that we go to and we find the money to pay compensation to property owners. If compensation has to be paid, it comes from the taxpayers, which, when you look at who pays taxes in this country, means primarily middle-income, middle-class people who pay the bulk of the taxes in this country. So what we are talking about is requiring middle-income, middle-class taxpayers to pay the cost of increased compensation to property owners. There is another consequence that will flow, and this one, I would say, is absolutely inevitable regardless of what else happens. This legislation will produce a huge volume of litigation. I asked our lawyers in the Justice Department who do work in this area how often it is the case that the difference between our initial estimate of the value of property and a property owner's is more than a third. The answer was virtually every case over 90 percent. And remember what we are talking about here is a principle that says everytime the Government takes action that results in a reduction in value of property or any affected portion of property of a third or more, the Government will be required to pay compensation. It is clear to me what we are doing is creating a litigable issue that will be litigated in literally hundreds of thousands of additional cases. So at a time when we are all trying collectively to reduce litigation and reduce the kind of government bureaucracy that is necessary to handle litigation and, in general, reduce the complexity of government, it seems to me this is moving in just the opposite direction. For all these reasons, we do believe that enactment of this bill would be a mistake. The Justice Department will join the Vice President in recommending to the President that he veto legislation of this kind with an automatic compensation entitlement, but I hope it will not come to that. It is my understanding that the motivations of this legislation lie primarily in particular problems with particular regulatory statutes and, particular regulatory actions which people have regarded as problems. If that is true, the answer is to focus on those problems and figure out how to solve them. I don't think there is any substitute for that kind of individual judgment. I don't think you can take refuge or recourse to this kind of really radical, abstract principle, which I do think has a major risk inherent in it that it will make it difficult or impossible for the government to function in a wide variety of areas and, alternatively, has the major risk of imposing some major unpredictable, but clearly massive new costs on the American taxpayers. So, for all those reasons, we are opposed to it, and I will stop at that point and would be glad to respond to any questions. The CHAIRMAN. Thank you, Mr. Schmidt. We are glad to have your testimony and the testimony of the administration, but your testimony seems to indicate that, my gosh, if this bill passes, the government is just going to have to pay too much money to take people's property. Much of your argument is based on the supposition that the concept of nuisance is all but nonexistent. But as commonly understood, the doctrine of nuisance is quite significant, and I think would nullify the parade of horribles that your statement and you here today claim that the bill will create. For example, dumping toxic pollutants into the water is clearly a nuisance use and would not require compensation, if regulated, and many others as well. Yet, somehow you seem to believe the opposite. So my question to you is what precedent do you cite to support your claim that a use which causes a harmful physical trespass is not a nuisance use? Mr. SCHMIDT. Well, Senator, the exception for circumstances where there is a violation of State law nuisance doctrine, where the action involved is one that would violate State law nuisance principles, it seems to me gets you almost nowhere in dealing with the areas of Federal regulation that we are concerned about. Really, by definition, the Federal Government has acted in these areas because State law was insufficient. There was seen to be a Federal interest, a Federal need for action. So in the whole range of areas where the Federal Government acts-whether it is the Americans With Disabilities Act or it is bank regulation or it is agricultural restrictions that are designed to assure that sanitary and phytosanitary standards are met are areas where the Federal Government has felt a need to get involved. So in all those areas, in anything that goes beyond something that is already a violation of State law nuisance doctrines, you are going to have a necessity for compensation under this bill if there is a reduction in value of more than a third. I would agree with you that in the single circumstance where there is already a violation of State law nuisance doctrines, then the impact is reduced, but that is a very narrow exception if we are looking at the whole range of Federal regulatory activity. The CHAIRMAN. It may be, but what you seem to be saying is that, my gosh, if the Government has to pay for all these takings, it is going to cost the taxpayers a lot of money. One of the reasons we filed this bill is maybe the Government shouldn't be making so many takings. They should not be making so many takings, just to make that clear. Certainly, they