Discouraging Federal actions that reduce the value of private property: evaluating procedural and financial approaches

A regulatory taking occurs when a court concludes that a government action has taken private property for a public use without paying just compensation to the owner--a violation of the fifth amendment. Often, the remedy is a monetary award whose value is determined by the court. ; In recent years there has been considerable interest in creating a statutory complement to the constitutional law of takings. Some believe that a statutory scheme, using procedural financial approaches, would discourage federal regulatory activities that reduce the value of privately owned property. The procedural approach would require federal agencies to evaluate the property value effects of proposed actions before undertaking them. The financial approach would require that federal agencies pay from their own budgets for any compensation awards that result from their decisions. ; This paper compares the existing procedural and financial approaches to the ones proposed. It describes the model of agency incentives and the regulatory environment implicitly assumed by these proposals and compares them to the literature on regulatory decision making and administrative law. Finally, the paper discusses some of the institutional factors likely to affect the outcome of the proposed reforms, including the role of the courts in enforcing analysis requirements, the extent of agency discretion, and the federal budget process.