The Texas Legislature established the Texas Highway Department in 1917 and in 1991 combined three agencies to create the Texas Department of Transportation (TxDOT). In 1925, the Legislature authorized the Highway Department to acquire right of way. Prior to 1925, right of way could only be acquired by counties and cities.
Acquisition of right of way is one of the most regulated processes at TxDOT. Acquisition by cities and counties is also heavily regulated. On a project requiring right of way, when a city or county utilizes state or federal funds in any phase of project development and/or construction, they must follow the same right of way acquisition procedures as TxDOT. At the state level, applicable requirements are found in the Texas Transportation Code, Texas Property Code and Texas Administrative Code. Federal requirements are found in the Code of Federal Regulations. Many of the federal regulations were developed in response to the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970. The fundamental foundation of all these regulations and statutes is the final phrase of the Fifth Amendment to the Constitution of the United States which states:…“nor shall private property be taken for public use without just compensation.”
TxDOT’s Right of Way Division is responsible for statewide oversight of right of way acquisition, and each of TxDOT’s 25 Districts has a Right of Way Section responsible for right of way activities in its specific area. TxDOT’s current annual right of way budget is $475 million.
Right of way acquisition at TxDOT consists of seven distinct processes. Although activities in these processes routinely overlap and run concurrently, they are presented here in the general order in which they occur. These processes are property description, title, appraisal, acquisition (by negotiation or eminent domain), relocation, removal of improvements, and adjustment of utilities. Outlined below are general overviews of these steps in the overall right of way acquisition process.
The first step in right of way acquisition occurs early in the design process and is the determination of the amount of land needed for the new or improved facility. Once this is completed, a right of way map is prepared by the department, and legal descriptions of the individual parcels are prepared, as required by law, by a registered public land surveyor.
TxDOT policy requires the department to acquire clear title in the name of the state. To begin this process, legal descriptions of each needed land parcel are delivered to a title company in a county where the parcel is located. The title company then returns a commitment for insurance to TxDOT. This commitment identifies the lawful owner/owners from whom the parcel must be acquired and any other defects (liens, easements, judgments, etc.) in the title that can be identified from public records. The department then initiates curative procedures to remove these defects from the parcel being acquired. This can involve execution of documents such as a variety of affidavits and partial releases of liens. On some parcels, these title/ownership issues become so complex that acquisition by eminent domain is required. When TxDOT concludes acquisition of the parcel, the title company issues an insurance policy in the name of the state and delivers it to TxDOT.
Using the legal description and right of way map, the appraiser determines the amount of just compensation the owner is due. Just compensation is made up of two components. The first component is the fair market value of the real property being acquired, and the second is damage, or reduction in value, to the remaining property caused by the acquisition.
Generally speaking, fair market value is the amount of money an owner could expect to receive by selling willingly to someone who willingly purchases the property.
The appraiser will usually determine this by evaluating concluded sales of properties that are comparable to the parcel being acquired by the state. This is called the sales comparison or market data approach and is the approach most often used since, in these circumstances, it is the real estate market in the project area that determines fair market value.
When sales data are inconclusive or not considered the best indicator of value, the appraiser may use the income approach or cost approach. In the income approach, as the name implies, value is determined based on a real property’s ability to generate income. The cost approach is used to place a value on a structure. In this approach, the appraiser determines the cost to rebuild or functionally replace a structure and then determines current value by subtracting depreciation of the structure that has accrued due to age and/or condition.
The second component of just compensation is the reduction in value of the remaining property caused by acquisition of the needed property and is commonly referred to as damage to the remainder. Damages vary greatly with size, location and use of properties and are often the most disputed component of just compensation. A change in ability to continue use of the remaining property in the same way caused by acquisition of the needed parcel is a common example of damage.
Usually speaking, TxDOT acquires property in three ways. The first is by donation. The second and most common method is by purchase following successful negotiation, and the third is by eminent domain or condemnation.
