BUSINESS INTERVIEW FINDINGS - BY STATE
Seven states (California, Florida, Louisiana, New Jersey, North Carolina, Ohio and Wisconsin) agreed to provide samples of their completed business relocations. Additionally, two local projects volunteered to participate (a HUD-funded project in Pittsburgh and a FTA-funded project in the San Francisco area).
Initially, the survey was to be done by mail - relocated businesses were sent a brief, short answer questionnaire and a reply envelope - and telephone interviews would follow the receipt of the questionnaire. However, a very poor response from the businesses and numerous errors in addresses forced abandonment of this system.
The process was changed to a straightforward, single-step interview at the relocated business site. Interviews were done in person, unless the business owner refused the appointment, or a personal meeting was not possible for an interviewer. Then telephone interviews were used. The formats of interview questions promoted open discussion and narrative, not only a yes or no response.
Participating agencies provided parcel summaries on the businesses that they selected for interviews. Additionally, each business was told its participation was voluntary.
Although the pool of respondents was not scientifically random, and no base or control group was examined for this study, the anecdotal reports elicited from the 178 business interviews were sufficient to substantiate reasonable conclusions. The length and substance of the interviews varied greatly, but for the most part, the businesses were very cooperative and supportive of the effort to share their experiences if their concerns could be helpful in formulating new regulations or policies.
It should be noted here that the responses obtained reflect some of the businesses' frustration of being displaced. Most of the business owners had complimentary comments regarding their dealings with various agency employees and consultants. However, for purposes of this report, we asked even those with a favorable overall response to provide us information about any weaknesses in the program or improvements they might suggest.California
A common complaint among business owners was that they were not aware of the extent of advisory services that should have been offered by the agency. When specifically asked whether their agent provided references, contacts and counseling to minimize hardships, seventy-three percent reported that they were not aware these services were available to them. A San Dimas, California, dentist who also owned and rented portions of the building in which his practice was housed stated, "CalTrans said they would help us find a location, which they didn't... ." Although all displaced businesses interviewed under the BART program were aware they had the option to appeal disputed amounts and payment types, almost half (forty-seven percent) of the businesses interviewed that were relocated by a CALTRANS project reported they were not aware an appeal was an option. The same San Dimas building owner also said, late in the relocation process, and after months of negotiations with the displacing agency, "This was the first time we heard of an appeal board. CalTrans never informed us of this process." However, many of the businesses that stated they were not aware of the advisory and appeal provisions acknowledged that they had in their possession printed materials that explained these options. They had apparently not read the material.
The reestablishment payment maximum in California, as in most other states, remains at $10,000. This often does not cover the total costs of reestablishing a business including code related cost modifications. Fifty percent of BART interviewees and fifty-five percent of CALTRANS interviewees reported code-related costs at their replacement sites that were not covered by the $10,000 reestablishment limit. For instance, a restaurant relocated by a BART project in South San Francisco incurred approximately $200,000 in health and safety code modifications, which BART initially refused to pay. BART later agreed to pay these costs, although the agency was not certain of federal participation. In another case, a rental car agency displaced in San Bruno, California, by a BART project incurred approximately $300,000 in seismic, ADA, landscape and other local code requirements. These costs were rejected when first submitted to BART. The relocating business appealed, and after more than six months of negotiations, BART agreed to pay these expenses without assurance of federal participation.
Since the current regulations place build-out at the replacement site under the heading of reestablishment, there is little if any, of the $10,000 remaining for most businesses to cover code-related modification costs.
Of those who were aware they could apply for reimbursement of search costs, seventy-five percent of the CALTRANS respondents indicated the payment was adequate, and one hundred percent of the BART respondents indicated the payment was not adequate. However, the real estate options in the BART displacement area were atypical and very limited. One BART displacee reported that a search for his replacement site became a "full-time job" and took more than 300 hours of his time. Another BART displacee indicated that if the level of advisory assistance were expanded and a "competent" agent actually assisted in the search for a replacement, then a $1,000 limit might be sufficient.
