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FTA Real Estate Program: Managing Capital Projects

Learn about FTA Real Estate Program guidelines, challenges, and solutions in capital project management with real-world scenarios and legal regulations.

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FTA Real Estate Program: Managing Capital Projects

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  1. FTA Real Estate Program 2019 Capital Project Management Workshop

  2. Overview of the FTA Real Estate Program Sean Ingvalson Senior Realty Specialist Victor Otero Realty Specialist Robert Merryman O.R. Colan Associates Federal Transit Administration TPM-22

  3. Discussion Points -FTA’s REALTY SPECIALISTS ROLE -RULES/REGULATIONS WE FOLLOW -TYPE OF DELIVERABLES FTA PROVIDES -PROJECT CHALLENGES AND FTA RESPONSES

  4. Legal Authority to Acquire Property(Federally Assisted) 5th: No person … shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation 14th: …nor shall any State deprive any person of life, liberty, or property, without due process of law State Admin. Regulation Uniform Act Implementing Regulations 49 CFR Part 24 FTA Circular 5010.1E Federal Uniform Act State Constitution PL-91-646 “Uniform Act” U.S. Constitution 5th and 14th Amendments

  5. JUST COMPENSATION “...nor shall private property be taken for public use, without just compensation.” — U.S. Constitution, Amendment V “It is the duty of the state, in the conduct of the inquest by which the compensation is ascertained, to see that it is just, not merely to the individual whose property is taken but to the public which is to pay for it.” — Bauman v. Ross, 167 U.S.548, 574 (1897) 2019 Capital Project Management Workshop

  6. Purpose of the Real Estate Program • The historic purpose underlying the Uniform Relocation Act (URA)* is: • For acquisition:  Treat owners fairly and consistently, encourage acquisition by agreement, minimize litigation, and promote confidence. • For displaced persons:  Treat individuals fairly, equitably, consistently, and do not cause disproportionate injury. • For agencies:  Act efficiently and in a cost-effective manner. • *Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended

  7. Real Estate Process within FTA CONSTRUCTION ROW PLANNING LRTP, STIP, TIP NEPA EA (Fonsi), EIS (ROD) DESIGN Preliminary and Final ROW Excess or Surplus Land FTA Concurrence

  8. FTA projects can significantly impact homeowners, businesses and nonprofit organizations alike. What problems will the homeowner encounter here? How will the acquiring project sponsor solve these problems? Project sponsors can deal with these issues using the Uniform Act and other strategies. Impacts of FTA Projects

  9. FTA TPM-22 Real Estate Deliverables • Provide Technical Assistance to all Regions and project sponsors • Review and Approve RAMP for all Capital Projects • RAMP requirement is not limited to CIG Projects • Provide Concurrence When: • Value for acquisition or disposal over $1M • Non-federal contributions whether in cash or in-kind contributions, and land exchanges of any value • For property condemnations exceeding $1M • However, not limited to these requirements

  10. Real Estate Acquisition Management Plan The FTA requirements for a RAMP are contained in: • 49 CFR 633.25 (RAMP as part of the PMP) • FTA Circular 5010.1E • Grant Agreement Language

  11. Challenges Project sponsors are not familiar the with real estate requirements of the Uniform Act or FTA’s real estate requirements • Conduct of negotiations • Relocation eligibility • Appraisal valuation with contamination • Title matters

  12. Challenges Cost are difficult to estimate and control • Market fluctuation • Property owner expectation • Condemnation • Litigation costs

  13. Challenges The time to acquire real estate is often under estimated • Real estate schedule gets “squeezed” by others • Compressed acquisition schedule cost more money • The court system is not bound by your project schedule • Government/Project real estate is not like private real estate

  14. Challenges There will be unexpected issues: Lawsuits Funding Contamination Encroachments Delayed Relocations

  15. Real Estate PMOC Involvement Would more Real Estate PMOC involvement be able to assist with these challenges? 2019 Capital Project Management Workshop

  16. Situations and Answers

  17. Project sponsor wants to reduce cost Project sponsor suggested that they could avoid relocation expenses by deferring a closing until a lease had expired. The owner agreed they would not extend lease, and would demand that the tenant vacate.