Donation is, of course, when a property owner elects to give needed property to the state without compensation. With growth of Texas and increases in real property values, this is becoming less frequent with each passing year.
Purchase, the most common method of acquisition, is when an owner accepts the required written offer from the state. The written offer is for the total of the two just compensation components, fair market value and damage to the remainder. When an owner accepts the offer from the state’s negotiator, a Memorandum of Agreement (MOA) is signed by the state and owner. The MOA documents all the conditions of the successful negotiation. The acquiring TxDOT district then orders the funds. When funds are received, a closing is scheduled and conducted at the title company. At the closing, the title company disburses funds to the owner(s) and takes the deed signed by the owner(s) for recording. At that point, the state has acquired title to the needed property.
Eminent domain or condemnation is used by the state when the offer is not accepted. In condemnation, the state files the appropriate petition with the county court at law or district court. The judge then appoints three special commissioners. In Texas, in order to qualify as a special commissioner, one must own real property in the county in which the needed property is located.
These commissioners set a date, time and location of a hearing. Property owners and other named parties are notified (served with a written notice in person) in accordance with law, and the hearing is then conducted.
During the Special Commissioners Hearing, evidence of value is presented by both the state and owner. Following the hearing, the special commissioners award the owner an amount of money they determine to be just compensation. The state then deposits funds in the amount of the award into the registry of the court and takes lawful possession of the property. If either party objects to the award, an appeal is filed, and a trial is scheduled before a jury as in any other civil case to determine the final just compensation due the owner.
When TxDOT acquires property, it must provide relocation assistance to displaced households and businesses. Relocation assistance must be made available to both owners and tenants. In order to be eligible for relocation assistance, an owner or tenant must be in occupancy at the time the state makes the written offer to purchase. For the purposes of the State’s Relocation Assistance Program, occupancy requirements are met if the owner or tenant is actually dwelling or operating in the site or has personal property stored in/on the property on the date of the written offer.
Residential relocation benefits include reimbursement for moving costs, rental supplements and housing supplements. Business benefits include reimbursement for costs of searching for a replacement site, moving, and re-establishment at the new business site. There are other types of benefits as well, and the amount of the benefit a displacee may be eligible for varies from case to case. A relocation specialist meets with each displacee, determines the amount of eligibility of the various benefits, and explains in detail the program and its documentation requirements.
Removal of Improvements
Once all displaced persons and personal property are removed from an acquired structure, it is ready to be removed or demolished by the state. This process generally involves two main steps. The first step, if applicable, involves removal of asbestos and/or any other contamination found on the property. The second step is the process of selling the structure to the best bidder for removal from the state’s right of way. Both negative and positive bids are accepted by the state.
When contamination is found, it must be removed in compliance with applicable requirements of the Texas Commission on Environmental Quality. A certification from that agency is required at the conclusion of the clean up process before the property can be utilized for construction.
Adjustment of Utilities
When all improvements and contaminants are removed from the property, utilities can begin adjustment to the new location required by the project. Adjustment of utilities involves determinations that should begin early in project development but do not usually conclude until after all right of way is acquired and cleared of obstructions.
First, existing utilities are located and advised of the new design and right of way and whether or not they are in conflict with the new or improved highway. Utilities then design and plan for the required adjustment. When the new right of way is ready, the utilities move to the new location that TxDOT has determined to be in compliance with its Utility Accommodation Policy.
Utilities requiring adjustment generally fall into two categories: those that are reimbursable and those that are not reimbursable. Reimbursable utilities are those that have a property interest and, therefore, as the term implies, are eligible to be reimbursed by the state for the cost of their adjustment.
With completion of all utility adjustments, the new right of way is ready for construction of the new or improved highway facility. A last internal step in the TxDOT process is completion of the final right of way map and closing of the right of way account set up for the project. The final right of way map shows recording data (in the county deed records) of each parcel and location of utilities.
For more information, contact Randy Spear at 254-296-0661 or 800-731-3913.
By Randy Spear. Reprinted with permission from Texas Town & City Magazine