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Pilot Projects

In March 2000, FHWA, AASHTO, and TRB sponsored an international tour (scan) to observe right-of-way and utility coordination practices in four European countries. The tour delegation identified practices they concluded could help ensure timely procurement and clearance of highway right-of-way and adjustment of utilities. The European Right-of-Way and Utilities report and recommendations can be found at http://international.fhwa.dot.gov/eurorightofway/

An implementation team was formed to encourage state DOTs to pilot procedures evaluated during the European trip (scan). Several state DOTs initiated pilots in 2001 and have analyzed the results. The Right-of-Way and Utilities Pilot Project Summary and Evaluation, contains information for each pilot that includes evaluations and lessons learned. Pilots covered the following initiatives: waiver of appraisals, modified appraisal reviews, acquisition and relocation incentive payments, conflict of interest, land consolidation, and preliminary engineering cost reimbursement for utilities.

Right-of-Way and Utilities Pilot Project Summary and Evaluation


Pilot Name: California Conflict of Interest

State Contact: Vern Rhinehart (916) 654-4456
FHWA Contact: Bill Todd (916) 498-5011

Pilot Purpose:

Identify benefits and risks in changing Caltrans conflict of interest policy to allow the same right-of-way agent to both appraise and acquire parcels valued up to $25,000 (now limited to $10,000) as a potential means of accelerating project delivery. Existing Caltrans policy requires a full appraisal report for parcels valued at $10,000 and above. The pilot program provided for continuing that policy.

When Approved: March 2001
When Started: March 2001
End Date: Currently operating

Summary of Pilot Approach, Implementation, and Current Status:

Initially the pilot program was to have included as many as 13 projects spread over 6 district offices. However, only 4 of those projects were found to have followed special charge coding designations required to quantify delivery efficiencies to the individual parcel level, and only 18 of those parcel values actually fell within the pilot $10,000 to $25,000 range. Interview discussions, however, broadly included lessons learned from the non-coded projects, and an additional 5 pilot project parcels marginally below the $10,000 threshold or marginally above the $25,000 limit were also useful in drawing general pilot conclusions.

Staff time charged to pilot project parcels using special coding statistics were run, appraisal and acquisition files were reviewed, and assigned agents, their supervisors and managers were interviewed for observations and recommendations.

Pilot projects typically involved multi-parcel strip type acquisitions for relatively minor widening and freeway sound wall installation projects from agricultural, residential and commercial properties. At this time the pilot is complete and a report is currently being prepared.

Evaluation of Results to Date (including savings, costs, benefits, downsides):

Observation: Only four projects were reviewed and 23 parcels evaluated. The size of the parcel sample is quite small; the evaluation will continue.

Time savings: Project delivery rates were not recognizably improved.

Cost savings: Support costs remain generally the same for similar parcels not in the pilot program.

Public reaction: Closure of acquisitions appeared to be facilitated. Agents gained knowledge of the market and of the specific parcels during the appraisal function, which benefited the acquisition activities. The relationship between owner and agent was enhanced.

Project schedules: These were met.

Standards of appraisal and acquisition products: Although there were instances of erroneously applying the appraisal waiver process occurred, standards were generally maintained.

Equitable treatment of all property owners: All standards were maintained.

Concerns:

Potential agent conflict of interest between valuation and acquisition settlement: None noted in the pilot.

Inexperienced agents assigned work: Requires additional management and supervision.

On one project offers were made before written appraisals were formally prepared: This is counter to Caltrans policy and Federal regulations.

Lessons Learned: Pressure to accelerate project delivery must not be allowed to diminish adherence to sound, accepted right-of-way principles that assure fair and equitable treatment and just compensation. Management must assure that staff are qualified in both appraisal and acquisition functions or be prepared to supervise staff more closely.

Appraisal reports should contain a body of basic information common to the general property type so that short supplements for the various participating parcels can be attached. Acquisition managers should evaluate the capabilities of agents and form well-experienced teams. Otherwise supervisory control must be intensified.

The single agent process can be an additional tool for managers to consider when delivering right-of-way products. However, it was not demonstrated to be a silver bullet for low-cost, quick, right-of-way project delivery. From pilot results traditional appraisals, containing multiple parcel valuations, and separate acquisition activities appear to be equally effective.

Would you recommend this technique to others? Statistical project efficiencies were not demonstrated from the limited pilot project study. Participants and managers indicated opinions both for and against the single agent process, and the $25,000 limit. However, few thought a higher limit would be advisable or beneficial. The process could be an additional tool for managers to selectively consider for application when appropriate, based on the type of project, parcels and available staff experience levels, especially if staffing constraints limit available qualified staff and a single agent could deliver a project.

Please describe any issues that might affect use of the technique in other states. The nature and scope of projects must support use of the pilot program as a project delivery tool. Acquisition managers should evaluate the capabilities of agents and form well-experienced teams. Otherwise supervisory control must be intensified. Selected projects typically involved existing highways where large numbers of small properties were acquired along the frontage. Proportionally very few of the parcels fell into the target value range of $10,001 to $25,000. Most parcels were below this range.

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Pilot Name: Florida Appraisal Review Modification

Florida DOT Right of Way Pilot Project Final Report

June 2005

Contact: Tom Shields 850-414-4609

Pilot Purpose: To test the effectiveness and efficiency in the use of high-tech software in the Appraisal Review process to flag areas of critical data elements where additional supporting information and analysis may be required in appraisal reports.

When Approved: October 2001
When Started: October 2001
End Date: June 2005

Summary of Pilot Approach, Implementation, and Current Status:

At the onset of this pilot, two right of way projects were identified: one in Tallahassee which is located in the District Three region and the other in Inverness, a rural town in the District Seven region of Central Florida. The requirement of a standard Technical Appraisal Review was being waived and an alternative review process, a computer generated Statistical Process Control (SPC) program, was being implemented and under study. The intent of the SPC was to provide the Department with a method of measuring core processes by identifying and measuring key appraisal information and comparing that information with statistical standards and thresholds. The desired result would be a comprehensive evaluation of the appraisal product, a high level of quality control, and optimization of personnel resources.

Each of the two districts also identified a Control Project from which statistical comparisons have been drawn from the timelines in critical areas relative to the appraisal review function in the production process. Collaborative efforts by Central Office, the Districts, and FHWA have been providing on-going analyses and in-process measures throughout the duration of the program. These results and comparisons with historical data at the conclusion of the pilot will produce the outcome measures. Historical data has been both narratively and statistically outlined to establish measurements and comparisons between the pilot projects and the control projects where possible.

