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Business Relocation Assistance Retrospective Study

Interview/Survey

In the final stage of the research, three (3) interviewers from ORC conducted telephone interviews with business owners in the selected States that represented businesses of different organization structures, sizes and types. ORC conducted these interviews during the months of February through June 2011 with businesses that were included in the relocation files previously reviewed in Task 4. A copy of the questionnaire form used is included as Attachment D – Business Owner Questionnaire.

Introduction and Background

When ORC interviewed business owners regarding patronage impacts after the relocation, many indicated that the business economic climate has been very weak since 2008. Economists have labeled this time since 2008 as the “great recession,” implying that opportunities for business growth have been much more negative than in typical economic downturns. Overall, the past three years have been particularly difficult for reestablishing businesses, and these economic conditions make it difficult to determine the true impact of the move on those businesses that we interviewed. Numerous business owners confirmed a decrease in business profits or clientele after the move. Some attributed this decrease to the general state of the economy or cited this factor in conjunction with the move as a reason for the decrease in business.

ORC reviewed 244 relocation files in Task 4 of the Business Relocation Assistance Retrospective Study. The initial objective of the research study was to conduct a total of 175 interviews with business owners. ORC sent a letter to each of the 244 business owners prior to the initial attempt to conduct the telephone interview. This letter explained the purpose of the interview, provided a copy of the questionnaire form, and indicated that an ORC employee would be calling them soon. Approximately fifty (50) of these letters were returned as undeliverable. The interviewers made intensive efforts through internet search engines (Google Maps, online phone directory websites) to locate updated phone numbers, and/or business address listings when the contact information from the relocation file review was missing, or no longer valid. In some cases, these searches yielded no results. If the telephone number was valid and there was no answer, the interviewer left a message with a request to return the call or a message that the interviewer would call back later. In these situations the interviewer made 3-4 follow-up calls to attempt to interview the business owner.

Although we made repeated, and numerous, attempts to contact and interview these business owners, we were able to conduct 148 interviews with displaced business owners, rather than a total of 175 interviews, which was the initial objective of the research study. While we were unable to confirm the cause of this problem with the businesses, there are two likely reasons we encountered this difficulty: 1) the business had either gone out of business and could not be contacted; or 2) the business owner was unwilling to respond to our repeated requests for contact.

Following is a listing of the selected states and the number of businesses interviewed in each state. Attachment E – Summary of Business Interviews is also included that indicates the organizational structure and type of each business interviewed, as well as the state.

State Number of Files Reviewed Number of Interviews
Delaware 6 1
Georgia 44 19
Indiana 36 25
Maryland 15 13
Minnesota 39 19
Texas 32 25
Virginia 31 21
Washington 41 25
Total 244 148

Opportunities for Improvement Identified by Businesses

The business owners identified several areas in the relocation assistance program where changes could improve the business relocation process. Following is a summary of the best practices and types of benefits/services that should be considered to ensure successful business relocations in the future, as indicated by the relocated businesses during the interviews.

1. Increase the maximum reestablishment expense payment

At least 20 of the 107 business owners interviewed who claimed actual move costs (18.7%) recommended an increase in the reestablishment expense payment, indicating that it was not sufficient or adequate to reestablish the business operation at the replacement site. It is difficult to determine the actual amount a business spent since most SDOTs cease collecting data once the limit is reached. Some business owners did provide information about additional expenses during the interviews; however, this information is based on their recollection and cannot be documented. Other business owners either declined to provide any information, or summarized the amount as being “a lot” or “much more than what the DOT paid.” This information is summarized in Attachment E – Summary of Business Interviews.

Note: If one were to adjust for inflation the $10,000 reestablishment expense payment authorized in 1987 (based solely on the Consumer Price Index), the amount would be approximately $20,000 in 2011 dollars. The United States Department of Labor website (http://www.bls.gov/cpi/) defines the Consumer Price Index (CPI) as “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.” This website contains a CPI Inflation calculator tool that allows a user to compute the buying power of an amount of money in one year to another year (http://www.bls.gov/data/inflation_calculator.htm).

During Task 4 of the Business Relocation Assistance Retrospective Study, ORC reviewed the relocation files of 150 businesses that claimed a reestablishment expense payment. In states with a reestablishment payment limited to the $10,000 statutory maximum payment (authorized under the Uniform Act), 75% incurred a reestablishment expense equal to or greater than $10,000. In states that authorized a payment in excess of $10,000, 65% of the businesses reviewed incurred reestablishment expenses equal to or greater than the maximum amount allowed. This last statistic is probably the strongest support for increasing the Uniform Act statutory limit of $10,000. Even in states where the reestablishment payment is authorized at $50,000, such as Minnesota and Washington, the majority of the businesses claimed the maximum allowed.

