Valuation Blunders in the Law of Eminent Domain

In dealing with the valuation problem, I will bracket these estimation issues in order to look to different and disturbing types of difficulties in the valuation enterprise. The law of eminent domain starts with the implicit assumption that the government is in general a good actor whose motives and laudable and whose behavior does not need excessive judicial oversight. Hence the general norm of judicial deference often applies to valuation decisions. In the cases that I shall review, as well as others, a general pattern emerges, whereby all doubtful valuation questions that arise dealing with key problems are at best obliquely touched by the standard valuation formulas.

The problems that I shall talk about here involve three major issues. The first of these addresses the many technical mistakes in valuation that were made in Penn Central Transportation Co. v. New York City, which badly misunderstood the correct rules for valuing air rights by making two serious valuation errors: the insistence that only “primary expectation[s]” matter, and further that transferable development rights are, in the context of a regulatory taking, just one factor to consider in deciding whether compensation is owing. The second issue involves an examination of cases involving conditional valuation, in which various contingencies have been regarded as sufficient to block the inclusion of important elements of value into the compensation formula. And the third addresses the problem of bundling, whereby the government is able to avoid the valuation question altogether by tying the authorization of a permit to the surrender of some collateral right.