Proposition 90 may have lost, but it hasn’t gone away for good. It is likely to be back in 2008.

That means local planners and many of the developers they deal with will spend the next two years looking over their shoulders. They’ll also be looking at how things play out in Arizona, where the equivalent of Proposition 90 passed overwhelmingly.

Proposition 90 would have reined in the use of eminent domain, but it also would have required compensation for regulatory takings, including any instance where a downzoning caused a substantial economic loss. The measure lost by only 5 percentage points.

The bottom line here is an important shift in the battleground over property rights in California. For a quarter-century – dating back to the landmark Agins ruling – that battleground has been the courts. And while property rights advocates continue to gain ground, they have rarely turned their courtroom victories into actual compensation because it is very difficult to prove a regulatory taking.

Now the battleground has shifted to the ballot box. Largely funded by Americans for Limited Government – an organization financed by New York real estate investor and libertarian Howard Rich – organizations throughout the West have been trying to place Proposition 90-style measures on state ballots. A similar measure already passed in Oregon, while Proposition 90 equivalents were either defeated or knocked off the ballot by the courts in Nevada, Washington, Montana, and Idaho (where the Proposition 90 equivalent only got 24% of the vote in November).

This means that the property rights push is now in the domain of political strategists rather than legal strategists. And the battle lines have already been drawn for 2008.

Proposition 90’s proponents have announced they will try to re-run the initiative in two years. “It’s clear that with even a bit more money for advertising that 90 would have won easily,” said Proposition 90 consultant Kevin Spillane, a Republican strategist.

Meanwhile, the proposition’s leading opponents – including local governments and redevelopment agencies – are talking about taking legislative steps to further rein in eminent domain as a way of inoculating themselves against an ’08 ballot measure. John Shirey of the California Redevelopment Association said it is likely that the anti-Proposition 90 forces will seek to place a more narrowly defined eminent domain measure on the ballot during 2008 in hopes of counteracting a broader measure that would include regulatory takings as well.

The pro-90 campaign spent $4 million, the vast majority of it in gathering signatures to place the measure on the ballot in the first place. Supporters essentially ran no “Yes on 90” media campaign. Meanwhile, the anti-90 campaign raised and spent $11 million, mostly on hard-hitting television commercials in the last week. It’s clear that this unanswered TV campaign won the election for the anti-90 forces.

The pro-90 forces believe that if they spend a little more money to run a campaign next time, they’ll win. Meanwhile, the anti-90 forces are recognizing how hard it is to raise money and run a successful campaign on what amounts to the initiative equivalent of a “down-ticket race.” The anti-90 forces had hoped to raise $20 million and say that if they had done so they would have scored a decisive victory. But they could raise only $11 million and they had to spend it in a crowded media market where both pro and anti forces on Propositions 86 and 87 were bidding up the price of political ads on television. About $136 million was spent by both sides on Proposition 87, the oil severance tax proposal, and $75 million pro and con was spent on Proposition 86, the cigarette tax proposal. Both measures were defeated.

The victory in Arizona is attributable to the combination of a vigorous pro campaign and a difference in the business community between Arizona and California. In California, the Chamber of Commerce, the Farm Bureau, and even the well-respected California Taxpayers Association opposed Proposition 90. In Arizona, all the equivalent organizations endorsed Proposition 207.

Arizona voters saw a series of compelling television commercials built around the theme of “Keep What You Own.” One ad highlighted injustices to women, the elderly, and minorities who own homes. If these same ads had run on California television during the last week or two of the campaign, Proposition 90 might very well have passed. (More amusing was an animated commercial featuring tough guys with New York accents suggesting local government opposition to the initiative amounted to a form of gangsterism. The ad ran in several Western states including Arizona and can be found on YouTube.)

The politics of business across the planning counter in the next two years could well depend on how developers or local governments are feeling about their chances on the ballot. There was considerable pressure in some locations right before the election to move forward with downzonings or moratoriums, but the anti-90 advocates – led by the redevelopment association – advised against such moves on the theory that it would give ammunition to the opposition.
Developers, on the other hand, may increasingly make their moves based on whether they think “Son of 90” will pass. They may speed things up if they are engaged in a redevelopment project. But they may also sit on their development plans so as not to stimulate a pre-election downzoning, especially as the 2008 election gets closer.

In the meantime, all eyes will be on Arizona, where an identical measure passed. Lots of litigation appears in the offing. It’s unclear, however, whether the opponents of Proposition 207 will follow the same legal tack they took before the election. At that time, they argued that the measure violated the state’s requirement “revenue source rule” – a constitutional amendment passed by voters in 2004 requiring future ballot measures that mandate spending to identify a revenue source. The courts allowed the measure to go forward, saying that Proposition 207 did not necessarily mandate spending because government agencies may or may not engage in land use regulations that would trigger its provisions.

Already, however, scattered skirmishes have occurred in Arizona regarding implementation of Proposition 207. Only days after the election, the tiny town of Etoy – located on Interstate 10 halfway between Phoenix and Tucson -- vastly expanded its borders to permit new development, claiming that under 207 the city had no choice.

Developers in California may invoke the prospect of Proposition 90 in their planning negotiations over the next two years, but it is unclear as to whether they will actually support “Son of 90.” One approach the property rights advocates could take is to try to peel off the Farm Bureau, the Chamber, the Building Industry Association (BIA) or the Taxpayers Association by making some compromises. The potential would seem to be there. After all, the rank-and-file BIA member certainly has more to gain by restraining downzoning in greenfield locations than in protecting eminent domain for redevelopment projects.

But the Proposition 90 forces do not seem inclined to make such overtures. Instead, they appear much more interested in trying to turn business opposition to Proposition 90-style measures into a political asset by suggesting that big business and big developers opposed Proposition 90 because they benefit from eminent domain. The day after the election, consultant Spillane said: “If I were a developer who benefits from abusing eminent domain … I would be very nervous and concerned about the election results.”