A key measure was the comparison of the number of days that elapsed between the appraisal being received by the Department from the consultant and the date the appraisal is approved for negotiation and forwarded to Acquisition. Another key measure was the estimated fees and costs associated with Appraisal and Review avoided by this alternative process.

The initial implementation of the pilot was very difficult and time consuming in training both the district employees involved and the consultants actually doing the appraisals. The SPC, at this stage in its development, was very technical, fragile, and data entry was tedious and laborious. There was a considerable amount of time used in technical assistance and follow-up to insure consistency in the two districts. A Desk Manual for the pilot project was developed and implemented by Central Office for the Districts involved to facilitate planning of the scope and specifying the responsibilities of the respective participants. This manual proved to be very helpful.

Report of Results:

The following is a breakdown by district of the project profiles of the pilot projects in Districts Three and Seven.

  District 3 District 7
Total Number of Parcels: 59 51
Type of Acquisition:    
Fee: 34 39
Temporary Easements: 24 3
Permanent Easements: 1 9
Type of Take:    
Whole: 6 9
Partial: 53 42
Property Type:    
Improved Residential: 27 3
Improved Commercial: 26 22
Vacant Land: 6 26

NOTE: During the acquisition phase of the pilot projects, some parcels were combined, replaced, or voided. Other parcels may have been appraised as Value Findings or were otherwise disqualified as "pilot" parcels. Therefore, parcel counts for the projects will have varied though out the reporting cycle. The statistics displayed above represent the final number of parcels and a breakdown of property and acquisition types.

Evaluation of Results to Date (including savings, costs, benefits, downsides):

Both projects have had all parcels acquired either through negotiation or condemnation. The next step in the evaluation of the effectiveness of employing the SPC was reporting the comparisons between the pilot and control projects and the technical review of a significant sample of the project parcels to assess the level of quality, or lack thereof, of the appraisals themselves. The technical reviews of parcels for both projects have been completed and an analysis of the technical review versus the Statistical Process Control review is reported below.

Time Savings:

  District 3 District 7
Days between Appraisal Received to Approved (Pilot/Control): 12 / 33 10 / 37
Percent reduction in review time 64% 73%

The waiver of the technical appraisal review has shown a substantial reduction in the time normally required for this function; an anticipated outcome. Interviews with primary users of the appraisal to evaluate the effects of not having appraisal summaries normally provided by the technical review indicate generally there to be no significant impact in this area. The obvious advantage here is an extended time for negotiation opportunities.

Cost Savings:

  District 3 District 7
Estimated cost savings attributable to electronic review: $285,000 $162,250

This estimate is based on what would be anticipated to be the usual and customary fees for the fee review of the parcels upon initial submission.

Technical Review Results compared to SPC Results:

District 7 Project:

Twenty-two parcels were randomly selected for technical review from the 51 available parcels. The reports were reviewed as to mathematical accuracy, completeness, logic and support of conclusions, consistency, and reasonableness. In general, the appraisals were found to be reasonably complete, accurate and adequately supported. No major inconsistencies were noted between the findings of the SPC and the technical review; however it was noted that the SPC fell short of adequately analyzing issues of severance damages and costs to cure. The technical review also noted certain other complex appraisal analyses in the reports that the SPC, in its current stage of development, would not be capable of screening for potential deficiencies.

District 3 Project:

Twenty-nine parcels were randomly selected for technical review from the 69 available parcels on the Crawfordville Road project in Tallahassee. In 38% of the sampled appraisals, the technical review revealed issues with the Highest and Best Use (HBU) analysis which dealt generally with noted inconsistencies and interim-use type of situations. The SPC reported 12 flags on HBU issues whereas the technical review concluded to 36 HBU-related flags. The technical review also revealed findings of minor math errors and raised questions as to the selection and treatment of comparable sales, neither of which were detected through the SPC. Also, as was found in the technical review of the District 7 project, the SPC was not capable of producing a complete analysis of issues dealing with severance damages and costs-to-cure because of the nuances and complexities involved. Based on an overall analysis of the project as to appraisal quality, the technical review found the appraisals to be marginal.

Lessons Learned:

The most significant challenge was the implementation of the SPC. At the initiation of the project, a large amount of time for familiarization and training was necessary for the pilot districts regarding general understanding, conceptual understanding, and data entry. It proved to be very difficult to achieve a reasonable level of comfort with participants. Another challenge was drawing meaningful comparisons for measurements between identified test projects and control projects. Even the most similar projects can have subtle differences that can affect the validity and reliability of cross comparisons. The lesson here is to do as much proactive work as necessary to insure all participants are in full understanding of what their individual responsibilities are and exactly what the desired outcome is for the pilot. It was also necessary to periodically monitor the district's performance with the pilot.

During the course of this pilot it became axiomatic that a tremendous amount of technical resources are necessary for the development, implementation, training and follow-up analysis of a program involving statistical process control analyses. Further, it is imperative that representatives of the user group be directly involved initially in the development of such a program to enhance the level of acceptance and understanding.

The development of the Desk Manual for the pilot project was very effective in helping to providing guidance to the participants.

Conclusion:

The SPC, in its relatively early stages of development, has restrictions on its effectiveness, especially in the analyses of complex appraisals involving unique highest and best use scenarios, severance damages, and substantial cost-to-cure situations. The preference here would be to have had the SPC further along in its development. Generally, the SPC was effective in assisting in the review and analysis of non-complex appraisal problems, primarily vacant land analyses. A definite advancement for the SPC would be an automated data entry feature that would run concurrently with the development of the appraisal.

Would you recommend this technique to others?

Yes, if the Agency had a completed software program having the capability of effectively assessing the quality of the appraisals at the anticipated level of complexity.

Please describe any issues that might affect use of the technique in other states.

The availability of technical resources and receptivity of participants.

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Pilot Name: Florida Incentive Offer

Florida DOT Incentive Offer Program Interim Analysis

July 29, 2005

Contact: Kenneth Grimes 850-414-4607

In addition to federal requirements, the Florida Department of Transportation acquires rights of way in Florida under somewhat unique state laws. Florida law provides for payment of property owner attorney fees and costs, appraiser fees and other expert fees by the condemning agency. Since the amount of attorney fees is computed on the difference between the Department's initial offer and the final closing or settlement amount, it is important that the Department make the highest initial offer that can be supported. Litigation must be avoided whenever possible in order to minimize the size and amount of the defendant's expert witness fees.