A comment offered by forty-six percent of all respondents was that they were not compensated for time lost as a result of the actual move or for the loss of business as a result of the relocation (downtime). These are presently non-compensable items under the federal program.
Forty-four of the displaced businesses in California had ceased their business operations by the time of the survey; thirty-one of those business owners were never located. Thirteen businesses were closed but the business owners were successfully located. Eleven of the thirteen closed businesses that were interviewed reported they were forced to close due to increased rent at the replacement location. These include a bar-restaurant in San Francisco, whose rent at the only available replacement site was increasing from $2,400 to $4,500 per month and a barbershop, also in San Francisco (with an average annual profit of $6,400) where the replacement site rent was going to be $1,000 per month, a $630 monthly increase. The remaining two businesses reported zoning related issues as the primary reason for not relocating their businesses.
Of the thirty-one business owners that could not be located, minimal information was obtained for sixteen businesses through interviews with adjacent business owners. Interviews indicate that seven business owners that were technically relocated never opened for business at the replacement site. Three of those seven businesses did secure signage and made an attempt to prepare the business for reopening. It was not possible to obtain factual data explaining why those businesses chose not to reopen. Nine additional businesses did open at the replacement location, but ultimately chose to close within the two-year period between displacement and this study. Adjacent business owners reported increased rent as the primary reason the businesses chose to close; however, this information is conjecture, since those affected business owners were not contacted.
Some of the California businesses interviewed in this study were partially protected from major rent increases either by terms of their leases or by governmental rent control, thus paying well below market rent in their displacement locations. Once displaced, however, they were forced to compete in the market rent arena with all other businesses searching for space. At a minimum, each business reported its rent would have doubled. In some locations, the rent would have tripled or quadrupled.
One bar owner had been at his displacement location for more than twenty years. He reported that during his eight-month search he was able to locate one inferior site that would have increased his monthly rental from $2,400 a month to $6,300 per month. He felt strongly that due to California's high cost of living, the Relocation Program should include rental assistance for tenant-business owners.
The majority of businesses interviewed in Florida were aware that there is an advisory assistance program for relocating businesses. A common complaint among business owners however, was that the agents assigned to their cases did not seem interested in assisting the businesses or were not qualified to provide meaningful assistance. Eighty-three percent of those requesting assistance in finding a replacement location reported their agents offered little or no useful assistance in securing the relocation site.
Another complaint heard from many business owners was they were not adequately informed of the project itself. Many owners reported the "rumor mill" fueled a general anxiety. One suggestion for future state projects from relocated business owners and operators was for the displacing agency to host general information sessions. This would allow the public to meet directly with representatives of the displacing agency. Some business owners believed this might also curtail the "he said - she said" phenomenon that occurred during their relocation projects. Another suggestion was that the agency should utilize outdoor advertising (billboards) located near the project site announcing which businesses will be displaced, and, when appropriate, the new business locations.
Those businesses that reported a decrease in revenues after their move largely attributed the decrease to the public's inability to locate the business at its relocated site. Repeatedly, the solution offered was additional funding for advertising from the dislocating agency.
Of those who applied for reimbursement for search expenses, sixty-two percent indicated the current limit of $1,000 was sufficient to cover their costs. However, a majority of the businesses interviewed indicated they were not reimbursed for search expenses. It is unclear whether the businesses were unaware a search expenses benefit existed or that they chose not to apply for it. As noted above, many businesses did not feel they were adequately informed of their rights as business owners or the benefits available to them. However, many businesses still were in possession of the agency's relocation brochure providing such information.
The opinion of most business owners in Florida, as in California, is that the $10,000 maximum payment for reestablishment expenses is often not sufficient to cover the total costs of reestablishing a business, including advertising and code-related cost modifications. Thus, a business is burdened with higher costs - those unreimbursed expenses - while it often suffers a temporary loss of clientele due to the move. Businesses that reported a decrease in business profitability after their move often reported the reason as being additional costs incurred as a result of code-related issues.
One business owner reported at his relocation site that ADA guidelines required modification of two bathrooms which alone cost the business $13,00 and there were additional code-related costs that were well above the maximum allowed under the reestablishment payment. Actual reestablishment expenses (not verified) among Florida interviewees ranged from $200 to $70,000.
