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Q & A: #1301
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Question 1301-1: Is there any significance in the change from using the term "right-of-way" to "real property?"

Answer: Yes. There is legal significance to changing the term "right-of-way" to "real property." The term "real property" generally refers to any interest in land. The term "right-of-way," on the other hand, generally refers to a longitudinal strip of land used for transportation purposes. For example, the amended 23 U.S.C. 156 permits States to retain the Federal share of net income from the sale or lease of real property acquired with Federal assistance from the Highway Trust Fund. In this instance, the term "real property" provides for States to retain the Federal share of net income from the sale or lease real property located both within and outside of the right-of- way. In the amended 23 U.S.C. 108 (a), the use of the term "real property" takes into account that not all acquired real property will ultimately be incorporated into Federally funded projects. The term also encompasses property that may be required for transportation enhancements, environmental mitigation, or CMAQ projects.

Question 1301-2: Will the allowable credit for early acquisitions be the historic cost incurred or the current fair market value of the acquired property?

Answer: The allowable credit for early acquired lands may be based on either the current fair market value or historic acquisition cost of such lands. The method selected (i.e., current fair market value or historic acquisition cost) by the State must be used on a consistent basis and specified in the State's Right-of-Way Manual. The State's Right-of-Way Manual may also specify certain criteria which would allow for use of the alternate method. For example, a State's Right-of-Way Manual may require that historic acquisition costs be used as the primary basis for credit purposes and that current fair market value would be used in those instances where: (1) there has been a significant lapse in time since the property was acquired, or (2) there has been a significant change in market conditions (not caused by the project) since the property was acquired.

Question 1301-3: Can the credit for early acquired lands include all costs associated with the early acquisition such as relocation expenses, property management costs, and costs incidental to the purchase, e.g., appraisal fees, recording costs, etc.?

Answer: No. The allowable credit for early acquired lands is limited to the current fair market value or historic acquisition costs of such lands (see above). Federal reimbursement of other costs associated with the acquisition are subject to the requirements of the amended 23 U.S.C. 108 (c).

Question 1301-4: Will credit for the cost of early acquisitions before the passage of TEA-21 be allowed?

Answer: Yes, provided the relevant project agreement is executed on or after June 9, 1998.

Question 1301-5: If an agency decides to acquire all of the project right-of-way with its own funds and apply the value of the property incorporated into the project toward its share of the cost of construction, what will the acquiring agency be required to provide to the Federal funding agency to support the amount of the desired credit?

Answer: The agency must provide documentation supporting the amount of credit sought for the acquired lands. The documentation must include: (1) a certification by the agency that the requirements for acquired lands specified in 23 U.S.C. 323 (b)(1) were satisfied, and (2) evidence supporting either the current fair market value (e.g., copies of the Certificates of Value or Review Appraiser Statements) or historic acquisition costs (e.g., closing statements, etc.) of the acquired lands.

Question 1301-6: When a project advances to the construction authorization stage, the final cost of the acquired right-of-way is frequently unknown due to outstanding condemnation cases. Assuming the agency has acquired the required property with its own funds and desires a credit toward the cost of construction, will the allowed credit be limited to the acquisition costs incurred as of the date of the credit application?

Answer: In such cases, while the initial allowable credit would be limited to the current fair market value of the acquired lands as of the date of the project agreement, the allowable credit may be adjusted upon resolution of the outstanding condemnation case(s).

Question 1301-7: How will the credit be applied to innovative projects such as SIB loans? Should the credit be taken from the amount the State or local government has pledged to repay the loan?

Answer: While there is a possibility that credit for land acquisition may be used in SIB-assisted projects, the main application of the changes in 23 U.S.C. 323 applies to standard Federal-aid project activities. The SIB is a State-backed entity that is capitalized with Federal funds and matched with non-Federal funds, at the State's traditional matching ratio. According to the SIB Guidance, SIB capitalization grants must be matched with liquid funds. So, at the time of capitalization, donated land, etc., would not count toward the State match. However, the non-Federal match is not required at the project-by-project loan level. The board of the SIB establishes its own requirements for repayments. It would be up to each SIB whether it found sufficient value in donated land, etc., to give up the liquid repayment funds available to lend to subsequent projects. SIBs have assisted projects that receive some portion of a project's total cost in regular Federal-aid grant funds and some portion in SIB loan funds. The matching requirements would be different for each portion of the financing. Regarding the second question, see the above reservation on whether the SIB would be willing to accept such payment. The purpose and operating characteristics of each SIB may dictate whether they would be willing to use land, materials or other non-cash contributions to fulfill repayment terms. The credit provisions will more likely apply to normal Federal-aid projects where the State matching share can be reduced by the acquisition cost of land incorporated into the project. Such credit, while available as of the effective date of TEA-21, must be determined and agreed upon as of the date FHWA and the State enter into the project agreement for the project on which the credit will be applied. Lands already used for transportation purposes, such as existing right-of way being required for a new or upgraded facility, will not be eligible for receipt of a credit.

Question 1301-8: Do early acquisitions by local governments or private parties for Federally funded projects need to conform to the Uniform Act requirements?

Answer: Yes, to be eligible for reimbursement, the amended 23 U.S.C. 108 (c)(2)(A) requires that any land acquired, and relocation assistance provided, comply with the requirements of the Uniform Act. To be eligible for credit, the amended 23 U.S.C. 323 (b)(1)(A) requires that the acquired land was "lawfully obtained." In such instances, if the property was acquired for a transportation purpose under the threat of eminent domain (subsequent to the Uniform Act), the requirements of the Uniform Act would apply. If the property was acquired by other means (e.g., local government acquisition via tax delinquency or exaction), it must have been acquired in accordance with the laws of the jurisdiction in which the property is located.

Question 1301-9: Is park land the land described in section 138 of Title 23? Can public park land incorporated into a project which furthers the park use qualify for credit? Can public owned right-of-way incorporated into a project qualify for credit?

Answer: 23 U.S.C. 138, 49 U.S.C. 303, and 23 CFR 771.135 describe the national policy regarding the preservation of 4(f) lands (i.e., publicly owned park and recreation lands, wildlife and waterfowl refuges, and historic sites). Federally funded projects requiring the use of such lands will not be approved unless: (1) there is no feasible and prudent alternative to the use of such land, and (2) the action includes all possible planning to minimize harm to such park, recreational area, wildlife and waterfowl refuge, or historic site resulting from such use. 23 U.S.C. 323 (b)(1)(C) prohibits non-Federal share credits for the incorporation of lands described in 23 U.S.C. 138 into Federally funded projects. Per 23 CFR 710.507(c), non-Federal share credits are not available: (1) for lands acquired with any form of Federal financial assistance, or (2) for lands already incorporated and used for transportation purposes.

Question 1301-10: Can lands acquired as part of a project funded by the right-of-way revolving fund, where the right-of-way project has been converted to a regular Federal-aid project, be credited toward the non-Federal share of the project?

Answer: No. A credit toward the non-Federal share of the project would not allowed since the lands were acquired with Federal assistance. (December 16, 1998)

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