  18. FTA Response The tenant established their eligibility by being legally present on the property at the Initiation of Negotiations. So the closing is irrelevant and the project sponsor will need to pay relocation

  19. Project sponsor wants to reduce cost A project sponsor will need to buy a four-family rental property The property currently has two vacancies They wish to enter into an agreement to leave the units vacant for 90-days while project sponsor attempts to settle the purchase

  20. FTA Response This can be accomplished but the project sponsor may not compel the owner to leave the units vacant The project sponsor and owner can negotiate a payment for leaving the units vacant The project sponsor will likely save relocation funds by this approach

  21. “Our project will not require condemnation” Project sponsor has assembled a cost estimate for right of way acquisition that omits funds for condemnation including legal expenses and potential awards They maintain they are on good terms with all of the property owners who will be eager to sell.

  22. FTA Response It is possible to acquire right of way without condemnation, but it is very rare. Even if all parties agree on value, it may not be possible for the owners to convey good title to the project sponsor. Condemnation is the property owner’s right if there is disagreement over value.

  23. The project has a “light” RAMP There is no such thing as a “light” RAMP Statements made in the RAMP indicate that the project sponsor is aware of various aspects of the project, but do not provide sufficient detail to evaluate the process to be used to accomplish the tasks required. Example: “The project manager will prepare fair market value offers for use on the project”.

  24. FTA Response The RAMP must inform the reader as to how each task required by the URA, grant, or State law will be accomplished and who will do the task. For the example: How will fair market value be determined? Who is authorized to set the estimate of just compensation? How will those offers be conveyed to property owners?

  25. Project sponsor concern about handling contamination A contaminated parcel was used as a parking lot. As the appraisal noted, if the property was not contaminated, it would have been used for commercial development. The difference in value between the two uses was small. The transit project sponsor did not feel it was appropriate to pay the value of the parking lot and then as a project expense remove the contamination from the site.

  26. FTA Response • The owner is entitled to what others would pay for the property (fair market value). • Absent an enforcement agency demand to remediate, then that is the correct value. • The project sponsor’s proposed use of the property is what triggered the need to clean it up. • The appraiser needs specific instructions to: consider the effect of the contamination on market value. *unless state law requires a specific procedure.

  27. Project delays have created a dire situation on the project A property owner has approached a project sponsor about early purchase of their residence needed for a project. The owner is being transferred and must sell the property, but the imminence of the project makes the sale impossible

  28. FTA Response FTA does not permit early purchase of property prior to completion of NEPA except for hardships, protective purchase and linear right of way This situation is likely a hardship project sponsor may request authority from FTA to purchase early, using local funds, as a hardship

  29. Project sponsor employs an appraiser not experienced with URA requirements • The project sponsor selected an appraiser for a project that had not had prior experience with appraisal requirement of the law and regulations • When FTA administratively reviewed the appraisals, it was noted that: • Sales were not verified with a party to the transaction • The owner was not afforded an opportunity to accompany the appraiser on the inspection • The sales history of the subject property was for three years • There was not a clear delineation of “Personalty” and “Realty”

  30. FTA Response FTA administratively reviews appraisals over $1 Million (unless an alternative threshold has been approved), however all appraisals must comply with the requirements of the URA regulations. All sales used in the appraisal as indications of the value of the subject must be verified by a party involved in the transaction. Congress stated in the law that owners must be afforded an opportunity to accompany the appraiser on the inspection of the property. A five year sale history of the subject is required by the URA regulation. The result of non-compliance is that the appraisal must be returned to be supplemented and/or corrected.

  31. Commercial tenants had the right to remove certain realty items A tenant (typically of commercial/industrial property) may have the right or obligation to remove certain items of realty at the termination of their lease. The project sponsor acquired the property from the owner of the real property but was unaware of the tenant claim. The lease provided by the tenant indicated they had the right to remove certain items of realty – a covered vehicle carport; storage sheds; and exterior lighting

  32. FTA Response The project sponsor must pay the tenant for “tenant-owned improvements” if the tenant has the right or obligation to remove these items. The real estate owner must disclaim its interest. Real Estate/Personal Property Report is critical. The items are valued in the appraisal at the greater of their contributory value or salvage value. *Note: Many leases have provisions that prevent the tenant from claiming an interest. These generally are enforceable. Disputes become a legal issue but for the project sponsor to hold clear title the issue would need to resolved.

  33. Project sponsor acquired an aerial easement but was unaware it would be necessary to move certain exhaust systems A portion of the guideway extended over a corner of a building. Project sponsor purchased an aerial easement from an owner allowing the project sponsor to construct and operate in the airspace. Project sponsor later determined that the exhaust system of the building would need to be moved.

  34. FTA Response The acquisition of the easement caused the need to “fix” something in the building. The appropriate measure of the damages involves a “cost to cure”, (i.e., estimated cost to move the exhaust system). This should be specified in the easement document and valued in the appraisal.

  35. Questions? 2019 Capital Project Management Workshop

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