Road budget rises

Revised appraisals add $51 million to projects

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From wire, staff reports

The $232 million rebuilding of U.S. 52 through Rochester, and the widening of U.S. 63 south of the city have forced a lot of property to change hands in the past two years -- from private hands to the Minnesota Department of Transportation.

MnDOT initially budgeted $32 million for land acquisition for the two projects, according to a story published today in the Star Tribune of Minneapolis. But because many land owners have challenged MnDOT's appraisals of what their property was worth -- and because the department has been forced to offer or pay substantially more for the land -- MnDOT has increased its budget for buying property in Rochester, from $32 million to $83 million, according to the report.

While some land owners say MnDOT deliberately "lowballs" their appraisals and first offers, the department insists its appraisals are based on the best available information, which in a surging real estate market like Rochester's means the appraised values are quickly out of date.

The appraisal process has also been complicated by the magnitude of the U.S. 52 project and the accelerated schedule for construction. The "design-build" plan for the project was intended to cut the project's timeframe nearly in half -- from as long as 11 years to five, saving money and minimizing disruption to the city.

State's biggest projects

The U.S. 52 project will rebuild 11 miles of roadway, from 85th Street Northwest to the U.S. 63 interchange during the next three years. It's MnDOT's largest spending for a highway project and the first "design-build" project in state history. The work will widen the highway to six lanes, add an interchange at 75th Street Northwest and rebuild three existing highway interchanges, among other major features.

The project is scheduled to be completed by 2006, although work on the highway mainline and crossroads is scheduled to be finished by the end of 2005.

The U.S. 63 project is a $31 million project that will improve two interchanges, at 40th Street and 48th Street, and upgrade nearby roads. St. Bridget's Road and 40th and 48th streets will be rebuilt as four-lane roads. Work is scheduled to be done by late 2005.

MnDOT officials acknowledge some initial offers for land acquisition in the area have been low, but they deny any effort to "lowball" offers.

According to the newspaper report published today, MnDOT had to increase its latest offers or settlement prices by more than 70 percent in several cases along U.S. 63, one of the hottest areas for development in the Rochester market.

Changes for MnDOT

MnDOT officials met with Rochester area landowners at a meeting sponsored by state Sen. Sheila Kiscaden and also attended by Rep. Bill Kuisle on Feb. 7 in Rochester. Following that meeting, Kiscaden led an effort to revise some of the department's land acquisition practices. The new law requires MnDOT to share appraisal reports with land owners and to make a good faith effort to conduct personal negotiations with land owners before taking land through condemnation.

Kiscaden, IP-Rochester, said people had reason to complain. "The offers were absurdly low," she said. "And as I would take call after call I began to think, 'No, wait, there's a pattern here.'"

If MnDOT can't reach an agreement with property owners, it seizes their land and pays them the amount of MnDOT's appraisal, a process known as a "quick take." The dispute then goes to a panel of three court-appointed commissioners who must determine the value of the property.

A Star Tribune analysis found that commissioners usually award owners substantially more money than MnDOT had offered them, but property owners must pay for most of their appraisal costs and all of their legal fees.

Allan Pint, director of MnDOT's Land Management Office, defended the department's practices. MnDOT follows federal rules, he said, and bases its offers on appraisals, most of which are done by independent, licensed appraisers. In-house appraisers then review the valuations and certify them as fair.

We are not alone

MnDOT's land acquisition practices have raised concerns among some land owners statewide, according to the newspaper report.

Lee and Pat Kerber were forced to move from their home near Chanhassen when MnDOT needed to widen Minnesota Highway 5. MnDOT offered them $175,000 for their three acres and the Kerbers challenged that. Eventually, they won $420,000 but they had to pay $53,000 in attorney and appraisal fees out of their own pockets.

Donald Luse fought MnDOT all the way to district court after the department gave him $312,000 for just more than five acres of land in Chanhassen. His own appraiser said the land was worth $1 million. Luse found out in court that MnDOT had five appraisals on his land ranging from $312,000 to $744,000, but revealed only one -- for $645,000 -- after he forced the agency into court.

Room for improvement

The changes in state law requires MnDOT to turn over its certified property appraisal when it makes an offer but the department says it still is not required to reveal the existence of any other appraisals while a case is pending.

Ken Moen, a former Rochester assistant city attorney who now has a private practice heavy with condemnation cases, said MnDOT's practices waste time and money.

"This is a crazy system," Moen said. If a highway project is for the public good, the public should pay for it, he said. "It shouldn't come at the expense of somebody who happens to get in the way."

State Transportation Commissioner Carol Molnau, who also is lieutenant governor, issued a statement saying that MnDOT generally does a good job but has "room for improvement."

In late July, Molnau asked the Federal Highway Administration and transportation departments of other states to help review MnDOT's methods for acquiring property and determine whether designing and building simultaneously affects land values.

She also asked the legislative auditor to review MnDOT's use of private consultants in acquiring property but said that probably wouldn't happen this year.