Cities Sidestep Property Rights With This One Trick

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Reprinted from DC Journal

The world needs creative problem solvers. But small-business owner Jeremy Sark was not impressed when city officials in Mauldin, S.C. used out-of-the-box thinking to sidestep the state constitution and jeopardize his livelihood.

People have a right to use their property in safe, reasonable ways. And if the government wants to revoke that freedom, it must meet two conditions: It must ensure that the interference serves a public use, and it must provide just compensation before destroying someone’s business. Yet Mauldin plans to shut down Sark’s U-Haul rental franchise, which opened in 2013, without honoring either constitutional protection.

Instead of compensating Sark through eminent domain or following other normal procedures, the city simply declared his business illegal with a gimmick called “amortization.” The scheme is basically retroactive zoning.

Normally, regulators establish rules in advance and grandfather in safe, reasonable, preexisting enterprises. But amortization flips the process upside down. It allows cities to adopt rules after the fact, and then pick and choose which businesses can stay open.

Typically, enterprises marked for elimination get a grace period to prepare for the setback. Governments claim the delayed enforcement counts as compensation. But even in slow-motion, the hit does permanent damage once it arrives.

Entrepreneurs who launch and grow legitimate businesses suddenly find themselves out of bounds. They follow the rules, but the rules change. It’s like moving the goalposts after a kicker attempts a field goal. Or redefining words after a debater sits down. Or altering documents after a notary public stamps them.

One day a business is legal, and the next day it is not. And all the owner can do is watch the clock wind down.

Trouble started for Sark and his general manager, Marie Dougherty, in 2021, when Mauldin amended its zoning laws as part of a grand plan to transform the downtown area. The city grandfathered in every existing business except truck rental businesses because a private developer once complained that U-Hauls are ugly. Officials did not care that they had been through at least eight developers in failed revitalization attempts over the previous decade. They were convinced that eliminating U-Hauls would finally do the trick.

Sark and Dougherty can keep operating their main business, an auto repair shop called Sark’s Automotive. But they must close or relocate the truck rental business, which complements the shop and helps attract customers there. The lost revenue will force them to lay off one or two employees.

None of the disruption is necessary. Sark’s Automotive is well-maintained and well-situated among similar businesses, which all escaped the city’s wrath. On one side of Sark’s Automotive is an auto parts store, on the other side is a big box furniture store, and directly across the street is a mayonnaise manufacturing plant. Other nearby businesses include a manufactured home retailer, a swimming pool repair company, an auto paint and body shop, a tire shop, more auto parts stores, and a rental car business.

Rather than accept the selective, arbitrary, retroactive zoning, Sark fought back with a constitutional lawsuit in September 2022. Our public interest law firm, the Institute for Justice, represents him.

Unfortunately, the abuse is not isolated to Mauldin. New Orleans adopted the nation’s first amortization ordinance in 1929, and cities started reviving the strategy in recent years. Dallas was among the first to use retroactive zoning to exclude auto-related businesses in 2005. National City, Calif. started targeting auto body shops in 2006. And Wilmington, N.C. unsuccessfully tried retroactive zoning to phase out short-term vacation rentals on sites like Airbnb.

Advocates praise amortization as a “promising solution” to reduce blight and rebuild aging communities to fit their vision of beauty. Mauldin Mayor Terry Merritt says thousands of cars pass Sark’s Automotive every day, and he wants motorists to see something besides U-Hauls. “We need to clean that up,” he told a local news station.

Some people might agree. But if the goal is to fix a city’s image, attacking safe, ordinary small businesses is not the way to achieve it. Regardless of the excuses, amortization is ugly. U-Hauls look beautiful in comparison.

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