5.0. HRSR 04-22-2002 EIkk
River
MEMORANDUM
TO: Housing & Redevelopment Authority
FROM: Heidi Hall, Economic Development Assistant 0
DATE: April 22, 2002
SUBJECT: Downtown Revitalization Project Update
Attachments
--Developer Pre-Proposal Meeting Agenda
• --April Downtown Revitalization Q & A Newsletter
Developer Pre-Proposal Meeting
The most recent event regarding the Downtown Revitalization Project was the
Developer Pre-Proposal Meeting, held at Lions Park Center on April 2, 2002. In
March, the City sent out Request for Proposals to 98 developers who, at that time,
were invited to attend the Pre-Proposal Meeting. The purpose of the meeting was for
the City to provide any additional feedback needed by developers interested in
submitting a development proposal for Downtown Elk River.
A mix of approximately eight developers, construction companies, or architects
attended the meeting, along with members of the Elk River Area Arts Alliance,
downtown business owners, residents, city staff, and HRA and City Council members.
Mayor Stephanie Klinzing welcomed the group, stating that the City is committed to
pursuing the revitalization of Downtown Elk River. The three concepts drawings of
the downtown, developed by the HRA and city staff, were also presented. Tony
Mikols, President of the Rivers Edge Downtown Business Association, Frank Galli,
owner of Diamond City Bread, and Lance Lindberg, long-time resident and area
realtor, expressed their views on the Downtown Revitalization Project in general. Jim
Prosser, from Ehlers and Associates reviewed the components and process of the
Downtown Revitalization Project, and finally, there were various questions asked by
• developers, residents, and HRA and City Council members during a question and
answer session.
Development proposals for Downtown Elk River are due on May 3, 2002. The
tentative schedule for reviewing the Proposals is as follows:
Proposal Review May 2002
Individual Developer Meetings May/June 2002
HRA Chooses Developer(s) to Interview Late June
Communication Efforts
Past communication efforts regarding the Downtown Revitalization Project included
advertising through the Elk River Star News, ERtV Channel 12, the Chamber of
Commerce, Elk River Municipal Utilities, and City Hall for the Downtown
Revitalization Project Open House.
Thirty people who attended the Open House or completed a Downtown
Revitalization Project Comment Form requested further information on the
• Downtown Revitalization Project. Staff provided the thirty people with the
Downtown Revitalization Project Update presented at the March 25, 2002 HRA
Meeting.
The Downtown Revitalization Project February and April Q & A Newsletters were
distributed through the Elk River Star News, which has a circulation of 7,300, the
Chamber of Commerce, Elk River Municipal Utilities, and City Hall.
Historic Context Study Update
Landscape Research, Inc. has completed the Historic Context Study of Downtown Elk
River. The final report is currently in draft form but will be available in its final form
for the HRA to review at the next regular HRA meeting on May 28, 2002.
•
• DOWNTOWN REVITALIZATION PROJECT
DEVELOPER PRE-PROPOSAL MEETING
AGENDA
Tuesday, April 2, 2002
10:00 a.m.
Lions Park Center
I. Introduction 5 minutes
2. Welcome by Mayor Stephanie Klinzing 10 minutes
3. Introductions of City Concepts 15 minutes
4. Overview of Business Concerns 15 minutes
5. Review of Process & Project Components 10 minutes
6. Questions & Answers 20 minutes
7. Adjourn 11:15 a.m.
•
C:\windows\TEMP\4-2DeveloperMtg.doc
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4
2 ,?' h Valuation• •
• P r
Viewpoint
VOLUME 7, NUMBER I SPRING 2002
BUSINESS RELOCATION: PART ONE
AN OVERVIEW OF THE RELEVANT LAW
BY STEPHEN T. HOSCH, DARRELL V. KOEHLINGERAND ROBERT J. STRACHOTA
Introduction you with just compensation for the real estate
Our clients often ask questions about the con- taken and, in appropriate circumstances, reloca-
demnation and relocation process: Will I incur tion assistance. An overview of Eminent
out-of-pocket expenses in the process of moving Domain Law can be found in Valuation
my residence/business to a new location? Will Viewpoint/Fall of 1999 (Part One) and Winter
my business suffer as a result of the forced move? of 2000 (Part Two). Generally, just compensa-
• Who will determine the value of my property? tion is the fair market value of the real property
How much will it cost to move my (based on a willing buyer and a willing seller).