would have to think twice before they start doing it because they are going to have to pay for them if they do, which is what the Founding Fathers really wanted. That is what they contemplated when they wrote the fifth amendment. So just saying, well, it is going to cost taxpayers money, well, that is tough. I mean, the concept of personal property rights, it seems to me, should be valued more than the Government's right to just indiscriminately take property. We brought Nellie Edwards here for one reason. Her case illustrates what is happening to literally thousands of Americans all over the country. Having been one of the authors of the Americans With Disabilities Act and having managed the bill on the floor, I personally don't believe that this is going to cause any takings problems at all to the Federal Government or any excessive taxpayer problems. I personally do not believe this legislation will cause any problems in that area at all. In your submitted testimony, you make the common mistake of claiming that this bill would stop local governments from engaging in normal zoning activities. Now, to set the record straight, you should know that this bill explicitly applies only to the actions of the Federal Government. It doesn't apply to the State government. Now, can you please tell me how you can claim that a town will be subject to a law which explicitly does not apply to it? Mr. SCHMIDT. The bill applies to Federal Government actions and to State actions which are funded by the Federal Government, but we didn't mean to imply, if there is something there that implies it, that State or local law would be directly covered by this law. If I could just respond for just a moment to what you were saying earlier, it isn't a question of not wanting to pay compensation for the taking of property. It is a question of what is going to be viewed as a taking of property. And the question is whether, in deciding whether regulatory action is sufficiently severe and restrictive that it shall be deemed to be a taking, we are going to take into account the various factors that the courts have looked to, such as the initial expectation of the property owner, the nature of the government interest; or whether we are going to have an absolute doctrine which says whenever regulatory action results in a reduction in value, that shall be deemed to constitute a taking. That is the issue. I think we all agree there should be compensation paid when there is a taking, but what we are saying is that this bill goes way, way beyond any doctrine that the courts have ever been willing to accept in terms of defining what a taking is. The question at that point is, obviously, if there is a taking, you have to pay for it, and the point I am making is if you radically expand the definition of "taking," then somebody is going to have to pay that large increase in cost and that is going to be the American taxpayers. The CHAIRMAN. I understand. That is why we have the legislation because the courts have been very narrow in their interpretation of the takings doctrine. They seem to be moving in the right direction, but they are still very narrowly construing it. If your recommendation that this legislation be vetoed happens to occur and the veto is sustained, that would be a victory for big brother against the rights of common citizens throughout this country; at least that is my opinion. It would be a tremendous loss for ordinary Americans. Let me just say this. Whenever we file legislation, I don't consider that the holy grail of legislation. I would prefer to have the administration working with us and telling us we can correct it and how you would like to see legislation. We all want to be concerned about the taxpayers, but every taxpayer out there has got to be concerned that one day what happened to Nellie Edwards could happen to them, and frankly that is why we have that Fifth Amendment Takings Clause in there so the government can't just go in and take people's rights away from them without paying just compensation, not just compensation. So I would suggest to you, and I know that you are this type of a person, is let's look at the bill, let's see what we can do to refine and make it better. We are open to your suggestions. Let's not just lock opposition here today Mr. SCHMIDT. Well, I hear you on that. The CHAIRMAN [continuing]. And just say nothing can be done because it is going to cost the taxpayers money. If it costs the taxpayers money, that is a good thing because it may make the Fed eral Government a lot more reticent to go and swipe property of common, ordinary citizens like Nellie Edwards or literally thousands of people like her across this country who feel like the government is intruding upon their very most important rights. That is all I am saying, so I will take your good faith that we will work together. Mr. SCHMIDT. I hear you on that. I do want to just make one comment on the Americans With Disabilities Act example. That is not an example that we have pulled out of a hat. We had a case where it was an International House of Pancakes which asserted that the ADA requirement to provide access to its bathroom facilities for the handicapped resulted in a reduction in the value of its restaurant, and therefore sought compensation from the Government. Now, as