Among the relocation case files reviewed in Florida, fifteen had ceased their business operations at the time of the survey and could not be located. Six business owners adjacent to the closed businesses reported the businesses had opened but closed within the first two years. Since the owners of the closed businesses could not be located, the underlying reasoning for closure can only be speculated. However, two former owners were located and interviewed. One, an elderly gentleman, chose not to relocate his business due to his age and failing health. Another business owner was forced to close after seven months at the replacement site due to increased rent, less highway visibility and cost of code modifications.
The relocation agents did not care about the situation;
The agents had not been adequately trained because they could not answer a question without going back to their office first;
No meaningful help was given in finding a replacement site, even after it was requested.
The majority of businesses interviewed, sixty-four percent did not request specific advisory assistance services, although they were aware of such. Among all businesses interviewed, the major complaint was a generalized concern about the "quality of information" that was provided, although the businesses acknowledged the accessibility of the state relocation agent. Comments that were often heard included:
"I would like to get 'straight' answers with regard to when I will actually be moved;"
"My agent provided contradictory information;"
"The agent did not appear to have any authority in the field;" and,
"I never really understood what my entire benefits package was."
Unlike comments heard in other states included in the study, the relocated business owners' opinions in Louisiana suggest that the relocation agents were motivated to assist. However, the majority of business owners believed their agent was not adequately qualified, creating the impression among business owners that they were on their own.
Like business owners in California and Florida, almost two-thirds of business owners interviewed in Louisiana believe the payment limit of $10,000 is not sufficient to successfully relocate and reestablish a business. One business owner proposed the state pay actual costs incurred by the business owner, including code-related cost modification, loss of business, and reestablishment. Fifty percent of businesses interviewed reported having code-related cost modifications at their replacement sites.
Two business owners questioned if adjustments were made in the reestablishment payment limit to address inflation.
Of those who applied for reimbursement of search costs, all but one business owner indicated the current limit of $1,000 was sufficient to cover their costs.
According to the interviews, the agents in New Jersey provided useful assistance in advising business operators of financial benefits, needed notices and help with preparing and processing claims. However, businesses interviewed reported that relocation agents provided little assistance in locating replacement sites. None of the twelve business owners interviewed credited the agency as being instrumental in finding a replacement location.
Of those businesses claiming a reestablishment payment, all but one claimed the maximum reestablishment payment, yet each spent substantially more, either from cash reserves or through financing, to reestablish their businesses. One business, an automobile transmission shop in Jersey City, reported spending more than $550,000 at its replacement location, approximately one-half of which was build-out costs. In Bergen, New Jersey, a stage production equipment company spent just under $200,000 at the replacement site to bring the building into compliance with current code requirement, including modifications to entrances and restrooms, and changes to meet current requirements for fire and occupancy codes. Another business owner borrowed $100,000 from the Economic Development Agency to adequately modify the replacement location for his men's clothing store in Paramus, New Jersey. The business owner reported however, that even with the loan, the total expenses of moving and reestablishing exceeded all relocation benefits received.
All businesses reported the $1,000 search expense maximum was inadequate to compensate for the actual cost of locating a replacement site. Several small proprietorships reported searching potential areas for periods stretching from a few months to several years. In addition to the direct costs (two indicated the $1,000 did not pay for the gasoline), the indirect costs to small businesses were greater. The time diverted from business and supervising operations was particularly damaging.
There was extensive and useful assistance provided by the agents in advising business operators of financial benefits, providing information on the project and the schedule, and providing needed notices, and helping with preparing and processing claims. There was little assistance provided in locating replacement sites. None of the business owners interviewed credited the agency as being instrumental in finding a replacement location; however, they did feel that the agents were knowledgeable and helpful.