residence/business? Is the new location suitable The Appraisal Institute defines relocation as the
for my purposes? Are there hidden expenses? "process in which a federal, state or local public
Who pays for what? How will I know if the gov- agency provides relocation services, paying mov-
ernment's offer is fair? Do I need a lawyer? ing costs and related expenses to individuals,
In simple terms, if government acquires your families, and businesses displaced by urban
property using its power of eminent domain, renewal projects or other federal or federally
then government is required by law to provide assisted programs": required by statute.
continued on page 4
MARKET TRENDS AND INDICATORS RnallialtRIMEMPIRU
Office Buildings 4' 10% 11070004MatkaaMONWOMON020114
usi ess Relocation Slime ror��txl�ne � �
Retail Centers 9 0%
Industrial Buildings 5% AnOtcervte rotth , ; t -
Business=Transact►o
Apartments 4 0% pj ttl
a';Releent haw 3 p, Y tib &r*
New Housing Starts 8.9% Paget
,S b Real EstateTraosaction
Y
Productivit 1.8% '
aret 1reus anc ert �, � b
Composite PE 32 Ibnd�cators � Se ��
Consumer Confidence Index 97.3 g
page
Number of IPOs 37.1 r gi O A
VALUATION VIEWPOINT 1
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iiiiikia
• It is important to understand that just corn- The governing regulations articulate three basic
pensation and relocation are two distinct types policies of the URA:
of benefits that may be available to persons and (1) To ensure that owners of real property to be
businesses impacted acquired for federal and federally-assisted
C C by condemnation. projects are treated fairly and consistently, to
Condemning author- encourage and expedite acquisition by agree-
Are there hidden ities generally recog- ments with such owners, to minimize litiga-
nize their constitu- tion and relieve congestion in the courts,
expenses? Who pays tional obligation to and to promote public confidence in federal
for what? pay fair market value and federally-assisted land acquisition pro-
))
or just compensation grams;
for the real estate. (2) To ensure that persons displaced as a direct
However, many do not understand and therefore result of federal or federally-assisted projects
often fail to recognize their obligation to provide are treated fairly, consistently, and equitably
relocation assistance. In this issue, our readers so that such persons will not suffer dispro-
will find an overview of the law pertaining to portionate injuries as a result of projects
government's obligation to provide relocation designed for the benefit of the public as a
assistance with specific emphasis on business whole; and
relocation. We will also address the related topic (3) To ensure that agencies implement these
of fixtures/equipment compensation, and offer regulations in a manner that is efficient and
the reader some insight into the fixtures/equip- cost effective.
ment and relocation issues that affect overall The URA by its
compensation and, in turn, real estate valuation terms applies only to C C
techniques. We will present a case study and federal agencies and
"frequently asked questions" in a subsequent federally-funded However, many do
issue of Valuation Viewpoint. projects. Minnesota, not understand and
however, like many therefore often fail to
The Governing Law has incorpo-
states, recognize their
Government's obligation to provide relocation rated by reference all
assistance to businesses or individuals who are obligation to provide
of the provisions of
required to move or relocate as a result of a pub- the URA regarding relocation assistance.
II
lic ifj
roect is established by the Uniform assistance,P relocation as ,
Relocatio n Assistance and Real Property ty
services, payments
Acquisition Act of 1970, as amended; 42 U.S.C. and benefits regardless of whether the project is
§§ 4601-4655 ("URA"); and the regulations funded in whole or in part by federal financial
implementing the URA, 49 CFR Part 24. The assistance.
IIIpurpose of the URA is to establish a uniform
policy for the fair and equitable treatment of
persons displaced as a result of programs or pro-
jects undertaken by a condemning authority.
4 VALUATION VIEWPOINT VOLUME 7, NUMBER 1 ' SPRING 2002
L
• Relocation Assistance property, including substitute personal prop-
Entitlement to relocation assistance under the erty.
URA depends on whether the potential claimant D. Storage of the personal property for a period
is a "displaced person." This critical term is not to exceed 12 months, unless the Agency
defined in the URA and implementing regula- determines that a longer period is necessary.
tions: 42 U.S.C. § 4601(6); 49 C.F.R. § 24.2.