In November 2001, the Florida DOT received approval to conduct a pilot project on incentive offers in amounts exceeding the fair market value. The objective of the Department's Incentive Offer Pilot Project is to assess the potential for incentive offers to reduce overall project costs and delivery time of right of way projects by encouraging early settlements and minimizing litigation and associated costs. The Department applied incentive amounts to initial offers on three separate right of way projects (pilot projects) in Districts Two, Four and Five. Separate but similar projects (control projects) in each District, produced under existing procedures with no incentive offers, were tracked as well. The pilot and control projects selected in each district were to the extent possible, similar in size, makeup, staff and project management. Details about each of the projects are attached.

During the second quarter of 2004, FDOT Right of Way Central Office and FHWA conducted field reviews of both the pilot and control projects in all three districts. The team collected information pertaining to the projects, and interviewed district management and staff to identify potential program strengths, areas of concern, and overall reception to the incentive offer program. Several parcels, on both pilot and control projects, have not been completed. In recognition of this fact, this report is considered to be an interim analysis of the incentive offer program. Further monitoring and tracking of projects will be performed until all parcels have been completed.

In addition to comparing the results of the pilot projects to the control project, a comparison to both District and statewide historical information was developed from the Right of Way Management System. The pilot projects were analyzed for the Cost of Land, Fees and Costs, Time Savings and Customer Satisfaction.

I. Measure of Cost for Land

Percentages shown below were calculated by taking the project's total dollar amount expended for land, improvements, and severance damages divided by the project's total initial appraisal amount.

  Pilot Control District State
District 2 145% 147% 151% 155%
District 4 131% 143% 197% 155%
District 5 138% 160% 158% 155%

Percentages shown above have been rounded to the nearest whole number.

These results indicate a savings on all pilot projects when compared to the control, district or statewide averages. Over the past ten (10) years, the Department averaged expenditures of $272.6 million per year for land, improvements and severance damages. Average percentages of the pilot project when compared to the historical statewide average produced a cost savings for land varying from 10% in District 2 to 24% in District 4. When applied to the total average land, improvements and severance damage expenditures, this translates into a potential monetary savings ranging from $27.3 million to $65.4 million per year.

II. Measure of Fees and Costs

Percentages shown below were calculated by taking project's total amount paid for fees and costs divided by the project's total dollar amount for land, improvements, and severance damages.

  Pilot Control District State
District 2 1% 11% 16% 20%
District 4 20% 21% 29% 20%
District 5 9% 10% 17% 20%

Percentages shown above have been rounded to the nearest whole number.

The range of pilot project savings for fees and costs above the statewide average were from 11% (District 5) to 19% (District 2). Over the past ten (10) years, the Department averaged annual payments of $54.8 million for fees and costs. Therefore, statewide implementation of the pilot process could potentially generate annual savings ranging from $6 million to $10.4 million in the amount of fees and costs paid by the Department.

III. Measure of Time Savings

Time required to obtain title to the subject property was determined by averaging the total number of days which elapsed from initiation of negotiations to the date of closing or date order of taking deposit was made. This is compared to the control project and to the district and statewide historical averages.

  Pilot Control District State
District 2 89 238 216 235
District 4 383* 380 364 235
District 5 212 358 208 235

* Time from initiation of negotiations to title transfer impacted by the county's proposed design changes.

The pilot process shows great promise in allowing for a reduction in project delivery time. Although late design changes can always delay project delivery, the pilot process can allow for quicker recovery, even in those circumstances.

IV. Pilot and Control Project Parcel Information

Shown below is specific parcel production information for each project (i.e. total number of parcels on a project, number of parcels currently open on the project, number of parcels that were negotiated, condemned or voided).

  Pilot-D2 Control-D2 Pilot-D4 Control-D4 Pilot-D5 Control-D5
Parcels Open - - - - - 5
Parcels Voided 5 4 2 11 7 10
Parcels Negotiated 41 44 48 55 60 93
Parcels Condemned 5 19 39 57 34 28
OT Deposits 3 12 13 3 3 3
Final Judgments 2 7 26 54 31 25
Total Parcels 51 67 89 123 101 136

V. Customer Satisfaction

Customer satisfaction was measured by an opinion survey of property owners on the pilot and control projects conducted by FDOT Central Office staff. The opinion survey consisted of the following seven questions rated from 0 to 5 with 5 being the highest rating:

  1. How well did we answer your questions about the project?

  2. How well did we explain the process used to acquire your property?

  3. Was the offer fair and reasonable?

  4. Were you given adequate time to make a decision about the offer?

  5. Was the Right of Way Agent informed and helpful?

  6. Was the Right of Way Agent courteous?

  7. How would you rate the usefulness of the printed material provided?

Questions 3 and 4 are not included on the Department's standard Acquisition survey therefore no responses are available for districts or statewide. Listed below are the average responses from the opinion survey for both pilot and control projects, along with district and statewide averages.

  Pilot Control District 2 District 4 District 5 Statewide
Question 1 4.68 4.56 4.51 4.54 4.80 4.58
Question 2 4.72 4.51 4.62 4.79 4.60 4.64
Question 3 4.65 4.52 NA NA NA NA
Question 4 4.64 4.63 NA NA NA NA
Question 5 4.54 4.65 4.51 4.83 4.50 4.69
Question 6 4.68 4.69 4.76 4.87 4.90 4.81
Question 7 4.68 4.61 4.41 4.23 4.30 4.41

The responses for questions 1, 2 and 7 are higher for the pilot projects than the statewide average. This indicates excellent acceptance by the landowners. This is further enhanced by the responses to questions 3 and 4 which indicate strongly that owners feel no coercion under the pilot process. The responses to questions 5 and 6 are slightly lower than the statewide average, although still very strong. This may be due to the fewer contacts typically occurring under the pilot process. Overall, the landowner surveys show very favorable results for the pilot.

VI. Comments

During the field review of the pilot and control projects, the review team interviewed each District's Right of Way Manager or designee for their impression of the incentive offer pilot. Overall, opinions were positive but did vary in some regards. One manager expressed that, although successful in acquiring parcels, such a program may be better suited for less complicated parcels. While another manager expressed a desire to fully implement the incentive offer program district-wide. Collectively all participating districts positively received the incentive program and implemented it in adherence with procedures.