I read this bill, if that International House of Pancakes could show that that, in fact, resulted in a reduction on any portion of its property The CHAIRMAN. Of a third or more. Mr. SCHMIDT. Any portion of its property, though, presumably limited even to a part of a restaurant, if you read those words to mean what they say. That International House of Pancakes would win that case. The CHAIRMAN. Well, what happened to the case? Mr. SCHMIDT. They lost because the court said The CHAIRMAN. Who lost? Mr. SCHMIDT. The International House of Pancakes lost- Mr. SCHMIDT [continuing]. Because the court said that under the other factors which this bill rules out-the question of is this a form of regulation that is achieving a generally acceptable purpose and falls within a range of generally accepted permissible regulation-we are not going to allow compensation, which is the result the courts would reach today under a large range of Federal regulation. But this bill makes no such distinction. This bill says if there is a reduction of any value of property or any portion of property Mr. SCHMIDT [continuing]. Of a third or more, you get to be compensated. It was the Cato Institute witness who testified before the House that, as I say, one of the reasons he liked the bill was that it would bring ADA enforcement to a halt. So we are not trying to generate horror stories here, but we are trying to describe in I hope an accurate way what we see as consequences. The CHAIRMAN. But as one of the authors of the bill, I think that is a horror story because I don't think the courts are going to interpret this law in that fashion to do away with ADA, in spite of what the Cato libertarian representative felt. There are people who feel that the ADA is an intrusive, oppressive bill. That is their right. Mr. SCHMIDT. Well, then they should repeal ADA. That is the point I was making. It seems to me the answer is to focus on forms of regulation you don't like, but if you put into law a kind of abstract principle and say this applies to every piece of regulation, you really do run, I believe, the risk that I was describing earlier. The CHAIRMAN. With regard to ADA, you and I agree on that, and the fact of the matter is that is why we wrote the third or more principle in this. But like I say, let's work together. Let's see if we can come up with something that really protects honest, decent, law-abiding Americans who are getting stiffed by the Federal Government in many cases, and especially on wetlands issues and on a large variety of environmental issues, and who are complaining to us all over this country. Let's see if we can resolve these problems. I will be happy to work with you. Mr. SCHMIDT. We are willing to work with you on that, Senator. The CHAIRMAN. Well, we appreciate it. Senator Biden, we will turn to you. STATEMENT OF HON. JOSEPH R. BIDEN, JR., A U.S. SENATOR FROM THE STATE OF DELAWARE Senator BIDEN. Thank you very much. I apologize, Mr. Chairman, for being late. As you know, there was an emergency caucus called to see if we could agree to an offer made by Senator Dole on this legislation before us today and it did not end until 10:30. I left early to come over here. I had an opening statement, which I will, in my time, make reference to as we go through, but let me go back to the IHOP, as they say in the ads, example, the International House of Pancakes. The point, I understand, General, that you were making is that if, as this bill reads, the restroom in question was considered to be a distinguishable part of—if they identified the portion of the property that the restroom took up as the only focus of whether or not it was being, in fact, impacted on by a third, then, in fact, we would have had a different ruling. If it says that when you look at the entirety of the property that International House of Pancakes owns, wherever they have their facility, and the restroom does not makeup a-they don't focus on that portion that makes up only the restroom; they focus on all of the property. It is unlikely to affect a third of the property, so it might not fall within it. Is that the point you were making? Mr. SCHMIDT. Yes, that is correct, and the doctrine the courts have applied, contrary to this bill, for quite a while, particularly since the Penn Central case decided by the Supreme Court, is you look to the aggregate of the property owner's interest, not to a single portion of it. It comes up much more often, obviously, if you are talking about raw land and you have an impact on 1 acre and you have got another 99 acres. But there is nothing in this bill that would limit the application of that doctrine even to the kind of circumstance that we are talking about with the House of Pancakes. The CHAIRMAN. Well, let's look at-and before I finish, I am going to give this statement because I think it is important to put it in context. It is relatively short, but let me follow up on a few things that the Senator asked you first. He gave the example of toxic waste going into the streams, and that would be a common law nuisance and therefore we would be able to act to stop it. But let me give you a slightly different example so I understand the degree to which, if there is any degree to which, this legislation changes the present jurisprudence on the issue of takings. |