Through a Glass Darkly: Measuring Loss Under ... - Land Use Law

594 THE URBAN LAWYER VOL. 39, NO. 3 SUMMER 2007
Use of the fair market value at the time of purchase (historical FMV),
rather than the actual price of purchase, reduces the public payment
payable by $85,000. 114 This sum represents a windfall to the landowner;
rather than merely compensating for the reduction in value of his property
caused by the land use regulation, the utilization of the actual purchase
price additionally “compensates” landowners for their irrational
(in economic terms) overpayment at the time of purchase.
A potentially more serious challenge to the Plantinga/Jaeger method
arises from the assumption, made in order to arrive at the hypothetical
value, that the income stream from the property would have remained
constant between the time of the original purchase and the date of the
Measure 37 claim had the land use regulation not been enacted. While
land markets are comparatively stable, this assumption undoubtedly
detracts from the accuracy of their method.
To see why this is the case, it is important to revisit the lessons learned
from the failings of the exemption method. It will be remembered that
the exemption method was based on a fallacious rationale, and that, in
light of the criticisms of its rationale, it was concluded that any accurate
valuation method must at least purport to capture “the difference
between the current value of the property and the [hypothetical] value
of the property that would have existed if the regulation had not been
imposed in the first place.” 115
In order to capture this differential it is clearly vital to delineate those
variations in land value which are attributable in some way to the land
use regulation and those which are wholly extraneous. Unfortunately,
there is an implicit assumption made by Plantinga and Jaeger that any
variance in the actual income stream between the time of purchase and
date of the claim is entirely due to the implementation of the land use
regulation in question. While the value of the land may be reduced by
any number of causes related or unrelated to the land use regulation, the
value of the hypothetical land in the Plantinga/Jaeger method is impervious
to any such variables. The method operates so as to insulate the
hypothetical value from the vagaries of the property market, freezing
the income stream at the date of purchase. In doing so, because the
actual value of the property (and its income stream) is affected by the
vagaries of the land market, so the “compensation”—the differential
between the value of the hypothetical and value of the actual land—is
affected by all causes since the property was purchased. Thus, the
114. $440,000 − $355,000 $85,000.
115. Hascic & Wu, supra note 77, at 3.
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