VII. Interim Conclusions

Based on the information collected thus far, the incentive offer program appears to decrease project costs, shorten time required to acquire title, to reduce fees and costs, and maintain landowner satisfaction. While the pilot projects are not yet final, we believe the currently available data indicates a very strong potential for this process. We would expect the final information from these projects to confirm what we find to date.

The findings on these pilot projects strongly indicate that wider application of the process in Florida should be undertaken.

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Florida Incentive Offer Procedures (2001)

November 27, 2001

Contact: Kenneth Grimes 850-414-4607

Florida Dot Procedures For Implementation Of The Acquisition Incentive Offer Pilot Project

1.1 PILOT/CONTROL PROJECTS

1.1.1 Incentive amounts will be added to initial offers on all parcels on the projects identified as "pilot projects," Acquisition of parcels on the pilot projects will comply with all applicable Right of Way Procedures, except as modified herein. The pilot projects to be acquired under the Incentive Offer Pilot Project are:

District Two - Item Segment 209999-1 District Four - Item Segment 230288-2 District Five - Item Segment 239416-1

1.1.2 Control projects have also been identified in each participating district. The control project must be acquired in compliance with existing Right of Way Procedures. The control projects for the Incentive Offer Pilot Project are:

District Two - Item Segment 210253-1

District Four - Item Segment 229499-1

District Five - Item Segment 238677-2

1.1.3 Agent to parcel ratios and levels of management oversight should be similar for the pilot and control projects. Current right of way project schedules for the pilot and control projects should be maintained, to the greatest extent possible, throughout the life of the projects.

1.2 INCENTIVE OFFERS

1.2.1 Incentives will be an amount of money above established just and full compensation. Incentives will be applied to all parcels on the pilot projects except for parcels owned by other governmental entities. No incentive will be added to offers to settle business damage claims.

The Department's Statement of Offer, Form 575-030-08 has been modified to accommodate the addition of an incentive offer. The modified form will be provided to the participating districts by Central Office Right of Way in an electronic format. The Statement of Offer (With Incentive) copy attached provides an explanation of the terms and conditions that apply to the incentive offer. The Statement of Offer (With Incentive) must be used to make offers for parcels on the pilot projects.

1.2.2 Parcels with Uneconomic remnant identified by the review appraiser will require separate offers pursuant to Right of WayManual, Section 7.2.10.1. Incentives for both offers will be based on the value of the partial taking without consideration of the remnant.

1.2.3 Incentives for parcels affected by tenant owned improvements, requiring a separate offer, pursuant to Right of Way Manual Section 7.2.9, Offers for TenantOwned Improvements, will be shared between the property owner and the tenant. The incentive will be divided based on the percentage shares of the value for the whole property attributable to the owner and to the tenant respectively.

Example:

Total Parcel Value = $200,000
Percentage of Total Value to owner = 80%
Incentive for Whole = $66,625
Tenant Incentive = 20% of $66,625 or $13,325

1.2.4 When there are multiple takings from the same parent tract, for example a fee and an easement, incentives will be provided for each parcel based on the just and full compensation for each parcel.

1.2.5 When, prior to an order of taking, the established just and full compensation changes the district must respond as follows:

A. If there is a change in the determination of just and full compensation resulting from an alteration of the parcel which is of such extent that the parcel has become a different parcel from that on which the original offer was made the district must provide the property owner a revised Statement of Offer (With Incentive) with a new incentive calculated based on the revised just and full compensation,

B. If there is a change in the determination of just and full compensation, other than as in Section 1.2.5 A, and the revised just and full compensation is more than the total previous offer just and full compensation plus the incentive, a revised offer must be made using the Statement of Offer, Form 575-030-08. No Incentive will be included.

C. If there is a change in the determination of just and full compensation other than-as in Section 1.2.5 A, and the revised just and full compensation is less than the total previous offer (just and full compensation plus the incentive) no new offer shall be made, unless, the previous offer has been formally withdrawn.

The property owner should be allowed adequate time to review and analyze any revised offer. However, a new offer and incentive will not preclude filing suit provided the minimum time for negotiation, as described in Right of Way Manual, Section 7.2.22, has expired.

1.3 ESTABLISHING THE INCENTIVE AMOUNT

Incentive amounts will be determined as follows:

Incentive Offer Computation

Offer Over But Not Over Incentive + % of Offer Amount Over
$0 $1,000 $1,000  
$1,000 $2,500 $1,000 + 83.3% $1,000
$2,500 $5,000 $2,250 + 70% $2,500
$5,000 $7,500 $4,000 + 50% $5,000
$7,500 $10,000 $5,250 + 45% $7,500
$10,000 $20,000 $6,375 + 40% $10,000
$20,000 $30,000 $10,375 + 35% $20,000
$30,000 $100,000 $13,875 + 32.5% $30,000
$100,000 $300,000 $36,625 + 30% $100,000
$300,000 $513,500 $96,625 + 25% $300,000
$513,500   $150,000  

Central Office Right of Way will produce each participating district an electronic method to calculate the amount of incentive offers. Incentive offers should be rounded to the nearest ten dollars.

1.4 DURATION OF INCENTIVE

Incentives will be held open to the date of deposit for orders of taking. Incentives will not be extended past the date of deposit.

1.5 NEGOTIATIONS

1.5.1 Application of incentive offers does not supplant the necessity for aggressive negotiations. The district may consider a11 property owner counteroffers.

1.5.2 Negotiations conducted after the Department acquires title through an order of taking and court deposit will be based on established just and full compensation without consideration of the incentive.

1.5.3 To the extent possible, settlements exceeding established just and full compensation plus the incentive must be avoided. Legal settlements, as defined in Section 3.1, Joint Eminent Domain and Right of Way, exceeding just and full compensation must be avoided unless additional information or circumstances arise that would cause a change in the Department's determination of just and full compensation, for example, a change in design.

1.5.4 It is recommended that the district file an eminent domain suit as soon as it becomes apparent that negotiations are no longer progressing.

1.6 ADMINISTRATIVE and LEGAL SETTLEMENTS

1.6.1 No Recommendation for Settlement, Form 575-030-24, is required for those parcels settled in an amount equal to the Department's established just and full compensation plus incentive, provided the settlement is achieved prior to expiration of the incentive pursuant to Section 1.4.

