THE MISSISSIPPI LEGISLATURE

Introduction

In response to complaints of inequitable compensation by owners of right-of-way purchased by the Department of Transportation, the PEER Committee reviewed appraisal and acquisition procedures of the Department of Transportation's Right-of-Way Division (hereafter referred to as "ROW"). The Committee conducted the review pursuant to MISS. CODE ANN. Section 5-3-57 (1972).

Overview

Although MDOT's standard operating procedures for right-of-way acquisition and appraisal adhere to nationally recognized standards, ROW personnel's inconsistent compliance with these procedures and the need for further development of procedures result in the following weaknesses within the division:

• Appraisers' non-compliance with procedures for the minimum contents of appraisals prevents review appraisers from having sufficient information to verify field appraisers' determination of just compensation.
• MDOT does not consistently adhere to standard operating procedures to insure logical consistency throughout an area or project.
• MDOT's standard operating procedures do not operationally define when to grant administrative settlements (granted for monetary consideration which differs from the approved estimate of just compensation), which results in inconsistent and inequitable utilization of such settlements.

During the right-of-way appraisal and acquisition processes, MDOT should make every effort to increase public confidence and maintain the department's and its employees' credibility with property owners. MDOT's Citizen's Right of Way Acquisition Guide does not fully inform property owners as to the department's appraisal and acquisition procedures.

For those right-of-way parcels which enter eminent domain proceedings, MDOT and the Attorney General's Office lack an effective monitoring system to track case status. This has resulted in MDOT's awarding of construction contracts without first obtaining immediate title and possession on all right-of-way parcels.

Background

MISS. CODE ANN. Section 65-1-47 (1972) authorizes the Transportation Commission to issue rules, orders, and regulations under which the department may improve the state highway system. To do so, the department acquires "right-of-way" from landowners, defined as the strip of land over which facilities such as highways, railroads, and power lines are built.

Appraisal Procedures

Initial Right-of-Way Appraisal

Once ROW receives project authorization from the Transportation Commission and prepares the necessary title and deed information, a ROW appraiser contacts the property owner for an appointment to inspect the property. MDOT does not normally acquire entire tracts of land; rather, it acquires parcels of tracts. For a partial acquisition, ROW appraises the entire tract to determine its fair market value before MDOT's proposed acquisition. The appraiser then determines the fair market value of the tract remaining after the acquisition of the parcel needed for right-of-way purposes. The difference between the two fair market values is what MDOT should provide as just compensation.

Review Appraisal

MDOT's Appraisal Review Section reviews appraisals for substance and form, and establishes the amounts of fair market value offers for real property. Standard operating procedures also mandate that review appraisers examine each appraisal report to insure that logical consistency in evaluation is maintained throughout an area or project.

Acquisition Procedures

Acquisition

After a review appraiser approves the appraisal, an acquisition agent contacts the property owner to make a written fair market value offer which MDOT believes to be just compensation for the property. After consideration of MDOT's offer, the owner may sign the warranty deed for the property, signifying acceptance of the offer, or the owner may present the acquisition agent with evidence of reason for a higher just compensation. MDOT and the property owner will then negotiate an agreement as to a fair market value offer.

Administrative Settlements

An administrative settlement is a negotiated agreement between MDOT and the property owner wherein MDOT agrees to increase the fair market value offer in return for the property owner signing the warranty deed. If MDOT and the property owner cannot reach agreement as to a fair market value offer through an administrative settlement, the parcel is condemned. MDOT will then initiate eminent domain proceedings against the property owner.

Eminent Domain Proceedings

Eminent domain is the power of government to take private property for public use or benefit, even against the wishes of its owner. This is also referred to as the power of condemnation. MISS. CODE ANN. Section 11-27-1 (1972) grants MDOT the right to condemn private property for public use. A special court of eminent domain convenes in the county of the parcel and a jury determines the amount of money to be paid the property owner.

Findings

Standard Operating Procedures (page 11)

MDOT's standard operating procedures for right-of-way acquisition and appraisal adhere to nationally recognized standards; however, MDOT personnel's inconsistent adherence to and the need for further development of selected procedures inhibit ROW operations.

ROW Parcel Files (page 11)

Six percent of ROW parcel files reviewed by PEER did not comply with MDOT's standard operating procedures requiring documentation of appraisals.

PEER examined a random sample of 305 ROW files to determine compliance with MDOT's standard operating procedures for appraisals and parcel files. Ninety-four percent complied with MDOT's standard operating procedures. Appraisers did not prepare sufficient documentation to support an opinion of value in six percent of the files reviewed by PEER. Of these eighteen files:

• six files did not contain an appraisal in any form;
• four files did not contain comparable sales; and,
• eight files did not contain two or more of the required elements of an appraisal.

MDOT review appraisers' failure to adhere consistently to standard operating procedures does not assure equitable appraisals throughout a project or geographic area.

PEER's review of ROW appraisals and parcel files documents the division's inconsistency in the payment of:

• compensation for land (see Exhibit A, page ix, for an example of inconsistent compensation for land purchased within a .37-mile section);
• damages for proximity of the highway; and,
• damages for landscaping and fencing.

