Colorado Legislative Council Staff

STATE

CONDITIONAL FISCAL IMPACT

TITLE:            CONCERNING THE DISPOSITION OF EXCESS STATE HIGHWAY RIGHT-OF-WAY BY THE DEPARTMENT OF TRANSPORTATION TO CERTAIN QUALIFIED TAX-EXEMPT ENTITIES.

Summary of Legislation

            The bill would create an exemption to the current right-of-way disposal process for the Department of Transportation (CDOT) and allow CDOT to dispose of up to five acre parcels of excess right-of-way to qualified charitable or non-profit entities that are adjacent landowners for less than fair market value. Five qualifications are listed in the bill that an entity must meet to be eligible to lease, exchange, or purchase excess right-of-way. Money received from the sale or lease of excess right-of-way would be deposited into the State Highway Supplementary Fund. For purposes of this fiscal note, disposal means the sale or lease of right-of-way.

State Revenues

            Current law (43-1-210, C.R.S.) requires that CDOT dispose of property at its fair market value. For any parcel with a value that is more than $5,000, adjacent landowners have a first right of refusal. If they do not exercise this right, any local governmental entity has a first right of refusal. In certain cases when CDOT acquires a property, a property owner may retain mineral or gravel rights in property. CDOT indicated that it places a reservation on that right that indicates the right may not be exercised if the roadway stability is at risk.

            The bill would require property to revert to CDOT should the non-profit entity choose to sell the property or abandon the property at some later date. The bill would also allow for the disposal of parcels that are less than five acres, at less than their fair market value, if a non-profit/charitable entity is an adjacent landowner. It is assumed that nominal consideration would be much less than the fair market value. It is also assumed that the number of non-profit/charitable entities that are adjacent landowners to useful excess CDOT right-of-way is minimal. This bill may reduce revenue CDOT may receive from future sales of excess right-of-way to a charitable entity that may have been sold to another entity at fair market value. The amount of any reduced revenue has not been estimated due to the number of unknown variables. This bill is assessed as having a conditional fiscal impact because of the number of variables an entity must have to qualify, the Transportation Commission approval of the sale, and the federal approval of the sale.

            CDOT has 275 parcels that are considered excess right-of-way that total approximately 755 acres most of which do not have any direct access. These were acquired at a cost of $3,302,000 between 1955 and 1998. A current appraisal of the fair market value has not been done. However, CDOT estimates that the value, at a minimum, is approximately $20,000,000. There is currently one known parcel this analyst is aware of where a non-profit entity is an adjacent landowner and the parcel is five acres or less. The number of other parcels and the value of those parcels that this bill may apply to is not known.

State Expenditures

            The bill specifies a number of conditions and federal requirements are imposed that may limit the potential cases this bill affects. The Transportation Commission would have to approve the sale. If federal funds were used in the purchase of right-of-way, the Federal Highway Administration (FHWA) must approve the property’s disposal. There is a federal requirement that the right-of-way purchased with federal money must be sold at its fair market value. Case by case exceptions may be granted and there is a federal provision that allows for the sale at less than fair market value for certain other transportation related purposes. Whether this bill would qualify under the federal exemptions is not known. If this bill does qualify under the exemption, there would be no expenditure impact to CDOT. If the bill does not qualify the state would have to seek an exemption on a case by case basis from the FHWA. Should a case be granted an exemption to the federal law, there would be no expenditure impact to CDOT.

            Without federal approval, disposal to an entity at less than fair market value would require the state to reimburse the FHWA. The amount that would be reimbursed would be equal to the percentage of the federal contributions used in the property’s purchase (generally 80 percent). For example, a parcel that was purchased for $50,000 with 80 percent federal funds and has a current market value $100,000 that was sold to a non-profit for $10,000, the state would owe the federal government 80 percent of $100,000 or $80,000. The reimbursement would not be sent back to Washington but would be applied to the federal share of an existing state highway project. This example would move $80,000 of state funds from an existing project to another project as federal funds.

            The number of cases that this bill would apply to that would require the state to reimburse the FHWA is estimated to be minimal.

Local Government Impact

            By providing an exemption for charitable entities to obtain state right-of-way, local governments may not be able to purchase these rights-of-way that they normally would be able to purchase. It is assumed that the purchase of some of these rights-of-way would be of interest to both local governments and charitable entities.

State Appropriations

            This fiscal note implies no additional state money would be required in FY 1999-00 to implement this bill.

Departments Contacted

            Transportation