1.6.2 All settlements above just and full compensation plus the incentive obtained while the incentive is open, or which exceed the Department's established just and full compensation after expiration of the incentive, must be justified in a Recommendation for Settlement or Mediation Report, Form 575-030-25, as applicable, in accordance with existing Right-of-Way Procedures. The full amount of the increase above the established just and full compensation must be supported. The incentive amount cannot be considered in the justification for the settlement.

1.6.3 If the District Right of Way Manager or the Department's representative at "mediation determines that a settlement as described in Section 1.6.2 is necessary, the factors supporting the decision must be documented in the Recommendation for Settlement or Mediation Report as applicable, in addition to support for the amount of the increase.

1.7 EFFECT of INCENTIVE ON RELOCATION ENTITLEMENTS

Replacement housing payment (R.H.P.) calculations for residential owners who have accepted offers with incentives will be based on the amount determined to be just and full compensation. The incentive will not be considered in the calculation and will not offset the amount of the RHP. However, where settlements exceed just and full compensation plus the incentive (see Section 1.6) or the incentive has expired (see Section 1.4) the RHP will be determined based on the requirements of Right of Way Manual Section 9.4, Replacement Housing Payments.

1.8 EMINENT DOMAIN

When parcels on the pilot projects must be acquired by eminent domain, the Department will file suit based on approved just and full compensation. The incentive amount will not be included. Districts should aggressively defend this value throughout the litigation process unless additional information or circumstances arise that affect the Department's determination of just and full compensation, such as a change in design.

1.9 FEES AND COSTS

If the District Right of Way Manager determines that it is reasonable and prudent to pay attorney fees or costs in addition to the incentive, the amount of the attorney fees or costs must be justified in a Recommendation forSettlement or Mediation Report.

1.10 IRS REPORTING

For parcels settled with incentives, the incentive amount will be included in "Gross Proceeds" when being reported to IRS on Form 1099-S.

1.11 PILOT/CONTROL PROJECT TRACKING

1.11.1 The Department has committed to FHWA to track the pilot and control projects until the litigation process has been completed on all parcels. The Department will provide semi-annual reports as to the status of the Incentive Offer Pilot Project to FHWA. More frequent reports may be provided if requested by FHWA or the Department's managers. Each participating district must maintain detailed records relating to time, costs, and other pertinent aspects for the pilot and control projects. The districts must, upon request, provide information to Central Office Right of Way for inclusion in reports to FHWA and the Department's managers.

1.11.2 Information in the Florida Accounting Information Resource System (FLAIR), Financial Management System (FM), Right of Way Control System (RWC), and Business Damage Tracking System (BDT) will be used to determine the effects of the Incentive Offer Pilot Project on project costs and production time. Each participating district must maintain current and correct information in these systems.

Note: The Right of Way Management System (RWMS) is expected to replace RWC and BDT prior to the completion of the Incentive Offer Pilot Project.

1.11.3 In order to properly measure costs associated with the use of incentive offers, attorney fees based on non-monetary benefits must be considered separately from other parcel costs on the pilot and control projects. Where an attorney fee is paid, on either the pilot or control projects, based in any part on a non-monetary benefit, the district must provide the Deputy Right of Way Manager, Acquisition, in Central Office Right of Way, a copy of page one of either the Recommendation for Settlement or the Mediation Report, Form 575-030-25, as applicable.

1.11.4 Central Office, Office of Right of Way will survey property owners affected by the pilot and control projects to obtain feedback about the process. Each participating district must provide the Deputy Right of Way Manager, Acquisition, in Central Office, Office of Right of Way, the names, addresses, email addresses, if available, and telephone numbers for all property owners on the pilot and control projects. For the control projects that are underway at the time the Incentive Offer Pilot Project is approved by FHWA, this information must be provided for all parcels already acquired by order of taking or closing within ten working days after receipt of a written request by the Director, Office of Right of Way. For parcels on the control and pilot projects that have not been acquired at the time of approval this information must be provided within 48 hours, excluding weekends and holidays, after individual parcels are closed or orders of taking have been obtained.

Note: The Incentive Offer Pilot Program does not affect relocation customer surveys.

1.11.5 Central Office Right of Way will also contact district staff and management involved in the Incentive Offer Pilot Project to obtain feedback regarding the project.

1.12 TRAINING

Central Office, Office of Right of Way will provide training to participating districts prior to each district commencing the "'Incentive Offer Pilot Program." Participating districts must ensure that all staff members involved with the district's pilot project attend the training. Attendees should include the District Right of Way Manager, District General Counsel, Deputy District Right of Way Manager, Appraisal, District Acquisition Administrator, assigned review appraisers, acquisition agents, attorneys, and other involved staff as necessary.

1.13 FIELD REVIEWS

Each participating district must arrange for field reviews of the pilot and/or control projects upon request by Central Office Right of Way. It is anticipated that field reviews will be attended by staff from FHWA and Central Office Right of Way and will be guided by district staff.

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Pilot Name: Florida Appraisal Waiver

Florida DOT Right of Way Pilot Project Update

July 2005

Contact: Tom Shields 850-414-4609

Pilot Purpose: To test the effectiveness and efficiency in foregoing the standard technical appraisal process in estimating market value by establishing and implementing alternative processes to develop a good-faith offer to be made to the property owner.
W hen Approved: District 3 (Chipley, FL): 4/6/2000 (Initial approval)

District 5 (DeLand, FL) 12/3/2001

Summary of Pilot Approach, Implementation, and Current Status:

The reporting period of this update is from July 2001 through June 2005; however, District Five received authorization to begin the Pilot on 12/3/01. District Three has been working under this pilot for just over five years.

This Appraisal Waiver pilot has been granted by the Federal Highway Administration on a district wide, on-going basis for both Districts Three and Five. FDOT has implemented the provision of the waiver by use of an Agent's Price Estimate (APE), a format used to construct a good faith offer. This pilot was initially put into place to test the results of increasing the ceiling of an APE from $10,000 to $20,000 by evaluating its effect on costs, production, and customer satisfaction. Since the initiation of this pilot project, FHWA has authorized the FDOT to increase its APE ceiling to $25,000 statewide; however, FDOT has continued to monitor the results of the $20,000 waiver pilot in the two districts for National study purposes.