Essentially, a "displaced person" is any person: E. Insurance for the
replacement value
• who moves from real property or of the personal
• moves his personal property from real property property in con- To ensure that
• as the direct result of a written notice of intent nection with the persons displaced...
to acquire, the initiation of negotiations for, move and neces- are treated fairly,
or the acquisition of, real property in whole or sary storage.
in part for a public project. consistently, and
F. Any license, per-
mit, or certifica- equitably...
A business that meets the definition of dis-
placed person" is entitled to various forms of tion required of
relocation assistance, including advisory services the displaced per-
and payments based on actual reasonable mov- son at the replacement location. However,
• ing costs and related expenses or, under certain the payment may be based on the remaining
circumstances, a fixed payment. useful life of the existing license, permit, or
certification.
Relocation--Actual and Reasonable G. Professional services necessary to plan, move,
Moving Expenses and install the relocated personal property at
The displaced business is entitled to payment for the replacement location.
actual moving and related expenses, as the con-
demning authority or agency ("Agency") deter-
H. Relettering signs and replacing stationery on
hand at the time of displacement that are
mines to be reasonable and necessary, including made obsolete as a result of the move.
expenses from:
I. Actual direct loss of tangible personal proper-
A. Transportation of personal property. ry incurred as a result of moving or discon-
Transportation costs for a distance beyond 50 timing the business. The payment shall con-
miles are not eligible, unless the Agency
silt of the lesser of:
determines that relocation beyond 50 miles is
justified. 1.The fair market value of the item for con-
tinued use at the displacement site, less the
B. Packing, crating, uncrating, and unpacking
g' g' g' p g proceeds from its sale; or
of the personal property.
2.The estimated cost of moving the item,
• C. Disconnecting, dismantling, removing, but with no allowance for storage. (If the
reassembling, and reinstalling relocated business is discontinued, the estimated
machinery, equipment, and other personal
VOLUME 7, NUMBER 1 SPRING 2002 VALUATION VIEWPOINT 5
WILL
• cost shall be based on a moving distance of uncomplicated move may be based on a single
50 miles.) bid or estimate.
J. Purchase of substitute personal property. If Relocation—Additional Eligible Expenses
an item of personal property which is used as
part of the business is not moved but is In addition to the
ccpromptly replaced with a substitute item that aforementioned
performs a comparable function at the expenses, a qualified
replacement site, the displaced person is enti- displaced business, A team approach is
farm, or nonprofit
tied to payment of the lesser of: essential to get the best
organization may
1.The cost of the substitute item, including also receive a pay- results for the client.
installation costs at the replacement site, ment, not to exceed
minus any proceeds from the sale or trade- $10,000, for expens-
in of the replaced item; or es actually incurred
2.The estimated cost of moving and rein- in relocating and reestablishing such small busi-
stalling the replaced item but with no ness, farm, or nonprofit organization at a
allowance for storage. replacement site. Reestablishment expenses must
K. Searching for a replacement location. A dis-
be reasonable and necessary, as determined by
• placed business or farm operation is entitled the Agency. Eligible expenses include, but are
not limited to, the following:
to reimbursement for actual expenses, not to
exceed $1,000, as the Agency determines to A. Repairs or improvements to the replacement
be reasonable, which real property as required by Federal, State, or
C are incurred in local law, code or ordinance.
searching for a B. Modifications to the replacement property to
replacement location. accommodate the business operation or
Entitlement to
make replacement structures suitable for con-
relocation assistance A displaced person
or entity may elect to ducting the business.
under the URA
take full responsibili- C. Construction and installation costs for exteri-
depends on whether ty for the move of the or signing to advertise the business.
the potential business, and the D. Provision of utilities from right-of-way to
claimant is a Agency may make a improvements on the replacement site.
payment for a per-
"displaced person." E. Redecoration or replacement of soiled or
sons moving expenses
in an amount not to
worn surfaces at the replacement site, such as
exceed the lower of paint, paneling, or carpeting.
• two acceptable bids or estimates obtained by the F. Licenses, fees and permits when not paid as
Agency or prepared by qualified staff. At the part of moving expenses.
