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Office of Planning, Environment, & Realty (HEP)

Real Estate Acquisition Guide For Local Public Agencies

IV. Administrative Matters

While this Guide is concerned primarily with the programmatic aspects of the Federal-aid highway right-of-way program, it is important also to understand the administrative framework in which the program operates.

Direct Federal Acquisition vs. Federal Assistance

There are two ways in which real property is acquired using Federal funds. The first is direct Federal acquisition. For direct Federal acquisition, an agency of the Federal Government buys the property directly from an owner and the United States of America becomes the title holder. The second method involves what is called Federal-aid or federally assisted acquisition. Under this method, non-Federal units of government (e.g., States, counties, cities, and others) and sometimes private entities, purchase real property as part of a project receiving Federal funds. This guide is concerned with the second method, Federal-aid.Under the Federal-aid highway program, FHWA expects the State to be responsible for the proper acquisition of real property even when it passes funds through to agencies at the local government level.

Federal-aid Highway programs

Federal-aid highway funding comes primarily from the highway trust fund that receives tax revenue from gasoline and diesel fuel sales. States also levy a tax on fuel sales to support their share of road improvement costs.

Authorization, Apportionment, Appropriation

When an authorization bill is enacted the Federal-aid program operates under contract authority. This means that once the authorized funds are apportioned or allocated to a State, they are a reliable financial commitment on the part of the Federal government on which the TIP and STIP documents can depend.

Project Authorization and Agreements

Projects in an approved STIP that have met the NEPA requirements are funded based on State requests for FHWA authorization to proceed with all or select phases of project activity, A project agreement must be executed before project expenses can be reimbursed.

Authorizations and agreements are based on State and local agency assurances to comply with prevailing Federal and State laws. The Uniform Act requirements discussed in the next three Chapters are critical whenever right-of-way is, or will be, required for the project. The Uniform Act applies when Federal funds are used in any phase of the project.


Federal-aid highway projects, like most Federal assistance, typically require that the agency receiving funding (the assistance recipient) contribute a portion of the cost of the project, known as the non-Federal share. The majority of such funding comes from State or local funds provided by State or local legislatures for this purpose. However, an assistance recipient may be able to reduce the amount of funds it needs to provide by obtaining credits which count toward its required share. Credits may be obtained in several different ways.


When a private party wishes to donate all or a portion of his or her property, he or she must be fully informed of the right to receive just compensation for the property. If he or she decides to donate the property to a project, the assistance recipient (your agency) may receive credit toward its cost share for the fair market value of the donation, determined in accordance with applicable Federal regulations (see Chapter V, Valuation) and its own agency policy. In addition, Federal highway legislation provides a credit for the value of State or local government-owned land which is incorporated into a project.

Disposition of Certain Revenues

When States or local governments sell, lease or rent real property previously acquired with Federal funds, income is generated. The income derived from these activities may be retained (rather than returned to FHWA) if it is used to fund projects eligible under Title 23 U.S.C. Highways. Thus, such income may be spent on eligible activities occurring under a different project from the one which originally provided the funds. You should contact your STD for further information and assistance. Additional information regarding these issues can be found in Chapter VIII, Property Management.

FHWA Contracting Requirements

Federal financial assistance carries requirements as well as opportunities. Negotiations and relocation contacts with property owners must be conducted by qualified agency personnel; however, if your agency does not have personnel who are knowledgeable or experienced in these requirements, you can utilize consultants. Contracting for such consultants, whether they deal with appraisal, acquisition, or relocation, must follow approved State or local (with State approval) procurement procedures. [These requirements are applicable only when Federal funds are used in the acquisition cost of the right-of-way.]

Note: We strongly encourage local government agencies with limited prior experience in contracting for right-of-way services to contact their SDOT for more detailed information on these requirements.

Agency Organization & Conflict of Interest

The Uniform Act requires that acquiring agencies be organized in such a way that conflict of interest and undue influence over valuation personnel are not present. This means that persons functioning as an appraiser or review appraiser are not subject to supervision or formal evaluation by a project or program negotiator. This organizational limitation is intended to ensure appraisal/valuation independence and prevent inappropriate influence. Project information sharing between appraisers/valuation preparers and other agency personnel is not prohibited and should be encouraged to assist in development of project information and participating in determining the scope of work for the appraisal or valuation as long as supervisory authority is not involved. If such a requirement creates a hardship in your agency due to limited staffing you should consult with your SDOT representative to see if a waiver of this requirement can be obtained from the Federal funding Agency.

This chapter has discussed issues which relate to the administration of your agency's real estate acquisition program. In the remaining chapters, we focus on elements relating to the acquisition of real property including valuation, acquisition, relocation assistance and property management.

Updated: 9/5/2014
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