Administrative settlement criteria for this pilot when an APE is used, is as follows: For parcels valued by an Agent's Price Estimate up to $2,500, administrative settlements may be made up to $5,000, exclusive of fees and costs. On parcels between $2,500 and $20,000, the amount of the increase, exclusive of fees and costs, may not exceed the lesser of 100% of the Agent's Price Estimate or $10,000.

Results to Date:

The following is a breakdown by district of the current status and performance report from districts Three and Five.

  District 3 District 5
Number of parcels 1,208 1,557
Total number of APEs prepared 294 207
Total number of APEs $10,000 or less 218 140
Total number of APEs $10,001 to $20,000 76 67
Total negotiated settlement % for your District 54% 70%
Negotiated settlement % for parcels initially Appraised 45% 58%
Negotiated settlement % for parcels initially done by APE 82% 83%
Negotiated settlement % for APEs $10,000 or less 84% 83%
Negotiated settlement % for APEs $10,001 to $20,000 76% 90%

Evaluation of Results to Date (including savings, costs, benefits, downsides):

The relatively high settlement rate where APEs are used is a clear indication of customer satisfaction relative to property owners. The districts report that most parcels done on APEs that subsequently required appraisals and eventual litigation, came as a result of title problems and not necessarily from a failure in negotiations. The districts also report that use of the APE has been very well received by the negotiation agents, due primarily to them being able to negotiate on a good-faith offer estimate they themselves produced. Pride of ownership has been a noted motivator. Statistically, the key indicator here, regardless of thresholds, is the comparison of the line-items "Negotiated settlement % for parcels initially Appraised" and "Negotiated settlement % for parcels initially done by APE. The increase in successful negotiations from 45% to 82% for District Three and from 58% to 83% for District Five are clear indications of the success of this program.

Time Savings:

  District 3 District 5
Total time savings through implementation of APEs 9,408 hrs. 4,681 hrs.

Cost Benefits:

  District 3 District 5
Total savings (Avoidance of Appraisal and Review process) $1,176,000 $1,029,300
Savings (Appraisal and Review) $10,000 or less $872,000 $643,400
Savings (Appraisal and Review) $10,001 to $20,000 $304,000 $385,900

Downsides:

There were some growing pains and steep learning curves early on in the initial development and implementation of the appraisal waiver program. Specifically, some parcels were targeted as candidates for APEs that eventually turned out to be more complex than originally anticipated. When negotiations failed and an appraisal was ordered, the result was sometimes a significant increase over the initial (APE) offer to the owner which placed the department in a very awkward position. Also, the department encountered a very limited negotiation success rate on a project in the very early stages of the Appraisal Waiver adoption when the APE was used on a high density, commercialized, and litigious corridor in Orlando. More stringent processes for screening viable APE candidates have been put into place to minimize these occurrences. We have noted no long-range downsides in the implementation of the Appraisal Waiver and highly endorse its use in the acquisition process.

Lessons Learned:

The Agent's Price Estimate appraisal waiver program continues to prove itself to be an effective, timesaving negotiation tool. It is also critical that an initial offer to a property owner based on an APE, not only be nothing less than Just and Full Compensation, but should be as realistically generous as practicable. Based on our experience, we have three strong points of advice we pass on to our districts when using the Agent's Price Estimate:

  1. Be Conservative when identifying parcels as potential candidates for APEs. It is critical that the person or people evaluating a taking must have the experience to foresee ANY possible cause of severance damages that could elevate the level of complexity of the appraisal problem beyond the intent of an appraisal waiver. To overlook severance damage issues due to a partial taking can not only lead to production impacts by having to backtrack in the acquisition process, but can be a disservice to the property owner and result in an underpayment in Just and Full Compensation, should the Department be dealing with an unknowledgeable seller/property owner.

  2. Be Liberal when deriving the Good Faith Offer. The Price Estimate should be recognizable as a generous (but reasonable) offer to the owner. If negotiations should fail and a subsequent appraisal prepared, what the agency definitely doesn't want is for the resulting appraised estimate of market value to be higher that the APE offer made to the owner. If the appraised amount exceeds the APE, it places the Department in a very poor posture and creates the appearance that the DOT has attempted to buy the property for something less than Fair Market Value.

  3. Be timely in communicating to the Appraisal Section when it is determined that the parcel can not be purchased through the APE and that an appraisal needs to be prepared. A big deterrent in using the APE we faced from our districts was the risk they faced in not having sufficient time to have an appraisal prepared, reviewed, and approved in order to file a law suit for condemnation and still meet the production schedule. Close coordination needs to exist between appraisal and acquisition when the appraisal waiver provision is used. The districts often include parcels targeted for APES in the appraisal contract and place hold on the appraisals. This provides for a light-switch provision to get the appraisal underway should negotiations fail.

Would you recommend this technique to others?

Yes, it is highly recommended; however, whatever processes are put into place to implement the appraisal waiver must contain the effective checks and balances to address the three points of advice detailed above.

Please describe any issues that might affect use of the technique in other states:

None noted other that those discussed above.

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Pilot Name: Michigan Appraisal Review Modification

Modified Review on Appraisals of Non-Complex Parcels

August 2005

Contact: Eric Smith 517-373-4143

DATE STARTED: June 2001
DATE COMPLETED: August 2005
PARCEL TYPE: Non-Complex Parcels
PROGRESS: Ongoing

Pilot Program Test And Control Jobs:

The pilot program was used on right of way acquisition jobs, M-45 in the Bay region, the Ontonagon bridge job in the Superior region, the US-31 job in the Southwest region and compared to the control job, M-84 in the Bay region.

M-84, Phase 1, (the control project):
The average time for a GFO (Good Faith Offer) to be presented after the appraisal was received was 80 days. There were a total of 14 non-complex parcels on this project.

M-84, Phase 2 & 3:
The average time for a GFO to be presented after the appraisal was received was 23 days. There were a total of 50 non-complex parcels on these two phases.

M-45:
The average time to present a GFO with a review waiver was 25 days. There were a total of 69 non-complex parcels on this project. The average compensation was between $10,000 and $75,000.

Ontonagon Bridge:
The average time to present a GFO with a review waiver was 14 days. There were a total of 22 non-complex parcels on this project. The compensation ranged from $1,500 to $59,000.

US-31:
The average time to present a GFO with a waiver of review was 22 days. There were a total of 12 non-complex parcels on this project.

