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Uniform Standards for Federal Land Acquisition (USFLA)

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Ken in Arkansas

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Jan 20, 2002
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Certified General Appraiser
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Arkansas
Does anyone know if USFLA applies to appraisals estimating just compensation for easements (only) when a FMHA grant is being made to the sewer improvement district constructing the sewer system? The district is being paid for approximately 1/3 FMHA grant, 1/3 municipal funds, and 1/3 annual assessments to property owners.
 

David C. Johnson

Senior Member
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Jan 15, 2002
<span style='color:darkblue'>Ken,

My guess would be "Yes, it probably would." Pardon my ignorance, but I am not sure what the acronym FMHA stands for (no doubt something obvious I will soon feel embarrassed about though). However, assuming the "F" stands for "Federal," this implies that these regulations are likely applicable. Assuming the municipality offers no guidance by regulation for some of the issues likely to be encountered, guidance by default would be via USFLA. These guidelines / regulations were largely (or entirely) authored by Dr. James D. Eaton, Ph.D., MAI, now with the US Department of Justice, who authored the book "Real Estate Valuation in Litigation." Both Dr. Eaton and these two publications were instrumental in preparing a STD-3 Review of the appraisal work done by Tom Hildebrandt, GAA, of North Carolina -- as they also were to Tom in the preparation of his NCAB-challenged appraisals (i.e., erroneously challenged). His appraisals had been performed for the attorney of the landowner (for equitable compensation purposes) due to the condemnation of a tract of vacant land. The condemnation pertained to the 1998 Piedmont Triad International Airport acquisition of this acerage adjacent to the airport that has been (and is currently being) discussed in several AppraisersForum threads over the last few months. Some of the operative text applicable to that case from the USFLA follows:

B-10. Enhancement or Diminution in Value Due to the Project.

"The [Supreme]Court early recognized that the 'market value' of property condemned can be affected, adversely or favorably, by the imminence of the very project that makes the condemnation necessary. And it was perceived that to permit compensation to be either reduced or increased because of an alteration in market value attributable to the project itself would not lead to the 'just compensation' that the Constitution requires." 191 With that recognition came the creation of the scope of the project rule, which provides that the United States cannot be charged in federal land acquisitions for values it has created in constructing the project for which the property is being acquired; nor can an owner be penalized for any diminution in value attributable to the project. 192 Accordingly, any increase or decrease in the market value of real property prior to the date of valuation caused by the public improvement for which such property is acquired, or by the likelihood that the property would be acquired for such improvement, other than that due to the physical deterioration within the reasonable control of the owner, must be disregarded in estimating the market value of the property for federal acquisition purposes. 193

Before the scope of the project rule can be applied, it first must be determined whether a government "project" exists for purposes of the rule. To constitute a project there are three legal requirements that must be met: there must be a public purpose requiring the acquisition of land, the particular lands required for the public purpose must be identified, and finally, such imminent acquisition must be evident to the public. 194 The critical consideration in the application of this rule is whether the "lands were probably within the scope of the project from the time the Government was committed to it." If they were, no enhancement or diminution in value attributable to the project 195 is to be considered in estimating market value; if they were not, but were merely adjacent lands, the subsequent enlargement of the project to include them (or their acquisition for some other public purpose) cannot deprive [or reward]the owners of the value added [or lost]in the meantime by the proximity of the project. 196

The question of whether the lands were probably within the scope of the project from the time the government was committed to it typically arises in connection with projects that involve boundary adjustments or that have spanned long periods between inception and the acquisition in question. Application of the scope of the project test to any set of facts "requires discriminating judgment." 197 The rule does not require a showing that the land ultimately taken was actually specified in the original plans for the project. It need only be shown that during the course of the planning or original construction it became evident that land so situated would probably be needed for the public use. 198

If a property's marketability has been detrimentally impacted by the creation of the government's project, thereby reducing the number of potential buyers for the property under appraisal, this does not by itself fall under the scope of the project rule, unless the reduced marketability results in an impact on the price at which the property could be sold. Even a substantial reduction of the attractiveness of the property to potential purchasers does not fall under the scope of the project rule because the definition of market value used for federal land acquisition purposes includes the presumption of a reasonable exposure time on the open market and, irrespective of that length of time, it is assumed to have passed on the effective date of value. Therefore, if the number of market sales within an announced project boundary decreases substantially, this fact is not considered unless the project has impacted the price at which the property could be sold.

Worth noting here is the rule that special benefits to the remainder property resulting from the project for which the land is acquired (a kind of project enhancement) are to be offset against the award of compensation in a partial acquisition. This rule, which is not inconsistent with the foregoing no-project-enhancement rule, is discussed in detail in Section B-12.

If there is any real question about whether the government's activities constitute a project, for purposes of the scope of the project rule, or whether the property under appraisement falls within the scope of the project, the appraiser should request legal instructions in this regard from legal counsel for the agency or, if litigation has been instituted, the responsible trial attorney. These questions are matters of law and not within the purview of the appraiser's function, which is limited to measuring the impact of the government's project, if any, on the market value of the property under appraisal."

__________________

dcj
</span>
 

Ken in Arkansas

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Junior Member
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Jan 20, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Thanks for the responses!

I may not have made myself clear. Fmha is Farmers Home Administration.
They are kicking in some bucks to lower the cost of the annual assessments after construction of the system is completed. Without that contribution as well as one from the local municipality, the annual assessments would be out of sight. They might be anyway.

Also I am not appraising the easements. I own property contiguous to the district which the district must cross with their main line. I will have a post down the road detailing what was contained in the appraisal on my property, but I am still getting my ducks in a row on that. This inquiry is to help me line up those ducks!

I have appraised easements for taking of road right of way, and indeed where federal funds are involved for the taking of land in fee the Standards must be followed. In this case Fmha is making a grant for to the district for them to apply to the overall cost of construction; no specific designation for use as far as I know. Common sense tells me that the Standards will apply, but I have not found that one innocent sentence in the Standards that covers everything.
 

Terrel L. Shields

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May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
FmHA/USDA offices are now generally called Rural Development Admin. or FSA Farm Services Admin offices.
 
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