/or spending restraint. Colorado’s Taxpayers’ Bill of Rights is the best-known, most all-encompassing, and strictest of these other means of limiting taxes and spending.

If you believe, like we do, that individuals can by and large spend their own money more effectively than the government, then, far from avoiding Colorado’s so-called mistakes, the New Mexico should consider the success Colorado has experienced under its strict tax and spending limit.

First and foremost, according to the Bureau of Economic Analysis, average annual per capita personal income in Colorado was $39,000 as compared to New Mexico where the average is below $30,000.[1] In 1992, the year in which the Taxpayer Bill of Rights was enacted, the average personal income of Coloradoans was 17th-highest in the nation. Today, Colorado ranks 8th nationally in personal income levels; the greatest jump of any state over that time.

Colorado also outperforms New Mexico when it comes to poverty eradication. According to the Census Bureau, Colorado’s 2006 poverty rate of 12 percent is below the US average of 13.3 percent and far below New Mexico’s rate of 18.5 percent. [2]

Far from being detrimental, Colorado’s constitutional tax and spending limit has helped raise personal incomes and reduce poverty at the same time.

In 2005, voters narrowly approved a measure to allow the state to spend more money than the inflation plus population rate called for under the limit. That said, it is important to point out that voters still have the final say over any and all tax increases.

All of this does not mean the Taxpayer Protection Act being discussed today attempts to copy Colorado’s legislation. I defend Colorado because its comprehensive tax and expenditure limit was the best, most strict limit in the nation.

So, how does the Taxpayer Protection Act compare? Similarities include:

* Both the New Mexico measure and Colorado’s law amend the Constitutions of their respective states. This is important because statutory limits are easily ignored or altered;

* Both acts limit spending to a factor of population growth. This makes sense because government needs to grow in order to provide basic services to increasing numbers of people;

* Both acts return a certain amount of revenues to taxpayers;

There are also major differences between the legislation that Colorado enacted and what New Mexico is considering. These differences reflect both New Mexico’s significant differences with our neighbors to the north and a learning process that has occurred since Colorado’s law was passed 15 years ago:

·        The first major difference is procedural. Colorado’s amendment was adopted by means of a citizen initiative at the ballot box. In New Mexico, we are working through the traditional legislative process to adopt a tax and spending limit;

·        Rather than basing the limit on the combined effects of population and inflation growth, the Taxpayer Protection Act allows for a more generous 3.6% rate of increase than inflation would provide. Since 2000, the annual inflation rate has never exceeded 3.4% and it has averaged 2.8%, thus government would be allowed to grow somewhat faster in New Mexico than has been the case in Colorado;

·        While Colorado’s law returns all excess revenues above the combined inflation and population growth rate, the Taxpayer Protection Act provides for New Mexico’s future by allocating 60 percent of the excess to the Permanent Fund. The other 40 percent of revenues would be returned to taxpayers;

·        Whereas Colorado’s act applies to all spending in the state, New Mexico’s act would apply only to General Fund spending;

·        Colorado’s act demands voter approval for any and all tax increases at both the state and local levels. The Taxpayer Protection Act does not address local government spending and does not require voter approval for tax increases.

We at the Rio Grande Foundation are supportive of this effort to limit taxes and spending in New Mexico. I think it is sufficiently clear that what we are trying to do here is not to “import” a Colorado law, but to promote an idea that has become popular nationwide having been adopted in some form or another in two-thirds of all states in the country.

The Taxpayer Protection Act would ensure that unsustainable 11 percent annual spending increases induced by volatile oil and gas revenue are a thing of the past. Preventing out-of-control spending is important if we are to avoid economically-harmful spending increases that will harm New Mexico’s long-term economic potential.

Limiting government growth to a sustainable pace is the single-best thing that legislators could do for the state’s economy.

Now is the time for New Mexico to act to limit spending. I hope you will seriously consider it during the upcoming legislative session.

[1] State Personal Income 2006, http://www.bea.gov/newsreleases/regional/spi/spi_newsrelease.htm.