The assigned acquisition agent performed a cursory staff review of the appraisal content. An "Appraisal Checklist", form 633E was completed by the acquisition agent stating there were no apparent issues that would alter the appraisal's conclusion.

Evaluation:

There was a considerable savings in time accomplished on the projects using the pilot program. The pilot program was well received by staff and worked well on non-complex parcels.

The lone drawback at this point is the lack data to analyze the pilot in more depth mostly because of the large number of projects deferred due to MDOT budgetary issues. With enactment of the new Transportation Bill more projects should become active in the next few months giving the opportunity for a better sampling a data and a more accurate analysis of the pilot program.

Preliminary findings based on a limited amount of data are as follows:
There was an average savings of 56 days when using the waiver of review.
The condemnation rate was unchanged at 8%.
Cost savings: An average of $3000.00 per parcel was saved.
Reduction of time between completed appraisal and making the GFO to the property owner.
Less time involved in the overall acquisition process thus helping reduce the uncertainty suffered by property owners waiting for a GFO.
No property owner complained or was at all concerned that a formal written appraisal review report was not prepared.

Lessons Learned:

While treating the property owner in a fair manner, on non-complex parcels a formal written review adds little value, is costly, and takes considerably longer.

Little or no change in the condemnation rate or administrative settlements compared to the control or other typical projects.

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Pilot Name: Mississippi Land Consolidation

State Contact: Jim Majure (601) 359-7457
FHWA Contact: Cecil Vick (601) 965-4217

Pilot Purpose: To broker voluntary land acquisitions to assist affected rural property owners to re-establish economic units.

When Approved: 2003
When Started:
End Date:

Summary of Pilot Approach, Implementation, and Current Status:

In 2003 the Mississippi DOT made public its willingness to use the land consolidation technique in the I-69 corridor. Numerous public meetings were held. These were well attended by the affected farmers in the I-69 corridor. The DOT offered to broker voluntary land acquisitions and will continue to investigate what role the DOT should play as this project evolves.

Results: No one in Mississippi has used this technique to date.

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Pilot Name: North Carolina Appraisal Waiver

State Contact: John Williamson (919) 733-7932
FHWA Contact: Mike Dawson (919) 856-4336 x 127

Pilot Purpose: Evaluate the use of appraisal waiver threshold amount of $20,000.

When Approved: October 10, 2001; modified February 26, 2003
When Started: Initial pilot October 10, 2001; expanded pilot February 27, 2003
End Date: October 10, 2003

Summary of Pilot Approach, Implementation, and Current Status:

In order to determine whether the increased waiver threshold can yield improved delivery of right-of-way a pilot was approved using the Federal agency waiver of regulations. 90 parcels were targeted on the original pilot. In 2003, this was expanded to include an additional state division. This addition was made to evaluate an area of the state that is predominately rural. A review by the FHWA office confirmed the efficiency of the increased waiver limit as well as the continued high standards used in property valuation and review by the state. NCDOT demonstrated a clear understanding of the use of the increased appraisal waiver protocol. Upon completion of the pilot program, the state requested FHWA to make the waiver limit permanent and increased to $25,000 to match other states waiver limits. That request was approved on December 18, 2003.

Evaluation of Results to Date (savings, costs, benefits, downsides):

NCDOT saw significant time and cost savings in the acquisition process by using the increased waiver limit under the pilot program for acquisitions in both the rural Division 3 office and the more urban setting of the Division 5 office. The requirement in 49 CFR 24.102 (c)(2) that the valuation problem be uncomplicated remains in place. A review of the program confirmed that NCDOT Division 3 and 5 offices are using the waiver provision correctly and effectively with no diminishment to the level of service or protection of the rights of impacted property owners.

Time Savings:

25% of claims settled on initial contact; 50% of claims settled within 1 month;

25% of claims settled with 6 months.

Cost Savings:

It is difficult to quantify the cost savings to NCDOT in real dollars. The use of the increased appraisal waiver threshold has allowed for considerable time savings to the department, which in turn impacted the project timeline in a positive manner.

Lessons Learned:

The pilot was determined to be highly successful. The appraisal waiver was most useful in rural environments where undeveloped farmland and acreage parcels were more common. In urbanized areas the waiver provision was found to allow for more expeditious acquisition in small strip takes although the opportunity to use the waiver was hampered by acquisitions that tended to be more complex in nature due to their urbanized setting.

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Pilot Name: South Florida Water Management Acquisition/Relocation Incentive

June 2005

Contact: Dick Moeller (561) 478-7210

Summary results from the 2004 South Florida Water Management District's acquisition and relocation incentive offers.

In an effort to maintain the schedule prescribed for this project, the South Florida Water Management District approved incentive payments to reach early agreement and relocation from the project area. These amounts are in addition to amounts previously discussed for the payment of just compensation and relocation assistance.

The acquisition of Rocks and Shady Oaks Fish Camps involved the acquisition of tenant owned improvements from 335 owners, 99 of which are primary residents at this location. This project and incentive program worked well. It took 3 agents six months to accomplish 316 relocations. It resulted in earlier and a greater number of settlements (94%) than otherwise would have been expected in Florida (52%). As of September 2004, 316 owners were signed at Level I. The $1,400,750 paid out in incentive payments was 5% of the total acquisition cost: $28,781,550. The prescribed performance dates in the following schedule were relaxed a bit due to the three hurricanes that hit during the 6 month time period.

Level I

Level II

Tenants (no ownership of improvements)

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Pilot Name: South Carolina Appraisal Waiver

State Contact: Oscar K. Rucker (803) 737-1400
FHWA Contact: Melvin Cooper (803) 253-3877

Pilot Purpose: Monitor whether, or not, the use of Cost Estimate offers under $20,000 is an effective tool in streamlining the valuation process, and a factor in time and condemnation reduction on SCDOT projects.

When Approved: May 2002
When Started: July 1, 2002
End Date: July 1, 2003

Summary of Pilot Approach, Implementation, and Current Status:

Time frame established for pilot implementation and procedure for data collection. Field acquisition personnel informed of pilot project and instructed to proceed with approved cost estimate offers of $20,000.00 and under. Data is currently being collected and analyzed for report to FHWA.

Results to Date:

Preliminary results are inconclusive to date.

Evaluation of Results to Date (including savings, costs, benefits, downsides):

Preliminary data indicates that 65% of offers on federally funded tracts were below the $20,000.00 threshold during 2003. We are currently analyzing cost and time savings along with any other benefits of the pilot project.

