This section is intended to acquaint the Engineer with some of the functions of the City in connection with the acquisition of private property for public use. The acquisition itself will be conducted by the Real Estate Division of the Bureau of Engineering. Included are some of the details of procedural rights under EMINENT DOMAIN, methods of acquisition, appraisals, and compensation.
E 145.1 Methods
The City's acquisition and/or use of private property is effectuated by two basic methods. The more common method, DEDICATION, is on a voluntary basis where the property owner either donates (grants) the property concerned without charge, or voluntarily sells the property to the City. The other method, CONDEMNATION, is involuntary and requires a court order.
There are other methods by which property may be acquired but which may or may not be directly concerned with a public improvement (e.g., adverse possession, escheat, default in tax payments, etc.).
In the acquisition of property by the City, the method by which the property is obtained is affected by the extent of ownership and rights desired, ranging from a fee simple estate, which is the largest estate known to law, to a RIGHT OF ENTRY. The degree of interest is based on
the purpose to which the property is put, as well as on the duration of these rights. Where appropriate, the ultimate plan of property disposition or reversion of interest is also a consideration.
E 145.11 Dedication
STREET EASEMENT dedications are acquired through voluntary action. The most frequent methods of dedication are specified in the Municipal Code under various ordinances and subdivision laws. These regulations make it mandatory to provide street easements:
- For access rights to newly subdivided property.
- To bring secondary or major street widths up to standard dimensions when:
- Taking out a building permit for a multiple dwelling.
- Changing the zoning to a less restrictive zoning (i.e., R1 to R3).
E 145.12 Negotiation
The most common form of voluntary sale of property to the City by the property owner is accomplished by NEGOTIATION through the Real Estate Division of the Bureau of Engineering. Compensation may be either in money or in a combination of money and certain repairs, replacements, or other forms of compensation mutually agreeable to the City and the property owner.
E 145.13 Condemnation
Where the owner refuses to accept the City's offer, and the completion of Public Works projects should not be delayed, the City will usually resort to condemnation procedures under “EMINENT DOMAIN”.
CONDEMNATION procedures are cumbersome. For this reason their use should be avoided where possible. However, if negotiations fail, the City files a complaint with the courts requesting CONDEMNATION of the property. At the same time, a sum of money equaling the appraised value of the property to be taken is deposited with the court.
Having received the case the court considers the following questions:
- Is the condemning party entitled to exercise the power of EMINENT DOMAIN?
- Is the property in question to be for public use?
- Is the taking of the property necessary?
- Is the condemnation just?
- Is the evidence submitted more in favor of the plaintiff (City) than the defendant (property owner)?
- What is the value of the property?
A prior assumption is made in this Manual that Public Works projects properly meet the requirements set forth under EMINENT DOMAIN. It is also assumed for the purposes of this Manual, that the courts will rule in favor of the City on all counts.
E 145.131 Order for Possession
The time required for condemnation proceedings is uncertain. In order to permit the construction of the proposed improvement prior to the judgment, a provision in the Code of Civil Procedures states that the City may take immediate possession and use of any right of way required for a certain public use, whether the fee title thereof or an EASEMENT therefor be sought. This provision is commonly known as an ORDER FOR POSSESSION The public use is limited to land to be used for reservoirs, waterways, utility lines, or street right- of-way purposes. Street right-of-way is used for the construction of public streets and alleys, sewers, storm drains, bridges, and their appurtenant structures.
NOTE - An ORDER FOR POSSESSION may be issued but the final construction clearance cannot be given until all displaces have been successfully relocated and usually the structure demolished.
An ORDER FOR POSSESSION having been obtained and cleared for construction, the land is then legally available for the Contractor to proceed. In cases where existing buildings or other improvements interfere with construction, the City may either issue a purchase order or include as part of the contract the remodeling or demolition of the building.
Since the timing and the proper sequence of steps of condemnation procedure are extremely important, a more detailed treatment of the subject is presented in Parts C, Operations and Control and K, Real Estate of the Manual.
E 145.2 Appraisals Of Property
The APPRAISAL OF PROPERTY is a determination of the fair market value and is the responsibility of the Real Estate Division of the Bureau of Engineering. However, knowledge of some of the basic appraisal principles should enable the Designer to make a more realistic overall approach in preliminary design studies.
Prior to discussing appraisal methods, two terms must be defined: MARKET VALUE and HIGHEST AND BEST USE OF THE LAND.
The MARKET VALUE of property is generally defined as the price agreed upon between a seller and a buyer, both knowing the true value of the property, the seller willing but not obligated to sell, and the buyer willing but not obligated to buy. The other term indicates that the value of the property is not limited to the present use of the property. It is generally based on the best profitable, legal, and reasonable use to which the land can be adapted.
E 145.21 Value Of Property
Three basic methods of appraising property are COMPARABLE SALES, REPRODUCTION COSTS, and CAPITALIZED COSTS. All three methods are reliable when properly applied and many appraisers use one or all three as a check. Experience and good judgment are necessary regardless of which method is used. A brief explanation of these appraisal methods is presented here.
- COMPARABLE SALES: This method compares sales of similar property in a given vicinity within a reasonable time prior to condemnation or other acquisition activity. The main disadvantage of this method is that no two properties are identical. Other disadvantages are that recent comparable sales are not always available and some factor must be used to bring the prices of older sales up-to-date or the sales are so recent that they reflect the effects of condemnation activity in the area.
- REPRODUCTION COSTS: This method evaluates the cost of reproducing the existing improvements. It is most applicable where existing improvements are proper, adequate, and reasonably adapted to a particular area. Depreciation or obsolescence of the improvements must also be taken into consideration.
Where a building has little or no market value, the value of the land is determined and the cost of building reproduction, less depreciation is added to arrive at a total figure. In the acquisition of this type of property, the payment can amount to little more than the value of the land.
- CAPITALIZED COSTS: This method is used for the purpose of determining the value of income property. It is based on the estimate of the capital amount of investment required to yield a net income at a reasonable rate of interest for a given piece of property.
For example, an apartment house produces $12,000 gross annual income. From this amount the annual taxes, maintenance, depreciation and other operating expenses are subtracted leaving a net annual income of $7,800. The net income is then divided by the interest rate (as determined by what the prudent man would be willing to pay) which in this case will be assumed to be 8 percent. The $7,800 divided by the 8 percent equals $97,500.
Therefore, it is assumed that $97,500 would have to be invested to produce an annual net income of $7,800 and the building appraised worth is $97,500
E 145.22 Severance Damages
The discussion up to this point covers the evaluation or appraisal of the acquisition or use of a parcel in its entirety. Most street widening projects require only PARTIAL PARCEL ACQUISITION. In addition to the taking of part of the property, there may be SEVERANCE DAMAGES to the property remaining in the owner's possession. This is the loss of value sustained by the remaining parcel. The owner is entitled to compensation for this loss as well as payment for the square footage taken. If the estimate of damages resulting from restrictions of rights and use or from partial acquisition is so extensive as to almost equal the market value of the entire parcel, it may be more expedient to acquire the entire parcel.
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