Agency's discretion, a payment for a low-cost or
6 VALUATION VIEWPOINT VOLUME 7, NUMBER 1 • SPRING 2002
iiiid AIL
• G. Feasibility surveys, soil testing and marketing A displaced business is eligible for the fixed
studies. payment only if the displacing agency deter-
H.Advertisement of replacement location. mines that:
I. Professional services in connection with the (1) The business
C C
purchase or lease of a replacement site. owns or rents per-
sonal property
J. Estimated increased costs of operation during which must be Fixtures and
the first two years at the replacement site for moved in connec- equipment may
such items as:
tion with such be movable or
1. Lease or rental charges, displacement and
immovable.
2. Personal or real property taxes, for which an
expense would be ))
3. Insurance premiums, incurred in such
4. Utility charges, excluding impact fees. move; and, the business vacates or relocates
K. Impact fees for one-time assessments for from its displacement site.
anticipated heavy utility usage. (2) The business cannot be relocated without
substantial loss of its existing patronage
Relocation—Fixed Payment (clientele or net earnings). A business is
• The fixed payment option provided under the
assumed to meet this test unless the Agency
URA and discussed in determines that it will not suffer a substan-
the governing regula- tial loss of its existing patronage; and
`c tion is not an addi- (3) The business is not part of a commercial
tional payment avail- enterprise having more than three other
...the real estate able to displaced busi- entities which are not being acquired by the
appraiser will review nesses. It is a payment Agency, and which are under the same own-
with the owner and in lieu of the pay- ership and engaged in the same or similar
ments for actual mov- business activities.
tenant which property in and related ing an re (4) The business is not operated as a displace-
components belong expenses, and actual ment dwelling solely for the purpose of rent-
to whom and how reasonable reestablish- ing such dwelling to others.
compensation ment expenses": 49
ompensation will
C.F.R. § 24.306(a).C.F.R. The business is not operated at a displace- j
be determined. ment site solely for the purpose of renting
The minimum amount
of payment available the site to others.
under this option is (6) The business contributed materially to the
the maximum amount is 20 000. income of the displaced person during the 2
$1,000; $ P P g
• taxable years prior to displacement.
I
49 C.F.R. § 24.3O6(a).
VOLUME 7, NUMBER 1 SPRING 2002 VALUATION VIEWPOINT 7
Relocation—Excluded assistance, the URA and governing
• Expenses regulations set forth the federal
Ineligible moving and related government's general policies with
expenses are numerous. They respect to real property acquisition.
include, but are not limited to, the Reestablishment Generally, these policies apply only
following: expenses must be to acquisition of real property for
A. The cost of moving any struc- federal projects and federally-fund-
reasonable and ed projects. Federal acquisition
ture or other real property
improvement in which the dis- necessary, as policies require that before the ini-