[2] US Census Bureau, “Number of People in Poverty 2006,” http://www.census.gov/prod/2007pubs/acs-08.pdf.

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Notable News Public Comments and Testimony

Free Market, Free Thinking: A Conversation with Paul Gessing of the Rio Grande Foundation

Albuquerque’s alternative weekly newspaper, The Alibi, recently did a full-length interview with Paul Gessing, President of the Rio Grande Foundation.  Paul discusses what exactly the Foundation does, not to mention both the intellectual and physical journeys that led him to New Mexico.

Click here to read the story. Click here to read a reader’s hostile response to the piece.

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Economy Public Comments and Testimony

Rio Grande Foundation President Paul Gessing’s Comments to Governor Bill Richardson’s Task Force on Eminent Domain Use

Chairman Bullington and distinguished Members of the Task Force, thank you for inviting me to address you on the issue of eminent domain in New Mexico and what, if anything should be done about it. My name is Paul Gessing. I am President of the Rio Grande Foundation. The Foundation is registered as a 501c3 in the state of New Mexico. Our mission is to promote the ideas of Liberty, Opportunity, and Prosperity here in the state. We do this by informing New Mexicans of the importance of individual freedom, limited government, and economic opportunity. We receive financial support from over 200 donors and foundations and the approximately 1,000 people who have signed up to receive our regular updates.

Although the Rio Grande Foundation is an independent organization dedicated to New Mexico, we are part of a nationwide network of like-minded policy organizations called the State Policy Network. A bulk of our work deals with economic policy, but we also support reforms that promote fair, competitive elections and greater participation in the political process on the part of the people of New Mexico.

While we had a number of concerns about the eminent domain bill that Governor Richardson vetoed earlier this year, we believe that its limited protections would have been better than nothing. However, if this task force’s recommendations assist Governor Richardson and the Legislature in creating stronger protections for property owners than last year’s bill would have achieved (with specific language along the lines of what Ms. Perkins described to you last week), then we will be extremely pleased.

Property Rights and the Harm of Eminent Domain Abuse

Although eminent domain was not at the top of many Americans’ agendas prior to the Supreme Court’s decision in Kelo, which was handed down in June of 2005, government’s use of the power has been controversial since the founding of the Republic. Back in 1795, in fact, the Supreme Court, ruling in the case of case of Vanhorn’s Lessee v. Dorrance, called eminent domain “The despotic power” and urged states not to exercise that power “except in urgent cases.” The justices went on to say that they could not imagine a situation “in which the necessity of a state can be of such a nature as to authorize or excuse the seizing of landed property belonging to one citizen, and giving it to another citizen.[1]”

We at the Rio Grande Foundation agree with the Court’s 1795 ruling. That is because it is our strong belief that private property rights constitute the foundation upon which all other human freedoms are based. Respect for private property is one of the major differences between America and less-free nations.

As I will explain later on in my testimony, those concerned with promoting long-term economic growth have a significant interest not only in maintaining individual property rights, but in protecting themselves against the often misguided and expensive plans of government officials and politically-connected developers.

First, let me briefly describe the situation as it stands now. Despite the explicit prohibition against taking private property for public use without just compensation found in the Fifth Amendment to the United States Constitution (and despite the precedence provided by the Court’s 1795 ruling), the Supreme Court’s 5-4 decision in Kelo throws the door open for eminent domain as long as government officials have a “plan” and believe that there will be some economic benefit from the taking. Thus, in just over 200 years we have moved away from using eminent domain to facilitate the construction of roads and bridges (which clearly fulfill the “public use” requirement), to allowing eminent domain to pave the way for a shopping center or new corporate offices. In the post-Kelo world, as long as government officials believe that tearing down a Motel 6 and giving the land to the Ritz Carlton will generate greater tax revenue, the use of eminent domain is perfectly acceptable (this example was used by Justice Sandra Day O’Connor to clarify the arguments being made by the City of New London lawyers during the Kelo hearing).

