Not Racing Past the Constitution

Posted on April 13, 2009 by Alan Ackerman

 

Washington Post

Rampant redistribution of wealth by government is now the norm. So is this: This redistribution inflames government's natural rapaciousness and subverts the rule of law. This degeneration of governance is illustrated by the Illinois legislature's transfer of income from some disfavored riverboat casinos to racetracks…

George Will possibly has this one wrong. 

Many states are increasing tax rates on gambling franchises in order to benefit other gambling franchises. This is especially true in jurisdictions which now allow casinos. Previous to the grant of these gambling casino licenses, racing was the main gaming venue in the community. Not only did this allow individuals to gamble, but it provided an opportunity for racing to prosper. With casinos, all this has changed. George Will would have one believe that detaxation of the casinos for the benefit of the racetracks is an improper act. However, what is not understood is that these gambling casinos have licenses which are grants by the government, not property rights. 

All too often, individuals lose their property rights and are not fairly and fully compensated. Businesses severely interfered with by governmental action are often treated with disdain, commonly having to deal with the issue that these damages are too speculative for them to be paid and therefore, no damages should be paid at all.

In this circumstance, we have something analogous to what are called "grazing cases" in the federal sphere. In the grazing areas throughout the Rocky Mountain states, ranchers have relatively small tracts of land which are not large enough to suit grazing. However, when the government provides federally-owned grazing lands at a relatively low price, successful cattle ranching activities may occur. When these ranches are condemned, owners attempt to claim that the compensation should include their beneficial grazing rights that they have obtained from the federal government. Courts have consistently held that the grazing is simply a license and the federally-owned land should not be considered as part of the parcel.

Relief has been granted in certain circumstances by legislative action. Nonetheless, what is the difference between ranchers who do not own land, but want to be compensated, and those who receive the benefit of a gambling license?

 

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Preakness facing Eminent Domain

Posted on April 9, 2009 by Alan Ackerman

Southern Maryland

Gov. Martin O'Malley proposed legislation Wednesday aimed at increasing the state's power to keep the Preakness Stakes in Maryland, despite potential legal challenges stemming from the race owner's recent bankruptcy filing.

The bill, which has the support of legislative leaders, gives Maryland the authority to acquire the Preakness and the two major horse racing tracks in the state through purchase or eminent domain as a last resort. Canada-based Magna Entertainment Corp, which owns the Preakness, Laurel Park and Pimlico Race Course, filed for federal bankruptcy protection in early March.

Eminent domain is the legal and compensated taking of private property by the government for a public use.

The bill also authorizes the Maryland Economic Development Corporation to issue bonds to purchase the rights to the Preakness and the racetracks.

Existing Maryland law gives the state first right of refusal if the Preakness is sold, but Magna's bankruptcy filings have clouded the issue of whether the provision would still be recognized in court.

In late March the state filed motions with the U.S. Bankruptcy Court in Delaware, where Magna has filed for Chapter 11 protection, to affirm its legal right to purchase the Preakness. Attorneys for the state remain hopeful that the federal judge will recognize its right of first refusal.

But Austin Schlick, the chief of litigation in the attorney general's office, said the state has also been working with Magna's attorneys and that he is "optimistic" the two parties can reach an agreement recognizing the state's right to hold on to the Preakness.

In light of the potential legal hang-ups, O'Malley said the bill gives the state the "maximum amount of flexibility in order to protect the state's best interests under any scenario."

Schlick said the state is wise to push the legislation at this time. Maryland does not understand what it is getting into when it attempts to acquire the horse track. The bankruptcy adds a layer of issues. Good luck. After all, the highest and best use may be a use other than as a race track!

The State is on the one hand omnipresent, but on the other, it is limited by its own constitutional delegations and limitations. Maryland could be in a position which it pays far more than it thought would be required.

Surely, the take will need to be a 'slow take' or the State runs the risk of raiding its own treasury out of pride.  

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