Administrative Settlements (page 18)

MDOT inconsistently grants administrative settlements because the department has not operationally defined when to use such settlements and does not require analytical justification for each settlement.

MDOT negotiates an administrative settlement if the property owner does not accept the department's initial offer. MDOT's standard operating procedures do not provide criteria which must be met prior to the granting of an administrative settlement, other than the Chief of ROW's signature on the parcel invoice. Standard operating procedures authorize ROW's Chief of Acquisition to make such settlements when they are reasonable, prudent, and in the public interest.

Without standard operating procedures to govern MDOT's use of administrative settlements, MDOT cannot insure that the department will provide consistent and equitable treatment of property owners whose property is acquired for highway purposes.

Citizen's Right of Way Acquisition Guide (page 22)

MDOT's Citizen's Right of Way Acquisition Guide does not fully inform property owners as to the department's appraisal and acquisition procedures.

MDOT's Citizen's Right of Way Acquisition Guide states that MDOT prepared the booklet in order "to explain the process which your Department of Transportation will follow in acquiring your property for right of way purposes and to explain your basic rights in the process." The twelve-page Citizen's Right of Way Acquisition Guide defines terms utilized in acquisition procedures. However, the book does not:

• provide a flowchart of procedures;
• clarify that, should the property owner withdraw these deposited funds and the jury determine compensation at a lesser amount, the property owner must reimburse MDOT the difference with interest;
• designate a contact person nor a telephone number for property owners to contact with questions; and,
• inform property owners that MDOT will consider private appraisals obtained by the property owner.

Monitoring of Eminent Domain Cases (page 23)

Because MDOT and the Office of the Attorney General do not monitor eminent domain cases effectively, the department awarded seven construction contracts from June 1992 to June 1993 without first obtaining immediate title and possession of all parcels involved.

MISS. CODE ANN. Section 11-27-85 (1972) provides for MDOT to obtain Right of Immediate Possession and Title upon the filing of a court-ordered appraiser's report and MDOT's deposit of not less than eighty-five percent (85%) of the amount of the compensation and damages as determined by the court-ordered appraiser.

As of October 15, 1993, MDOT had 265 active eminent domain cases. From June 1992 to June 1993, MDOT let seven construction contracts which had pending eminent domain cases in which the local fee attorneys had not obtained immediate title and possession of the parcels.

This occurred because neither MDOT nor the Attorney General's Office tracks the status of eminent domain cases or fee attorneys' progress towards obtaining Immediate Title and Possession. Although the Attorney General's Office has statutory authority to appoint fee attorneys, the office lacks written procedures to govern the selection of local fee attorneys or to monitor the attorneys' progress on assigned cases.

MDOT's Eminent Domain Coordinator, the department's liaison with fee attorneys, maintains a database of all eminent domain cases. However, the database does not reflect the status of a case, but provides only a compilation of dates and information on eminent domain activities.

According to MDOT's Construction Division, from January 1, 1992, to June 30, 1993, contractors on four construction sites requested extensions or supplemental agreements for projects which were not expected to be completed on schedule due to conflicts with ROW parcels.

Recommendations (page 26)

ROW Parcel Files

1. Beginning July 1, 1995, MDOT's Executive Director should require review appraisers to complete all applicable items on a checklist of the required components of an appraisal when conducting review appraisals.

2. Beginning July 1, 1995, MDOT's Internal Audit Division should conduct an annual random sample of right-of-way parcel files to check for adherence to MDOT's standard operating procedures.

Equitable Appraisals

3. MDOT should revise its standard operating procedures to require review appraisers to maintain a log of each project which records the tract size, the amount of compensation by item, and land unit value for each parcel on that project.

4. By July 1, 1995, MDOT should develop a standard checklist of all possible compensable items and standard compensation for such items.

5. By July 1, 1995, MDOT should develop written guidelines concerning the awarding of damages for specific items and should train all appraisers in these guidelines.

Administrative Settlements

6. No later than July 1, 1995, MDOT should develop standard operating procedures specifying conditions which must be met prior to considering an administrative settlement being made, including:

• documentation of each settlement and elimination of "fill-in-the-blank" forms;
• creation of an Administrative Settlement Review Committee; and,
• granting of administrative settlements only for compensable items as governed by standard operating procedures.

Citizen's Right of Way Acquisition Guide

7. By July 1, 1995, MDOT should revise its Citizen's Right of Way Acquisition Guide to increase its effectiveness in informing property owners of appraisal and acquisition procedures, including:

• a flowchart of procedures;
• clarification that MDOT is only required to deposit 85% of the court-appointed appraiser's appraised value; and,
• an addition to the guide which states that MDOT will accept and consider a private appraisal and determination of just compensation which is obtained by the property owner for the acquisition.

8. Using existing resources, MDOT should establish a toll-free number for property owners to contact with questions concerning ROW procedures and/or their parcel.

Monitoring of Eminent Domain Cases

9. The Attorney General's Office should develop written standard operating procedures for the selection and monitoring of local fee attorneys and should require fee attorneys' submission of the following status reports:

• Counsel Acknowledgment Report;
• Counsel Interim Evaluation Report;
• Counsel Evaluation Report;
• Pre-Trial Report; and,
• Trial Report