- Report Published -
|Business Relocation Process|
|Department of Transportation|
|HJR 490 (Regular Session, 1999)|
|House Joint Resolution 490 (Appendix A), passed by the 1999 session of Virginia's General Assembly, requested that the Virginia Department of Transportation (VDOT) conduct a review of its business relocation process. The resolution specifically mentioned the difficulties faced by gasoline service stations operating on leased land after they are displaced and the compensation they could receive. At the request of VDOT's Right of Way & Utilities Division, the Virginia Transportation Research Council conducted the review and expanded the study to include all business displacement transactions.|
When this study began, VDOT's payments to relocated businesses were limited to the federal maximums for the reestablishment payment and the in lieu of (ILO) payment offered to displaced businesses specified in the Uniform Relocation Assistance and Real Property Acquisition Policies Act (Uniform Act). These limits were $10,000 and $20,000, respectively.
A displaced business has two options: (1) the actual moving costs and reestablishment option or (2) the ILO option. A displaced business owner can receive payment for "actual, reasonable, moving costs and related expenses," under Section 24.303 of the Uniform Act, and, as such, these payments do not have a specific monetary limit. However, business owners provide VDOT with evidence of actual moving costs. A business may receive reimbursements for items such as expenses incurred when moving the business or other personal property, direct losses of tangible personal property, replacement site search costs (limited to $1,000), and disconnection of equipment or machinery and subsequent reconnection at the new site.
Different procedures are in place for reestablishment and ILO payments. The first concerns monetary limits. In addition to actual, reasonable moving expenses, a business may be eligible to receive a reestablishment payment, not to exceed $10,000 under Section 24.304, for expenses actually incurred in relocating and reestablishing a small business, farm, or non-profit organization at a replacement site (Federal Register, Vol. 54, No. 40). Reestablishment payment eligibility is broad and includes a wide range of items. A relocated business may have expenditures on such items as repairs or improvements to the new property as required by local codes and ordinances and modifications to make the replacement property suitable for the operation of the business. These expenditures can be reimbursed under reestablishment. A relocated business may face expenses to build exterior signing and can have that expense reimbursed. Typically, a business faces increased operating costs at the replacement site, such as higher rent or higher utility costs, and this can be reimbursed under reestablishment. A business may choose the ILO or fixed payment option rather than actual moving costs and reestablishment. Under this choice in the Uniform Act, an eligible business can receive a payment up to $20,000 maximum based on its net business income.
Effective July 1, 2000, Senate Bill 63 raised the reestablishment and ILO payment limits to $25,000 and $50,000, respectively (Appendix B). Even though these limits applied only to businesses displaced in Virginia and the federal maximums were not increased, the study was continued in an effort to evaluate these differences.
During the course of the study, the researchers conducted lengthy interviews with VDOT right-of-way professionals to gain insight into their experiences with relocating businesses. The researchers also surveyed other states to discuss their business relocation programs and to determine any shortcomings they may have experienced with the federal program. The researchers also conducted a mail survey of displaced owner occupied and tenant business owners about their relocation experience and solicited suggestions for improving any and all aspects of the business relocation process and procedures. The researchers also conducted extensive data analysis to determine trends in reestablishment and ILO payments and what the average payouts for each would have been in the absence of limits for displaced businesses in Virginia.
As required by the study legislation, the researchers contacted the Virginia Gasoline Marketers Council and the Small Business Association to obtain their input.
The researchers drew a number of conclusions and developed resultant recommendations with respect to VDOT's procedures for the compensation of displaced businesses. Most important, the business survey responses, interviews with right-of-way agents, and data revealed that the increase in the reestablishment and ILO payments promulgated in Virginia as of July 1, 2000, was warranted. Three recommendations are made: (1) current federal ceilings for reestablishment and ILO payments be raised; (2) because of the eroding power of inflation, these new limits should be indexed to a measure of inflation, such as the Consumer Price Index; and (3) VDOT should also index the payments.