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04/20/95 09:02 CITY OF BLOOMINGTON ADMIN DEPT 4 93379310 NO.458 P005 v. • Mr. Ornstein Page 4 A. The Character of the Governme Action. Since c ha a v. Cit of ariba t, 292 N.W.2d 253 (Minn. 1980) , Minnesota courts have tended to analyze the character of the governmental action on a three-tiered basis. In the McShane case, the court recognized, first, a distinction between activity which constitutes a physical invasion by governmental activity and land use regulation by the government. 292 N.W.2d at 257. Here, there is no actual physical, invasion of park owners ' property by the government. Next, the court made a further distinction in the character of the governmental action by dividing land use regulations into two categories. Relying on Euclid v. Ambler Realty Co. , 272 U.S. 355, 47 S.Ct. 114 (1926) , the court acknowledged that almost all land use regulations would be found not to constitute a compensable taking unless they deprived the landowner of all reasonable uses of the property. McShane, 292 N.W.2d at 257. Hence, land use restrictions have repeatedly been upheld against taking challenges although there had been a significant: diminution in the value of the property as a result of the regulation. Id. These types of cases involve land-use regulations which effect a comprehensive plan, or offer a reciprocal benefit and burden to all. Id. The court termed these "arbitration" regulations. Id. at 258. The McShane court distinguished arbitration regulations from what it termed "enterprise" regulations. 292 N.W.2d at 258. . Where a regulation is found to benefit a governmental enterprise, such as the municipal..airport in McShane,. the appropriate analysis is more beneficial to the landowner. With enterprise regulations, " Juin essence, the public has appropriated an easement. In such cases, . . the burden on the landowners is grossly disproportionate to the burden he should be expected to bear as an ordinary citizen, and the use of regulation to take his property rights is, in effect, a shortcut to avoid compensation. " Id. Consequently, in such cases, a property owner is entitled to compensation where the property has suffered a measurable and substantial diminution in market value. Id. at 258-59 . Only where a case involves a regulation which clearly benefits a government enterprise, such as the municipal airport in McShane, do Minnesota courts apply the enterprise function standard. Generally, Minnesota courts conclude that land-use regulations serve arbitration functions and find no taking unless all reasonable uses of the property have thereby been precluded.