placed person reserved owner- determined by nation of negotiations, the real
ship. However, this part does property to be acquired shall be
P P the Agency. appraised and the owner, or the
not preclude the computation
under Sec. 24.401(c)(4)(iii). owner's designated representative,
shall be given an opportunity to
B. Interest on a loan to cover moving expenses. accompany the appraiser during the appraiser's
C. Loss of goodwill, profits, or trained employees. inspection of the property.
D.Any additional operating expenses of a busi- The criteria to be used for preparing
ness incurred because of operating a new appraisals is explained in the governing regula-
location except as provided in Sec. tions: 49 CFR§ 24.103.The format and level of
24.304(a)(10). documentation for an appraisal depend on the
complexity of the appraisal problem. The regu-
E. Personal injury. lations provide that the condemning authority
F. Any legal fee or other cost for preparing a or agency ("Agency") is required to develop min-
claim for a relocation payment or for repre- imum standards for appraisals consistent with
senting the claimant before the Agency. established and commonly accepted appraisal
practice for those acquisitions
G. Physical changes to the real
which, by virtue of their low value
property at a replacement loca-
or simplicity, do not require the in-
tion of a business except as pro-
vided in Secs. 24.303(a)(3) and
It is a payment "in depth analysis and presentation
the payments
necessary in a detailed appraisal. A
lieu o f p y
24.304(a). detailed appraisal shall be prepared
H. Costs for storage of personal for actual moving and for all other acquisitions.A detailed
property on real property related expenses, and appraisal shall reflect nationally
already owned or leased by the actual reasonable recognized appraisal standards,
displaced person. including, to the extent appropri-
reestablishment
ate, the Uniform Appraisal
• Real Property Acquisition expenses" Standards for Federal Land
In addition to establishing the gov- Acquisition. An appraisal must
erning framework for relocation
continued on page 13
8 VALUATION VIEWPOINT VOLUME 7, NUMBER 1 SPRING 2002
WAIL
• contain sufficient documentation, including val- able about the various forms of compensation
uation data and the appraiser's analysis of that that arise as the result of a condemnation. These
data, to support his or her opinion of value. include the following:
The Condemnation Appraisal Team (1) Compensation for Real Estate: includes the
land and building;
The real property to be acquired includes land,
buildings and fixtures. Based on our experience (2) Compensation for Fixtures/Equipment:
in conducting con- includes both movable and immovable; and
C C demnation appraisals, (3) Relocation Payments: reimburses the tenant
we have concluded or fee-owner being dislocated.
the owner and that the issue of corn- Appraisers who regularly conduct condemna-
pensation are ensured pensation for fixtures, tion appraisals will find it useful to become
whether movable or
familiar with the URA, the URA of a more regulations,
m fair an
f
0 aid
immovable, is the and the laws in their local jurisdictions. For the
accurate valuation biggest problem con- most part, laws regarding the valuation of real
of the condemned fronting the apprais- estate and the appropriate methods of valuation
er. In many non-resi- have been set forth relatively clearly throughout
property and its dential appraisal Y Y g
the country. However, the laws regarding com-
di various components. assignments, the
pensation for fixtures/equipment and the reim-
building owner and bursement of relocation expenses have been
the tenant are differ-
given less attention over the years, m
ent parties; each is g Y making com-
pensation in these areas much less clearly
entitled to compensation. However, owner corn-
defined.
pensation is different from and separate from The acquisition of
tenant compensation. The Unit Rule, which
tenant - owned
clarifies this, will be discussed in our Summer
improvements is The format and level
2002 issue. During the required property
addressed in Section of documentation for
inspection, the real estate appraiser will review 24.105 of the URA f f
with the owner and tenant which property corn- regulations. It pro-
ponents belong to whom and how compensa- vides that when on the complexity of
tion will be determined. A team approach is
acquiring any interest the appraisal problem.
essential to get the best results for the client. The in real property, the
minimum number of experts recommended is Agency shall offer to
three: the real estate appraiser, the fixture acquire at least an
appraiser, and the relocation expert. equal interest in all buildings, structures, or other
The allocation of property components to improvements located upon the real property to be
owner or tenant and the decision as to which acquired,which it requires to be removed or which
expert handles which components rests most it determines will be adversely affected by the use to
often with the real estate appraisers. It is essen- which such real property will be put. This shall
tial that the real estate appraiser be knowledge-
VOLUME 7, NUMBER 1 SPRING 2002 VALUATION VIEWPOINT 13
i
UAL
• include any improvement of a tenant-owner who of the tenant improvements or the cost to move
has the right or obligation to remove the improve- the fixtures/equipment, or the cost of new
ment at the expiration of the lease term. equipment (installed), whereas the building
The improvements owner is entitled to just compensation for the
t t considered to be real real estate (land and building). Again, the Unit
property are any Rule, to be discussed in our Summer 2002 issue,
Based on our building, structure, governs the Agency's responsibility to reimburse.