Business owners commonly cited the following reasons for needed increase of reestablishment expenses:

As a group, food handling operations, and any type of medical facility, incurred the largest amount of code modification costs. For example, three (3) different business owners of medical facilities in the state of Washington said they incurred code modification expenses ranging from $120,000 to $250,000. These modifications included items such as special flooring, impermeable walls, widened doorways, an additional handicap accessible ramp, and a sprinkler system.

2. Increase the amount of the fixed payment for nonresidential moves

The fixed payment (or in-lieu-of payment) has traditionally been an expedient alternative to an actual move cost claim for a small business. There is no relationship between the payment amount and the complexity of the move. Displaced businesses are often glad to accept the fixed payment because it provides a simplified method of compensation, or sufficient amount of money without having to document details. \ Nine of the 41 business owners interviewed (22%) who claimed a fixed payment recommended an increase in the amount of this payment. During Task 4 of the Business Relocation Assistance Retrospective Study, ORC reviewed the relocation files of 80 businesses that claimed a fixed payment. In those states with a fixed payment limited to the $20,000 statutory maximum payment (authorized under the Uniform Act), 78% had two-year average annual net earnings equal to or greater than $20,000. In states that authorized a payment in excess of $20,000, 76% of the businesses reviewed had two-year average annual net earnings equal to or greater than the maximum amount allowed.

If the maximum statutory amount of a $20,000 payment were updated to account for inflation (based on the Consumer Price Index for the time since the 1987 amendments to the Uniform Act), the payment amount would be approximately $40,000 in 2011 dollars. This amount was determined using the CPI Inflation calculator at the U. S. Department of Labor website (http://www.bls.gov/data/inflation_calculator.htm).

3. Improve advisory services provided to business owners/operators

After conducting the interviews with the business owners/operators, we surmised there was a wide variance in the quality of advisory services provided. Some business owners were complimentary toward those personnel handling their relocation. They indicated that the process worked well, that they were happy with the program, and they were very pleased with the payments and advisory services. This assessment is confirmed by the fact that 63% of the business owners who responded to question to Question #7, [“Do you feel you were treated fairly by the displacing agency?”) answered “yes.” Others reported not being informed of certain payment options, or had negative comments about the competency of the assigned agents (DOT employees and consultants). For example, there were instances during the interviews where the business owners alleged that they were not informed about payment options (searching expenses or reestablishment expenses), or were directed toward a fixed payment rather than an actual cost move (at least 11 business owners made this comment during the interviews, which represents a 7.4% occurrence).

Business owners also recommended that DOTs provide more information related to the projects, including schedules, which would assist them in planning for their move. Although the State DOTs did offer assistance, in some instances the displaced businesses believed the assistance would have been of little benefit because the agent did not adequately understand the business or its needs. This opinion is illustrated by comparing the business owners’ responses to two questions on the questionnaire form. Question #2.b. Part Two asks, “In terms of advisory assistance, did the State assist in locating replacement locations?” Of the 127 business owners who responded to this question, 88 (69%) indicated the State DOT did provide assistance, while 39 (31%) said the State did not provide assistance. Question #3 asks, “How did you locate your replacement site?” Eighty-nine of the 95 business owners who responded to this question (94%) stated that they located the replacement site on their own. Looking at these responses together, one can conclude that the DOT may have provided information about replacement sites, but it did not lead to the business owner locating the replacement location. They saw this effort as one they accomplished on their own because they had the best understanding of what was needed at the replacement site.

In addition, the discussions with the business owners indicated that the assigned relocation agents did not possess the specialized expertise that could benefit certain kinds of businesses. For example, medical facilities and food handling operations may require special permitting at the replacement site; auto repair operations may need zoning variances; or franchise operators may have special needs to be able to maintain the franchise license. The feeling was that assigned relocation personnel lacked the necessary expertise and, therefore, provided inadequate advisory assistance. The relocation agents also could have advised the owners that professional services were available to assist with various aspects of the move. At least 14 business owners made comments related to a relocation agent’s inadequate specialized expertise or an agent’s failure to refer them to professional services, which represents a 9.5% occurrence rate.

4. Simplify the relocation process

At least 6 business owners commented that either the overall relocation process, or some aspect of it, was too complex. Their comments included statements such as, “make it simple – too picky about documentation,” and “too much paperwork.” Some of their recommendations for simplifying it include:

Other Comments of Interest

Some of the interviewed business owners also recommended making the following items eligible for reimbursement or compensation:

Updated: 09/05/2014
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