Although the Kelo decision put eminent domain front-and-center in American public opinion, the fact is that the habit of using eminent domain to force private-to-private property transfers had become all too commonplace in many states even prior to Kelo. In New York alone between 1998 and 2002, there were 146 instances of eminent domain for private use – and these are just those instances that the media publicly documented; we have no way of knowing how many so-called consensual or voluntary takings occurred where property owners were threatened with eminent domain. These takings were primarily based on precedents set by two court decisions. The first case was the U.S. Supreme Court’s 1954 Berman v. Parker decision, which allowed governments to use eminent domain to seize private property in order to tear down so-called “blighted” areas.

For those of you who are familiar with the neighborhoods of Washington, DC, it was Berman that is largely-responsible for the Southwest quadrant of the city. Unlike much of the city which has managed to retain its charming brick row-houses and is now in the midst of a tremendous revival, the Southwest quadrant – which was home to a predominantly black population – was bulldozed in the 1950s to make way for 1960s and 70s “redevelopment” using massive slabs of concrete that have proven inhospitable to the urban life so prevalent in the rest of the City.[2]

The second decision – the one that really began the trend of eminent domain for private use – was made by the Michigan Supreme Court and is known as the Poletown decision. In this 1981 ruling, the Michigan Supreme Court allowed the city of Detroit to bulldoze an entire neighborhood, complete with more than 1,000 residences, 600 businesses, and numerous churches, in order to give the property to General Motors for an auto plant. That case set the precedent, both in Michigan and across the country, for widespread abuse of the power of eminent domain. It sent the signal that courts would not interfere, no matter how private the purpose of the taking.

New Mexico and Eminent Domain

Thankfully, despite the broad power given to it by the federal government and a State Constitution that offers relatively few protections for New Mexicans, governments in this state have not engaged in the kind of massive abuses of eminent domain found in other states. But, that is not to say that as more people move to New Mexico and as the state continues attracting more businesses and heavy industry – with requisite calls for “economic redevelopment” – that eminent domain abuse will not become a greater problem.

Now, as Rio Rancho Mayor Kevin Jackson discussed last week, there are some specific problems relating to the platting of land in New Mexico and our state’s history that have created added pressure for eminent domain in certain areas. Given a situation in which so many land owners in the areas affected by poor platting have not developed their land and that so many of these parcels of land are owned by individuals residing elsewhere, I can understand why city officials were willing to delegate their eminent domain power to a developer. After all, they had been presented with a seemingly reasonable and generous offer and since “obsolete platting” technically creates conditions of “blight” as defined in New Mexico law, this may have seemed like the simplest option.

Obviously, we’re not dealing with a situation as we saw in Connecticut where Susette Kelo and many of her neighbors had been living in their houses for upwards of 50 years. While Rio Rancho’s use of eminent domain to resolve its platting problem is unlikely to stir up that kind of backlash from the American people or even a majority of New Mexicans, it is not necessarily the best policy either. More importantly, it is vital that opponents of eminent domain reform not use what amounts to a historical anomaly to derail strong eminent domain protections for all New Mexicans.

The Problem of Platting and Blight

I want to stress to this panel that the Rio Grande Foundation is concerned about the likelihood for abuse contained in any “blight” exemption that might be contained in any new eminent domain restrictions. Prior to the Kelo decision, blight was used and abused regularly by state governments in their uses of eminent domain. In fact, in Lakewood, Ohio, the City attempted to condemn homes using eminent domain by calling the area blighted. Why was this community considered blighted? Well, some homes didn’t have an attached two-car garage or they had less than two full bathrooms. Other than that, the homes were well taken care of.[3] My point is that even the most innocent and well-intended blight definition will inevitably be twisted, expanded, and even redefined by special interests over time, so I urge you to keep that in mind when making your recommendations.