Lessons Learned:

Factors such as proximity damages, severance damages, highest and best use, etc should be monitored closely to insure that a fair offer is made.

Would you recommend this technique to others?

I don't feel that I can make any recommendation at this time until final analysis of pilot project is complete.

Please describe any issues that might affect use of the technique in other states.

Where statute requires DOT to pay all litigation expenses and an appraisal is required for condemnation purposes it may justify all offers from appraisals in lieu of cost estimates.

Just compensation must be set by DOT for all cost estimate offers.

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Pilot Name: Virginia Preliminary Engineering Cost Reimbursement

State Contact: Gregory Wroniewicz (804) 786-2931
FHWA Contact: Barbara Middleton (804) 775-3341

Pilot Purpose: Reimburse utility companies for 100% of the preliminary engineering cost incurred on a Virginia DOT roadway improvement project.

When Approved: September 1, 2000
When Started: September 1, 2000
End Date: To be determined

Summary of Pilot Approach, Implementation, and Current Status:

Each District has tried this on at least 1 or 2 projects. The Richmond District tried over 50 projects. Right now, in several Districts, the plans and estimates are coming in at approximately the same time as always. In a couple Districts, the estimates are arriving sooner. Some Districts think it is an improvement, some think there is no difference. To date, we have noticed a small but steady increase in the timely response and receipt of the plan and estimates from the utilities and their consultants.

Evaluation of Results to Date (including savings, costs, benefits, downsides):

The VDOT roadway project workload has been reduced in the last few years so a good response is not available at this time. However, the utilities view this as a very important step by VDOT in helping them meet the engineering demands for their relocations. The utilities have down sized their engineering staffs in the last few years so, when our workload does return, we should see great benefits from this program.

Lessons Learned:

The process can speed up the plan and estimate submittal from the utilities. The utilities are very supportive of this pilot and believe it will benefit VDOT in the future in getting the plan and estimates sooner when the construction resumes.

Would you recommend this technique to others?

Yes.

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Pilot Name: Virginia Relocation Incentive

State Contact: Stuart Waymack (804) 786-2923
FHWA Contact: Barbara Middleton (804) 775-3341

Pilot Purpose: Early move incentive program on the Woodrow Wilson Bridge.

When Approved: March 30, 2001
When Started: April 7, 2001 (1st incentive claim processed April 30, 2001)
End Date: April 22, 2002 (last incentive claim processed April 22, 2002; last tenant moved December 2001)

Summary of Pilot Approach, Implementation, and Current Status:

Incentives were offered to tenants in addition to the full relocation payment. Incentive payments were based on the early move date. VDOT successfully relocated 403 tenants in 8 months. This was significantly less time than originally scheduled. The relocation incentive program was a major factor in getting the project back on schedule and minimizing additional delays.

Results to Date:

The incentive program cost the project approximately $1.2 million. This was offset by construction schedule-related savings of approximately $6 million. If relocations had been delayed and the opening of the new bridge delayed, the VDOT could have been assessed a $50,000/day penalty by the Maryland State Highway Administration. There was reduced property management overhead cost for the condemned properties during the relocation period.

Evaluation of Results to Date (including savings, costs, benefits, downsides):

The tenants moved quickly and took advantage of the incentive payment.

Lessons Learned:

The program developed goodwill between the tenants and VDOT and has gone a long way to improve the image of VDOT and FHWA in the eyes of those impacted by the project. It serves as a model for future residential relocation programs. Virginians and all users of the Capital Beltway will enjoy reduced commuting expenses and travel times through earlier project completion. The southern span is scheduled to open for traffic in 2006. Final completion of the bridge is expected in 2008.

Would you recommend this technique to others? Yes.

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Pilot Name: Washington State Appraisal Review Modification

June 2005

Contact: Gerry Gallinger 360-705-7305

At present the Washington State Department of Transportation (WSDOT) is required by Washington Administrative Code (WAC) to review all appraisals prepared for acquisition. Historically, these reviews are thorough and in a narrative format. In 2001 the WSDOT proposed a pilot project in which the review appraiser would forego a field inspection in the interest of saving time. In addition, rather than using a review document that is narrative, the WSDOT would use a checklist with blanks that need to be filled in, along with a comment section to explain any minor adjustments made to the appraisal in review.

Certain criteria would need to be met before the appraisal could be considered for desk review only.

In order to gauge the success or failure of this program it is imperative that measures be established to compare results. To this end, WSDOT would select two or more projects of as similar nature as possible. These projects would have 10-25 parcels meeting the appraisal criteria for a modified review.

To date, there have been no projects identified that met the criteria. Thus, the pilot never went forward.

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Pilot Name: Wisconsin Appraisal Review Modification

State Contact: Rebecca Krugman (608) 266-2362
FHWA Contact: Roger Szudera (608) 829-7508

Pilot Purpose: Appraisal review by Central Office review appraisers eliminated.

When Approved: March 2003
When Started: March 2003
End Date: Ongoing

Summary of Pilot Approach, Implementation, and Current Status:

The second project is getting under way in the spring of 2004. It will be Highway 32 in Racine and Kenosha Counties. The Racine County portion will be the control section, and will have Central Office review. The Kenosha County portion will not have Central Office review. The state will then look at the difference in time to get approved offers out to owners once District 2 receives the appraisal. This should cut down on workload for Central Office review appraisers. Right now plats are being processed.

Evaluation of Results to Date (including savings, costs, benefits, downsides):

One project is complete, Highway 11 in Racine County, project ID # 1320-06-20. It had 50 parcels that were a mix of agricultural, commercial, and residential use. This was a resurfacing and realignment project with mainly strip takings.

Overall, the process was improved from a production standpoint. We cut 2 to 3 month off the acquisition time on this project. We feel there were no ill effects on property owners or taxpayers by not running the appraisals through a Central Office reviewer. The same conclusions on value were reached by using in house staff and in house senior agents when questions arose.

Lessons Learned:

On simple straightforward projects, Central Office review of appraisals is not necessary. It is advantageous to have the option of running trouble parcels through the Central Office reviewers when needed, however, on simple projects District 2 staff is capable of handling the work in house.

Would you recommend this technique to others?

Yes. This frees up the Central Office appraisal reviewer to review the more complex parcels in the state.

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Updated: 04/02/2013
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