Looking at his land in Westerly, Rhode Island, Anthony Palazzolo sees prime oceanside real estate. The state's Coastal Resources Management Council sees a wildlife refuge.
Palazzolo's case before the U.S. Supreme Court is not about which vision will prevail. The CRMC has made it clear that it will never allow him to build on the site's 18 acres of wetlands, which provide "refuge and feeding areas for larval and juvenile finfish and shellfish and for migratory fowl and wading birds."
Palazzolo is not challenging the CRMC's authority to stop him from developing his land. He is simply asking to be compensated for the imposition.
Under the Fifth Amendment's Takings Clause, which applies to the states by way of the 14th Amendment, the government may not take private property "for public use" without paying "just compensation." The Supreme Court has held that takings can occur through regulation as well as outright confiscation.
Palazzolo estimates that his property would be worth about $3.1 million if he were allowed to build the 74 homes he had planned. The state reckons that the one home the CRMC will let him build, on a small, dry part of the site, would be worth about $200,000. In other words, Palazzolo has lost something like 94 percent of the property's value.
The state argues that as long as the land retains any value at all, Palazzolo does not deserve compensation because no taking has occurred. In any case, it says, Palazzolo shouldn't be allowed to seek compensation because the state's wetland regulations were already in place when he acquired the property.
Actually, Palazzolo has been trying to develop the site for four decades, encountering one bureaucratic obstacle after another. Until 1978, however, the land's official owner was Shore Gardens Inc., a corporation of which Palazzolo was the sole shareholder.
In 1978 Palazzolo let the corporation lapse, and he became the legal as well as the de facto owner of the land. But by then, the state legislature had created the CMRC, which in 1977 issued regulations prohibiting the filling of coastal wetlands without special permission.
Therefore, according to the state, Palazzolo was "on notice" when legal ownership of the land passed to him that he wouldn't be able to do much of anything with it. Control of the land had already been seized from Shore Gardens, which could not pursue a takings claim because it no longer existed.
This will be a pretty neat trick if the Supreme Court lets Rhode Island get away with it. When Shore Gardens bought the property in 1959, there was no reason to think it would not be able to fill in the wetlands and build on them; that's what developers in the area had been doing for years. "Exactly what has become of those development rights today?" Palazzolo's attorneys ask in their Supreme Court brief.
Well, Shore Gardens has gone the way of lapsed corporations, so it can't have them. Palazzolo knows he doesn't have them. Wait–here they are! They have magically reappeared, inside the clenched fist of the Coastal Resources Management Council.
"The inescapable conclusion," write Palazzolo's attorneys, "must be that Rhode Island is the de facto possessor of the development rights, for which it has paid nothing. If the promise of the Takings Clause is to retain meaning, then the doctrinal anomaly that permits the state to acquire a substantial interest in real property without cost must be questioned."
As the Supreme Court explained in 1960, the Takings Clause is "designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole." This means that if Rhode Island wants to use Palazzolo's property for a wildlife refuge, it ought to pay him, passing the cost on to the public in whose name it is acting.
That idea worries Rhode Island Attorney General Sheldon Whitehouse. "If the Supreme Court accepted the extreme position," he told The New York Times, "one could arguably have a situation in which, in fairly short order, taxpayers would have to buy property in order to protect it from development."
Horrifying as that situation may sound to Whitehouse, it is exactly what respect for property rights requires. If taxpayers are not willing to cover the cost of "protecting" land, why should Anthony Palazzolo get stuck with the bill?