March 16, 2020
By Trevor Bratton

If you want to buy a piece of land, then you have to pay a price that the owner is willing to accept. But too often, government doesn’t have to play by the same rules—and in Arizona, one town is trying to use that special treatment to acquire a utility company branch at a bottom-dollar price.

Last year, Bullhead City filed a ballot initiative (Prop 415) with Mohave County to use eminent domain to acquire a branch of the private utility company EPCOR. The valuations on the costs of the utility company varied widely—ranging around $55 million according to the city to $130 million according to EPCOR. The city’s valuation relied on public records, views of the system from behind a chain-link fence, and other questionable methods (other abuses aside from those addressed in this post can be read here).

Eminent domain—the power of government to confiscate private property for the so-called “public good”—is often little more than legalized theft. While Arizona has taken steps to ensure its residents enjoy the strongest protections for property rights in the nation, even the Goldwater Institute’s home state has experienced its share of eminent domain abuse. Bullhead City’s move to acquire the EPCOR branch is just the latest example.

Setting aside this questionable behavior, we should ask whether the government should be using eminent domain for the purpose of acquiring a private utility at all. Public utility companies often fail to comply with regulations, and when cited for infractions, they are less likely to be penalized compared to private firms. The government-run utility is being kept in check by the same overarching entity running it. Private companies, on the other hand, have the utmost incentive to comply with regulations and keep rates low for their customers to avoid expensive penalties from regulators and potential loss of clients.  

But despite these potential consequences, government proceeded anyway, offering “just compensation” as a valuation significantly less than the company’s. This certainly does not look like just compensation on its face.

But the Arizona Legislature may soon put a stop to actions like these. A bill currently working its way through the Legislature aims to stop local governments from lowballing property owners and manufacturing public uses in the future. HB2499 holds local governments accountable by requiring that any local government that uses eminent domain to seize a private utility company also assume all existing assets and contractual liabilities that are made in good faith and necessary for current and future services. The bill would protect private utility companies like EPCOR by assuring the true value of the company is reflected in valuations and after the acquisition takes place. The bill will be prospective to prevent such abuses from happening in the future.

Private property rights are among our most essential rights as Americans, and the Goldwater Institute has been leading the charge to protect them. In 2006, Arizona voters enacted a Goldwater Institute reform, the Private Property Rights Protection Act, to prevent unjust seizure of private property. Requiring government to weigh the costs and benefits of the regulatory burdens it imposes helps discourage excessive regulation and abuse. HB2499 is another commonsense reform that holds local governments accountable when using eminent domain to acquire private utility companies, helping to ensure that these companies do not face the same fate as EPCOR in the future.

Trevor Bratton is a Policy Analyst Fellow at the Goldwater Institute.

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