experience...we have or other improve- We recommend that the real estate expert
ments which would appraise the land and the basic building, strip-
concluded that the be considered to be ping away movable and immovable
issue of compensation real property if fixtures/equipment, and assigning the appraisal
for fixtures, whether owned by the owner of these components to other experts.This holds
of the real property true regardless of whether the landlord or the
movable or immovable,
on which it is located. tenant has ownership of these components. By
is the biggest problem Compensation for focusing on the value of the real estate alone, the
confronting the t e n a n t - o w n e d appraiser can then more easily use and apply
appraiser. improvements is standard comparables which do not typically
based on the amount include any unusual components. An exception
• which the improve- to this recommendation occurs when the real
ment contributes to estate appraiser also has unique knowledge about
the fair market value of the whole property or its valuing fixtures and equipment. In this situa-
salvage value, whichever is greater. Salvage value tion, the real estate
is defined in Sec. 24.2 and will be discussed in appraiser is qualified c c
our Case Study/Summer 2002 issue. to value the real
property and its However, the
Identifying and Valuing the Real Property components without laws regarding
Components additional assistance
When appraising non-residential real estate, it is from other experts. compensation
recommended that the professional appraisal However, we still for fixtures/
team conducts the property inspection with the prefer to see the fix- equipment and the
owner and the tenant. The ideal team includes tures and equipment reimbursement of
the real estate appraiser, the fixture appraiser, the carved out from the
equipment appraiser, and the relocation expert. real estate and sepa- relocation expenses
During the inspection, the experts will discuss rately valued. By have been given less
who is responsible for valuing the individual doing so, we antici- attention over the years
components of the property. At this time, it is pate the difficulty of
• also important to identify what is owned by the valuing the improve- ))
tenant and what belongs to the building owner. ments themselves
This is essential because the tenant is generally and avoid the basic conflict inherent in assigning
entitled to receive the lesser of the market value a single value to a multi-component property.
14 VALUATION VIEWPOINT VOLUME 7, NUMBER 1 • SPRING 2002
UAL
410 Having isolated the land and the are attached or installed to the
building values from the total, the C C land and building in a rather
appraisal team can deal with the permanent manner. It is our
Fixtures, on the other P
remaining fixed assets: furniture, fix- view that fixtures and equipment
tures, and equipment. Furniture hand, are articles that are compensable assets and
items are personal property that are were once personal should be valued separately from
readily moved and are not in any way property but have the real estate.
attached to the real estate. Fixtures, Fixtures and equipment may
on the other hand, are articles that since been installed or be movable or immovable. The
were once personal property but have attached to the land electric fuel pumps and car vacu-
since been installed or attached to or building in a rather urns in our gas/convenience store
the land or building in a rather per- example are movable; the owner
permanent manner.
manent manner. Equipment, anoth- can move them to the new site
er form of fixed asset, is generally not and continue to use them. The
categorized as real estate and usually cement tank islands that are
is not physically or legally attached to the prop- designed to protect the electric fuel pumps and
erty. Sometimes equipment can be categorized as create a traffic pattern on site for the conve-
a fixture in the sense that it has been installed or nience/fuel operation are immovable. It is
attached to the land or building. An example of unlikely that they could be removed without
• each of these three categories of assets is damaging the real estate and they, themselves,
described in the following scenario. would be damaged in the process.
In the condemnation of a gas/convenience
store, the appraisal team finds many examples of Conclusion
the types of fixed assets. A gas/convenience store Professional real estate appraisers who regularly
usually has an office for the manager, which conduct condemnation appraisals must become
includes a desk, chairs, filing cabinets, and other familiar with the various forms of compensation.
commonly used office equipment: appropriately As team leader, the real estate appraiser must be
categorized as furniture for appraisal purposes. familiar with the special property components
These are assets that can be moved to the that are not standard in the appraisal of real
replacement facility; the costs of the move are estate. Involving a fixture/equipment appraiser is
eligible for reimbursement under the Act. recommended. When the appraisal team, as a
Gas/convenience stores may have many different group, inspects the property, the owner and ten-
types of fixtures, but for this article we will men- ant are ensured of a more fair and accurate valu-
tion video shelving, a food snack bar, a cooler, anon of the condemned property and its various
components. In the next issue of Valuation
and special cigarette shelving as examples of fix-
tures that have been installed and attached to the Viewpoint, readers will benefit from the experiences
Aiik real estate that are specific to this operator's of relocation experts, Salo Ale of Faegre d' Benson
up business plan. Equipment, such as the electric and Steve Eriksson of Eriksson Commercial Real
fuel pumps, car vacuums, and cement tank Estate, Inc. Mr. Ale and Mr. Eriksson will present a
islands, are fixed assets that are not real estate but case study and answer frequently-asked questions. m
VOLUME 7, NUMBER 1 • SPRING 2002 VALUATION VIEWPOINT 15