I’d like to discuss the specifics associated with the platting issue that was discussed last week and offer some ideas for ways in which legitimate economic development in a poorly-platted area like Rio Rancho might occur without resorting to abusing eminent domain. First and foremost, as was touched on yet not elaborated upon last week, if any property poses a specific physical danger to any nearby other property, there are existing police powers that can be used to address the problem. The fact is that whether the situation is a crack house down the street or the potential for massive flooding, governments can and do have the power to act to protect citizens.

Now, as I understand it from last week’s discussion, Rio Rancho has in the past struck deals with Pulte homes to allow Pulte to essentially “borrow” the city’s eminent domain power in order to develop specific parcels of land that were poorly platted. At the same time, Pulte has provided significant infrastructure to the city and to residents of the new development. This may sound like a win-win deal, but what about those people who wanted to build their retirement homes on that land? Also, did those property owners really get fair market value for their land or was Pulte able to use the eminent domain club to get the land at a reduced cost with enough left over to provide the added infrastructure and still make a tidy profit? I don’t have all of the answers to these questions, but I can tell you that allowing private entities to use government power – even if it appears to be for the good of the community – is likely to be abused.

It is the Foundation’s belief that ultimately a free or at least less coercive environment could have led to a similarly beneficial result. Here I will outline some ideas on how things might have been handled differently and how they might be handled in other similar situations in the future.

  • A private developer ie. Pulte works with individual landowners to assemble parcels of land large enough for development. This is the most logical and simplest of all choices. Why hadn’t it been done before? Possibly, Pulte and other developers, cognizant of the eminent domain threat at their disposal decided against the more difficult and possibly more costly method of assembling parcels of land and decided against this method because they felt they could get the land cheaper with the City’s help.
  • The City could contact landowners throughout the parcel of land and explain to them that if they agree to sell their land which, in its current ownership structure is worth far less than its real market value if assembled, they can cash in on the opportunity to sell for a decent price. As the city assembles those voluntarily willing to part with their parcels of land for a fair price, developers could then bid on the right to develop that particular area.
  • Additionally, Rio Rancho could look to the example the city of Anaheim, California provides, where the Mayor has chosen to solve platting problems as well as stagnant development without resort to eminent domain. In Anaheim, the city used a strategy of overlay zoning and also announced a sort of first-come first-served policy on applications for residential permits.  So, developers who sought approval for 200 condo units would get it, up to whatever the city determined was the maximum. Rio Rancho could do something like that, perhaps with utilities or other permits. That encourages developers to buy and people to sell while it’s still saleable.
  • Lastly, and only in areas that are considered threats to other areas, the city could indeed use its powers of condemnation in order to construct flood control ponds and other tools to ensure the livability of already-developed areas. It is unclear to me exactly how developing particular parcels of land protects adjacent land, but in the likelihood that this is the case, the legitimate use of eminent domain for flood protection is indeed a public use and would be legal under even the most restrictive eminent domain abuse protection legislation. If the City felt it necessary to recoup the costs of these outlays, it could easily do so by taxing existing and future residents to pay for these flood control services.

While it is possible that the City could indeed leverage the resources of private developers in order to improve flood protections and protect homeowners in existing developments (with or without abusing eminent domain), it is hard to see why existing homeowners should have the right to force development of a particular parcel of land in order to protect their homes. These people clearly purchased their houses without the adjacent land being developed. If their properties need additional protections from the ravages of Mother Nature, it is ultimately their responsibility to pay for it.

More “Typical” Eminent Domain Abuse

While it is worthwhile to spend a significant portion of my time discussing the platting issue which is admittedly somewhat tricky, I believe that the more “traditional” forms of eminent domain abuse will become increasingly common in New Mexico. In fact, current efforts to create a “city center” in Ranchos de Albuquerque may fall into this category. Although the village has, to my knowledge, not yet used eminent domain to condemn any property owned by existing landowners, the threat of eminent domain has been made in the pages of the Albuquerque Journal.

Should the village ultimately resort to using eminent domain to take land from one group of private property owners for the benefit of other private individuals or entities and, at least theoretically, the people of Ranchos de Albuquerque, this would qualify as eminent domain abuse. This is exactly the type of development that we believe must be prohibited under New Mexico law.

