March 16, 2020
By Trevor Bratton
If you want to buy a
piece of land, then you have to pay a price that the owner is willing to
accept. But too often, government doesn’t have to play by the same rules—and in
Arizona, one town is trying to use that special treatment to acquire a utility
company branch at a bottom-dollar price.
Last year, Bullhead
City filed a ballot
initiative (Prop 415) with
Mohave County to use eminent domain to acquire a branch of the private utility
company EPCOR. The valuations
on the costs of the utility company varied widely—ranging around $55 million according
to the city to $130 million according to EPCOR. The city’s valuation
relied on public records, views of the system from behind a chain-link fence,
and other questionable methods (other abuses aside from those addressed in this
post can be read here).
Eminent domain—the
power of government to confiscate private property for the so-called “public
good”—is often little more than legalized
theft. While Arizona has taken steps to ensure its residents enjoy
the strongest
protections for property rights in the nation, even the Goldwater
Institute’s home state has experienced its share of eminent domain abuse. Bullhead
City’s move to acquire the EPCOR branch is just the latest example.
Setting aside this
questionable behavior, we should ask whether the government should be using
eminent domain for the purpose of acquiring a private utility at all. Public
utility companies often fail
to comply with regulations, and when cited for infractions, they are less
likely to be penalized compared to private firms. The government-run utility is
being kept in check by the same
overarching entity running it. Private companies, on the other hand, have
the utmost incentive to comply with regulations and keep rates low for their
customers to avoid expensive penalties from regulators and potential loss of
clients.
But despite these
potential consequences, government proceeded anyway, offering “just
compensation” as a valuation significantly less than the company’s. This
certainly does not look like just compensation on its face.
But the Arizona
Legislature may soon put a stop to actions like these. A bill currently working
its way through the Legislature aims to stop local governments from lowballing property
owners and manufacturing public uses in the future. HB2499
holds local governments accountable by requiring that any local government that
uses eminent domain to seize a private utility company also assume all existing
assets and contractual liabilities that are made in good faith and necessary
for current and future services. The bill would protect private utility
companies like EPCOR by assuring the true value of the company is reflected in
valuations and after the acquisition takes place. The bill will be prospective to
prevent such abuses from happening in the future.
Private property rights
are among our most essential rights as Americans, and the Goldwater Institute
has been leading the charge to protect them. In 2006, Arizona voters enacted a
Goldwater Institute reform, the Private
Property Rights Protection Act, to prevent unjust seizure of private
property. Requiring government to weigh the costs and benefits of the
regulatory burdens it imposes helps discourage excessive regulation and abuse. HB2499
is another commonsense reform that holds local governments accountable when
using eminent domain to acquire private utility companies, helping to ensure
that these companies do not face the same fate as EPCOR in the future.
Trevor Bratton is
a Policy Analyst Fellow at the Goldwater Institute.
