Constitutional principle, applied economics, public-finance theory — the North Carolina Senate was dangerously close Thursday to looking like a serious, deliberative body engaged in constructive dialogue. The contrast to what happened on the Senate floor Wednesday was stark.
The issue on the floor Thursday was a bill that ended North Carolina’s use of “amortization” to compensate the owners of private billboards that governments decide to regulate. Unwilling to offer cash to property owners affected by billboard bans, local governments made use of amortization to specify a certain period of time after the regulation takes effect during which a billboard can remain up and producing revenue.
The outdoor-advertising industry, property-rights advocates, and just plain old sticklers for constitutional safeguards had long objected to this practice. Although it might have sounded plausible that allowing someone to collect revenue for a while was operationally the same as paying them a cash settlement up-front, the modest use of a thinking cap was all that one needed to spot the problem.
The Fifth Amendment requires that private property be taken by government only for public use and only if just compensation is forthcoming. The idea is that if government officials, acting on behalf of their citizens, deem the removal or severe restriction of private property to accomplish a legitimate public purpose — not that I think billboard bans meet this test — then they should be compelled to weigh the potential benefits to citizens against the cost (via compensation) that removal would impose on the citizens. But only billboard owners and their customers are involved in amortization. If those receiving the benefit of a ban, folks who don’t want to look at the signs, bear no financial responsibility, that unconstitutionally tips the scales in favor of government regulation. Or, as Tony Adams of the North Carolina Outdoor Advertising Association put it, amortization isn’t just compensation “because you’re paying yourself to remove your own property.”
As Sen. David Hoyle, D-Gaston, pointed out, amortization for billboards also represented a dangerous precedent. What if local governments later decided to apply the same principle to businesses or homes lying in the path of a highway? No, cash compensation is required to keep government from abusing the rights of its citizens and from imposing excessive regulations that do not justify their costs.
So far, so good. But Sen. Hamilton Horton, the longtime conservative Republican from Forsyth, still had an objection. Billboards typically derive much their economic value from the fact that they are visible from highways. Taxpayers finance the construction and maintenance of highways. Why, then, should taxpayers have to pay to take down the billboards they have already, at least indirectly, subsidized?
For the most part, the state legislature would benefit greatly if it routinely paid more attention to Horton’s sage counsel. But in this case, I disagree — not with the fact that highway construction adds value to billboards, but with the argument that this fact vitiates a claim of compensation. The argument proves too much. Highway projects and other public infrastructure always confer a range of benefits (and costs) across a broad swath of people. For example, a new or widened highway might make a specific location more attractive for a gas station, restaurant, or car wash. That doesn’t mean that if a local government subsequently wanted to condemn the land in order to build an interchange, it could justly avoid paying the current market price.
The Senate ended up approving the compensation bill by a 34-11 margin. Good debate, good result.
Hood is president of the John Locke Foundation and publisher of Carolina Journal.