Signs of the Times - March 2013 - (Page 74)
Compensability and Valuation
of Billboards in Condemnation
The tenets should be applicable for on-premise signs.
By Richard Rothfelder
The best and highest-renting the most motorists and
billboards are located
where they can be viewed by
potential customers – next to the busiest highways. The
busiest highways, in turn, are likely to eventually be
widened or otherwise improved, so they can accommodate even more of the increased traffic demand. Logically,
then, the most-expensive billboards are among the property interests that must removed in highway widenings.
This article addresses two of the most hotly contested
questions in condemnation law: when the government
widens a highway, or undertakes some other public
improvement that requires billboard removal, is it
required to pay the owner just compensation? Further,
if such compensation is required, how is the billboard
to be valued in eminent domain?
Governmental entities typically say no compensation
is required; they argue that billboards are personalty
(personal property) only entitled to relocation benefits.
If it must pay for billboard removals to accommodate
the highway widening, the government says to use only
the cost approach, which means using lower valuations.
Billboard owners, by contrast, claim billboards are
like any other private property; if the government
takes or damages them for a public purpose, it must
pay just compensation without regard of the property’s
characterization. Similarly, they argue their billboards
should be appraised in eminent domain under the
traditional income and comparable-sales approaches,
similar to hotels, apartments, office buildings and other
income-producing properties.
The government argument
The Court, in Harris County vs. Clear Channel Outdoor,
Inc., 2008 WL 1892744 (Tex.App. Houston [14th Dist.]
2008, no pet.) explained the position of the Texas
Dept. of Transportation (“TxDOT”), representative
of most DOTs and other governmental entities, on
billboard compensability in eminent-domain cases:
Prior to December 2004, both TxDOT policy and
federal law considered billboards to be real property
and required that the billboard owner be compensated
for the loss of the sign or the cost of relocating the sign.
However, in late 2004, for reasons not disclosed in the
record, TxDOT initiated changes in the regulations
addressing how billboards affected by transportation
projects should be handled. These changes, which took
74 SIGNS OF THE TIMES / MARCH 2013 / www.signweb.com
effect in December 2004, dictated that billboards affected
by transportation projects would no longer be treated
as real property, and sign owners would no longer be
offered compensation for the loss of the sign.
Under its current policy, TxDOT and most other
governmental entities offer only relocation benefits
under federal and state laws for billboards displaced
by highway improvements. (see Uniform Relocation
Assistance and Real Property Acquisition Policies Act,
42 USC §4601; Texas Property Code, §21.043). The
government sometimes doesn’t even name the billboard owner in the eminent-domain case, especially if
the lease isn’t recorded, or if the fee interest is acquired
through voluntary purchase.
In support of its position, the government argues
that billboards are characterized as personal property,
for which compensation is not required in a condemnation proceeding. Assuming only real property is
compensable, the government then utilizes the threepart test under Logan v. Mullis, 686 S.W. 2d 605 (Tex.
1985), to argue that billboards are characterized as
personalty: (1) the mode and sufficiency of annexation,
either real or constructive; (2) the adaptation of the
article to the use or purpose of the realty; and (3) the
intention of the party to annex the chattel to the realty.
Because the third element, regarding the intent of
the party placing the property, is preeminent under
the Logan test, Sonnier v. Chisholm-Rider Co., Inc.,
909 S.W.2d 475, 479 (Tex. 1995), the government
emphasizes the provision often found in billboard
ground leases, which reserves the right of the owner
to remove his billboard after the termination of the
lease. Similarly, governmental entities often argue
billboards should be characterized as personal property
because they’re considered personal property by local
taxing and appraisal authorities, (Clear Channel
Outdoor, Inc. v. City of Milwaukee, 2011 WL 3050131
(Wis. App. 2011), and to qualify for federal taxinvestment credits (Whiteco, Inc. v. Commissioner, 65
T.C. 664 (1975). Citing cases from other states, TxDOT
then concludes billboards are personal property and
not compensable in eminent domain under the Logan
test (see, e.g. Rite Media, Inc. v. Secretary of the Massachusetts Highway Department, 712 N.E.2d 60 (Mass.
1999); Department of Transportation v. East Side Development, L.L.C., 892 N.E.2d 136 (Ill. App. 2008, pet. for
http://www.signweb.com
Table of Contents for the Digital Edition of Signs of the Times - March 2013
Signs of the Times - March 2013
Contents
ST Update
Smart Inking
Technology Update
Vinyl Apps
Strictly Electric
Lighting Techniques
The Moving Message
Technology Review
Technology Review
Design Matters
New Products
ADA: One Year Later
The Supergraphic Connection
ISA Sign Expo 2013 Preview
Compensability and Valuation of Billboards in Condemnation
Industry News
Advertising Index
Editorially Speaking
Signs of the Times - March 2013
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