What is amortization?
Amortization is a powerful tool the government uses to remove properties that do not match the vision of city planners without having to pay any compensation to the property owner. Under this scheme, the government changes the zoning in the area in which a business sits and makes conducting that business at that location illegal (this is usually referred to as making the business a “nonconforming use”).
Simply showing up at a business and telling the owner it must shut down immediately would undoubtedly cause a public outcry and rightfully be seen as heavy-handed and abusive. So, instead, the government acts to get the same result, but does so in slow-motion. Under amortization, once it declares a business “nonconforming,” the government gives the business a certain time frame to ostensibly earn back, or “amortize,” its investment in the property. At the end of this period, the business owner must bring the property into compliance (even if it is not suited for the new zoning rules) or cease operation—and the government does not need to pay any compensation to the property owner.
Planning zealots believe that providing this period of time provides a property owner with compensation for any taking of the owner’s property. This is ridiculous—in a taking, the government is supposed to compensate a property owner, not have the property owner compensate themselves.
Nonetheless, cities across the country and in Texas have used amortization as slow-motion eminent domain without any compensation, often to force a transfer of the property to more attractive private owners. Unfortunately, in the middle of the last century, the courts, including Texas’s, largely found amortization laws to be constitutional, although a small number of courts have struck them down as takings without just compensation and a violation of due process.Compare City of University Place v. Benners, 485 S.W.2d 773 (Tex. 1972) (upholding a Texas municipality’s use of amortization) with Hoffman v. Kinealy, 389 S.W.2d 745, 752 (Mo. 1965) (striking down amortization in Missouri because “it would be a strange and novel doctrine indeed which would approve a municipality taking private property for public use without compensation if the property was not too valuable and the taking was not too soon …”). [/c]
The reasoning of the cases upholding amortization has since been undermined, especially in Texas. Amortization is, at its core, retroactive legislation. Using amortization, cities take legal, preexisting uses and apply new restrictions that make the uses illegal. Amortization disrupts settled business expectations and, often times, destroys businesses and livelihoods, all because a city planner has determined, after the fact, that the property owner who is already there does not fit into the new zoning scheme for the area. The Texas Supreme Court has recently revitalized the Texas Constitution’s prohibition on retroactive legislation. 1
Under the Texas Supreme Court’s interpretation of the state constitution, amortization should be unconstitutional because it unfairly changes the rules for property owners and imposes disabilities on them well after they changed their position based on a city’s previous law.
Moreover, five Justices of the U.S. Supreme Court have recognized that retroactive laws raise serious due process issues and must be closely examined by the courts. 2
If the courts apply this close examination to Dallas’s zoning laws, this would likely preclude the city’s use of amortization to disrupt Hinga’s long-established business.
How cities use amortization to gentrify neighborhoods
When he applied for another permit, the staff of the City Plan Commission recommended that the commission grant it and continue to allow Hinga to operate. But the Plan Commission rejected the recommendation of its own staff and voted to close his business down.
During a hearing before the Plan Commission, Commissioner Paul Ridley argued that Hinga’s business should be shut down in order to “enhance the physical appearance” and “urban character” of the area. And when the Dallas City Council considered Hinga’s appeal of the Plan Commission’s denial, City Councilmember Rickey Callahan said that driving auto-repair businesses from the neighborhood was necessary because otherwise it would be difficult for the area to attract businesses “like a Starbucks or a Macaroni Grill.”
This disdain for a long-time Dallas taxpayer is not surprising. Immigrant-and-minority-owned businesses are often the targets of planners who have a vision of a sterile, homogenous city-scape that looks just like every other gentrified city in America. Hinga is no different.
Time to end amortization in Texas and across the U.S.
In the United States—and especially in Texas, which bills itself as a haven for over-regulated businesses from other parts of the country—the government should not be destroying businesses just because a planner has a “vision” of a city that does not include small businesses that have been there for years. This is especially true when this “vision” has largely resulted in an area largely dominated by vacant lots.
Hinga is now working with the Institute for Justice, which has already spearheaded a massive effort to save his property. A Change.org petition supporting Hinga’s right to his own property earned more than 90,000 signatures. Both the City Council meeting and the Plan Commission meeting regarding whether to grant Hinga an extension were attended by dozens of Hinga’s customers, friends, and supporters. Nonetheless, the desire of the City to drive this entrepreneur off his property overcame this effort.
Dallas has sued Hinga to enforce its zoning code and, represented by IJ, Hinga has filed a countersuit arguing that the city’s actions are unconstitutional. But it never should have come to this—there is no good reason why Hinga should not be allowed to remain where he has been for decades. And, if the city wants to live up to its own self-proclaimed reputation as a good place to do business, it should stop using amortization against existing businesses in the future.