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National Business Relocation Study

I. Executive Summary

For the past several years, the Federal Highway Administration (FHWA) has received comments regarding the inadequacy of business relocation payments. These comments were typically about the reestablishment payment since it is capped by law at $10,000. These comments to FHWA came from states, other federal agencies, and the affected businesses.

In response to widespread concern about the adequacy of relocation and reestablishment procedures and payments for businesses displaced by public projects, the Federal Highway Administration contracted with the Project Management Institute (PMI) to conduct a study to examine current practices in business relocations, garner opinions concerning these practices, and synthesize recommendations from the information and comments collected in the study. Specifically, the research addressed the adequacy of the current Uniform Act provisions for business relocations.

The study approached these issues by gathering information from all perspectives and parties involved in business relocations. Surveys were conducted with representatives of:

As is always the case in such situations, the research results were not scientific, but anecdotal. The standard practices of the industry and the realities of a retrospective study eliminate the ability to develop a statistical baseline. Furthermore, much of the inquiry addressed the perceptions of both displacing agency personnel and displaced business owners and these perceptions are of course, subjective. There were however, certain questions posed whose answers could be quantified, and those responses were statistically analyzed to indicate trends rather than absolute results.

Additionally, the work of a select number of states that use variations on the Uniform Act in business relocation work, or who are considering alternate approaches in handling business relocations and reestablishment, was reviewed.

In aggregate, a total of 224 business relocations were reviewed, and the owners or managers of 178 of those businesses were directly interviewed, either in person or by telephone. Seven state departments of transportation and two metropolitan transit agencies provided the information on the businesses that were interviewed. The states and agencies were selected to provide a diverse geographic range and various project types.

The research approached three general areas of inquiry:

  1. The usefulness of advisory services;
  2. The adequacy of search expense reimbursements;
  3. The adequacy of reestablishment payments.

The report details the responses and organizes them both by geographic source and by their frequency. Generally, the responses indicated:

  1. Advisory services generally were considered fair to poor. Many businesses indicated that the agents assisting their relocation were not adequately informed about the benefits available to the businesses or were unable to provide meaningful assistance in locating replacement properties. Agencies acknowledged that some agents were not adequately trained or informed to meet the complexities of complicated business relocations but also observed that some displaced businesses expect certain services from the relocation agents that are beyond the purview of the agency.

  2. Search expenses were generally considered adequate, although a significant number of business respondents did not feel they were fairly compensated for their search costs. Those responses that indicated allowable search expenses were not adequate to meet the real costs incurred by the business usually existed in situations where the business had particularly difficult or restrictive requirements, where timing within the project required quick action on the part of the business or where conditions in the general real estate market were particularly restrictive. The I-195 Project points out the shortcomings in the definitions of allowable reimbursements in this category.

  3. Reestablishment payments were almost universally considered inadequate. Only those businesses that were very small were able to be operated without great concern for customer access or that did not have specific operational needs found the reestablishment expenses adequate. Areas of particular concern for relocated businesses were:

RECOMMENDATIONS
After analyzing and synthesizing the information collected in this study, the report develops from the responses of federal, state and local agencies; right-of-way professionals; and businesses that have experienced relocations, the following recommendations:

  1. Each displacing agency should be required to prepare a written business displacement analysis.

  2. The reestablishment payment cap should be raised, incorporating guidelines to provide an incentive to prudently spend authorized payments.

  3. Increase the flexibility of the reestablishment payment to meet particular real costs now excluded from the list of eligible expenses.

  4. Increase the amount of the fixed payment.

  5. Increase the amount of the search expense and add flexibility to the guidelines.

Updated: 09/05/2014
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