Business owners in North Carolina generally offered the same comments on the adequacy of reestablishment payments as were received in other states. Of those businesses claiming a reestablishment payment, fifty percent had actual costs that exceeded the permissible reimbursement. One business owner reported that relocation caused his rent to double from $2,000 to $4,000 per month. With the increased rent and other real expenses associated with reestablishing the business, the business owner felt compelled to discontinue the business and seek employment with another company. Another small business, a plumbing and heating contractor in Greensboro, North Carolina could not locate an affordable replacement in the immediate area where he had enjoyed a large "walk-in" clientele. As a result, he moved the business fifteen miles to the basement of his home. The business owner reported he has lost the majority of his former customer base and has not yet developed new clientele because of limits on advertising reimbursements.
The business operators claiming a search expense did not offer any negative comments regarding the adequacy of the search expense payment, although one business operator in Greensboro reported spending approximately $15,000 for water, soil and environmental analysis and zoning and planning evaluations on three prospective sites.
The majority of business owners surveyed reported that their agents provided adequate advisory services. One business owner reported, " ...my relocation assistant was invaluable in giving advice during the move, assisting in the compilation and filing of the necessary documentation and exercising due diligence and persistence in the completion of the paperwork in a timely manner." However, another commented that the agents exhibited a "take-it-or-leave-it" approach to their relocations. One business owner commented that it seemed the agents were trained only to provide offers and written information, not to help people.
Nine of the eighteen businesses interviewed in Ohio claimed an in lieu payment instead of the actual cost and reestablishment payment. Three business owners claimed the maximum amounts of reestablishment payments, and one of those three reported that the payment was inadequate to cover the actual reestablishment of his business.
One Ohio business was required to make code-related modifications at its relocation site that exceeded the $10,000 cap.
No business owners interviewed reported claiming a search payment. When asked, "What additional services could the displacing agency offer to lessen the impact of business displacements?" several business owners reported they felt they should have been compensated for their time and expenses while searching for a replacement site, which creates the presumption that they had not been informed of a search payment option.
The majority of business owners surveyed reported they were not satisfied with the level of assistance provide by their agent. One business owner commented that his agent was always available but was not very helpful. Another business owner indicated his agent wanted to be helpful, but due to the "program being a mess," agents were limited as to the level of support they could provide.
Only one business owner applied for a reestablishment payment; she claimed the categories of allowable costs were too restrictive to cover all of her actual reestablishment expenses.
Two businesses claimed reimbursement for search expenses; both believed the amount was inadequate to cover their actual search expenses.
The majority of businesses interviewed (fifty-seven percent) did request specific advisory assistance services from their agents and were satisfied with the level of service they received. Fifty percent of business owners interviewed reported their agents offered assistance in locating a replacement site and seventy-one percent also indicated the agent provided references and contacts.
Unlike business owners in most other states included in the study, the businesses in Wisconsin felt their agents were knowledgeable and qualified to assist. A building supply firm in Holman, Wisconsin, said it was pleased with the services it received from the agency and the financial benefits it received during its relocation. Its negative comment was that the agency was not familiar enough with the requirements of its particular business to offer meaningful assistance in locating possible replacement sites.
Another Wisconsin business owner reported that he had two different agents working with him during his relocation. He recommended only one agent be assigned to each business owner to prevent conflicting information, confusion and delays.
In Wisconsin, the reestablishment payment may be augmented by a state authorized payment titled a Business Replacement Payment (BRP). Typically, displaced businesses are eligible for this expanded benefit.
As a result of the expanded benefits available from the state, eighty-three percent of business owners reported they felt the payments were adequate to move and reestablish their businesses. Fifty-seven percent of business owners reported an increase in profits since their relocation. Reasons cited include securing larger buildings in better locations, securing more attractive and efficient buildings with more usable space and being able to relocate to a better market area. Business owners reported that many have been able to increase their employment, which may have been a response to general economic conditions.
The business operators claiming a search expense had no negative comments regarding the adequacy of the payment.
Because of the significantly larger percentage of satisfied relocated businesses in Wisconsin, as compared to other states, it seems the expanded benefits program contributes to the likelihood of businesses surviving and thriving after relocation by a public agency. The consensus of business owners in Wisconsin was that they were treated fairly and were adequately compensated by the displacing agency. The Wisconsin staff also recognized the advantages of this expanded benefit program. However, the successful relocations reported here may also have benefited from the generally positive economic conditions in their area.