While Jennifer Perkins covered many of the policy prescriptions and legal changes that New Mexico can implement in order to prevent this type of abuse from occurring, I’d like to point out exactly why governments should refrain from becoming intimately involved in economic development issues in general and why eminent domain is especially ripe for abuse. These are not simply moral arguments; rather they are economic and moral. Time and again, the economic evidence has shown that the economies of nations, states, and cities are improved when governments protect property rights and create an even playing field without picking favorites.

I have already mentioned Michigan’s Poletown decision. In 1981, the Michigan Supreme Court allowed the City of Detroit to seize and bulldoze an entire neighborhood so that General Motors could build an auto plant. More than 4,200 people were displaced from their homes, 140 businesses were lost, as were 6 churches and a hospital. GM paid Detroit $8 million for the property, while the City paid more than $200 million to acquire and prepare the land.[4]

Although Detroit Mayor Coleman Young and GM had promised the project would create 6,000 jobs, when all was said and done, the plant employed only 2,500 people. It is estimated that the Poletown taking resulted in a net loss of jobs and it is clear to me that along with the substantial loss of property tax revenue, the city was ultimately worse off from a revenue standpoint than it was before.

There are dozens of similar examples all across the country.[5]

Conclusion

Simply put, eminent domain for the supposed benefit of economic development is the most significant rationale for abusive use of eminent domain and, if Governor Richardson and the Legislature fail to act, it will become a problem here. To that end, I urge you to use the model legislation and language provided by Ms. Perkins in your recommendations and to keep in mind that when we as a nation have been at our best it has been due to our respect for the rights of the individual. The times at which we have been at our worst have unfortunately been the times when we have forgotten the inalienable rights the Founders set forth in the Constitution in favor of some collectivist agenda.

There is no doubt that eminent domain has a role to play in our political and economic system. Without it, the Interstate Highways would never have been built and countless utility and other projects that are used by all of us on a daily basis would never have been created. Yet, I hope I have clearly illustrated the very real problems that arise when governments at any level abuse or even delegate their powers to private entities.

As Justice O’Connor noted at the end of her dissent in Kelo:

Any property may now be taken for the benefit of another private party, but the fallout from this decision will not be random.  The beneficiaries are likely to be those citizens with disproportionate influence and power in the political process including large corporations and development firms.  As for the victims, the government now has license to transfer property from those with fewer resources to those with more.  The Founders cannot have intended this perverse result.  “[T]hat alone is just government,” wrote James Madison, “which impartially secures to every man, whatever is his own.”

In closing, I would like to remind you that the purpose of this task force is to consider, not whether eminent domain for private benefit can be useful, but whether or not eminent domain is a necessary tool for state and local economic development. While there are situations in which it might be simpler to use government power to quite literally steamroll the opposition, we must create a legal framework deferential to individual property rights, lest those rights be abused.

Thank you for your time and attention this afternoon. I look forward to answering your questions.

[1] Jeff Jacoby, “Abusing Eminent Domain,” The Boston Globe, September 30, 2004,http://www.boston.com/news/globe/editorial_opinion/oped/articles/2004/09/30/abusing_eminent_domain/.

[2] Charlotte Allen, “A Wreck of a Plan: Look at How Renewal Ruined Southwest,” The Washington Post, July 17, 2005,http://www.washingtonpost.com/wp-dyn/content/article/2005/07/15/AR2005071502199.html.

[3] 60 Minutes, “Eminent Domain Being Abused?” July 4, 2004, http://www.cbsnews.com/stories/2003/09/26/60minutes/main575343.shtml.

[4] Castle Coalition, “Redevelopment Wrecks,” June 2006, http://www.castlecoalition.org/publications/redevelopment-wrecks/index.html.

[5] Paul J. Gessing, “Eminent Domain Abuse: If they Can’t Tax It, They’ll Just Take It,” National Taxpayers Union, August 24, 2004,http://www.ntu.org/pdf/ib_ntu_148.pdf.