Government agencies sometimes condemn privately owned operating utilities for their own use. Water companies, landfills, hydroelectric plants, and transportation lines are examples.
But these cases pose a problem: How to measure "just compensation," especially when regulators set the rates charged (and profits earned) by a privately owned utility at artificially low levels, even when the commodity is scarce and the need for the service high. What elements underlie valuation when there are no recent sales of similarly situated, or "comparable," utility properties to look to?
Courts emphasize flexibility in setting "just compensation" under the Fifth Amendment and similar provisions of state constitutions. Yet, all too often, condemnation commissioners and trial courts adhere to "black letter" rules of valuation. In fact, many circumstances compel a variation (em a "toning" (em of the black letter law.
"Value," or "market value," is ordinarily measured by the purchase price that, in all probability, would emerge from fair negotiations between an owner who is willing, but not forced, to sell, and a buyer who is willing, but not forced, to buy. That definition raises another question: What is the highest and best use to which the condemnee could legally have put his property?