Regulatory Impact on the Value of Billboards - Missouri …€¦ · · 2011-05-16Regulatory...

Regulatory Impact on the Value of Billboards

National Alliance of Highway Beautification Agencies Annual

Conference

August 11, 2009 ~ Branson, Missouri

NAHBA Annual Conference – Presented by J. Allen Smith

The Law Pertaining to Billboard Valuation

Fifth Amendment

““Nor shall private property be taken for Nor shall private property be taken for public use, without just compensation.public use, without just compensation.””


Highway Beautification ActHighway Beautification Act

““Just compensation shall be paid upon Just compensation shall be paid upon the removal of any outdoor advertising the removal of any outdoor advertising sign, display, or device lawfully erected sign, display, or device lawfully erected under State lawunder State law…”…”

Billboard Valuation Law 23 U.S.C.A. § 131(g)


Uniform Real Property Relocation Uniform Real Property Relocation and Acquisition Actand Acquisition Act

“…“…just compensation to be paid for just compensation to be paid for any building, structure, or any building, structure, or improvementimprovement…”…”

“…outdoor advertising structures…are ‘structures’ or ‘improvements’within the meaning of [§ 4652].”Whitman v. State Highway Comm’n of Mo., 400 F. Supp. 1050, 1070 (W.D. Mo. 1975).

Billboard Valuation Law 42 U.S.C. § 4652


Distinguishing Valuation Methods:Taxation vs. Eminent Domain

Billboard Valuation Law


• Adams Outdoor Advertising, Ltd. v. City of Madison, 717 N.W.2d 803 (Wis. 2006).• Addresses the proper distinctions and

approaches to billboard valuation interests in eminent domain and taxation scenarios.

• Remains the most recent case that addresses these issues.

The Court Confirmed Three Billboard Property Interests

1.Leasehold2.Billboard Structure3.Permit



The Nature of Permits1. Permits are “valid for a designated location

only”2. They “terminate when a billboard is moved”3. The value “primarily inheres in the permit

because the City has severely restricted the number of permits”

Adams Outdoor Advertising, 717 N.W.2d at 832.



“A billboard permit is real property “because a billboard permit is a right or privilege appertaining to real property…” Id. at 817.

“The primary value of the permits is unrelated to the structures; rather, the primary value of the permits appertains to the location of the underlying real estate.” Id. at 822.



Three methods of valuation are equally applicable to establishing fair market

value in eminent domain cases:

1.Income2.Cost3.Sales Comparison



“Although the same appraisal methods may be used to establish fair market value for condemnation purposes as may be used to establish true cash value for purposes of personal property tax assessments, the property valued differs depending upon the purpose.” Id. at 822.



In Eminent Domain, fair market value of a billboard is the price “the aggregate asset—the lease, permit and sign—would bring in the marketplace.” Id. at 823 (citing Vivid, Inc. v. Fiedler, 580 N.W.2d 644, 650 (Wis. 1998)).



“In contrast, an appraisal for personal property tax assessment purposes includes only the value of personal property, and therefore excludes the value of the leasehold and billboard permit.” Id. (emphasis added).



“Therefore, we conclude the same methods of appraisal may be used in eminent domain as are used in appraising personal property for tax purposes, provided care is taken to exclude from a personal property tax assessment any value attributable to elements other than tangible personal property.” Id. at 824. (emphasis added).



The Adams Case: 2009 Sequel

• “Before 1994, the City used the cost less depreciation methods to assess the value of Adams’ signs. The city began using the income approach to valuation following an eminent domain proceeding …

• “…That appraisal, says Adams, ‘inspired’ the city assessor, Michael Kurth, to use the eminent domain value for the signs for personal property tax purposes.”

• “In his reassessment, Mr. Kurth continues to reject the cost approach.”

March 31, 2009

The Adams Case: 2009 SequelAssessment 2002 2003

$1,565,100$1,565,100Dr. Aguilar$6,750,000$5,750,000City-post Adams$5,858,000$6,022,400City-pre Adams

“The problem with the City’s approach is that it ignores the clear direction from the Supreme Court regarding the inclusion of permit value in the property tax…The City’s effort to include permit value in its assessment of the billboard structures is fatally flawed.”

“[Dr. Aguilar’s] approach is one ‘that nearly all jurisdictions use

to assess billboards.’”

“…Adams persuades me that its assessed values are correct and that it is entitled to Judgment for the amount of taxes levied based on the City’s assessed values in excess of the values

assigned by Dr. Aguilar.”



The Adams Case Continues to be Upheld

• Walgreen Co. v. City of Madison, 752 N.W.2d 687, 311 Wis.2d 158 (Wis. July 8, 2008).• assessor was required to determine value of leased

properties under the income approach

• Allright Properties, Inc. v. City of Milwaukee, 2009 WL 590165, (Wis. App. Mar 10, 2009).• adopting and applying the income approach

• City of Scottsdale v. Eller Outdoor Adver. Co., 579 P.2d 590 (Ariz. Ct. App. 1978).

• Florida Dept. of Transp. v. Powell, 721 So. 2d 795 (Fla. Ct. App. 1998).• Minnesota v. Weber-Connelly, Naegele, Inc., 448 N.W.2d 380 (Minn. Ct.

App. 1989).• Lousiana Dept. of Transp. and Dev. v. Chachere, 574 So.2d1306, 1311

(La. Ct. App. 1991).• New Hampshire v. 3M Nat’l Adver. Co. 653 A.2d 1092, 1094 (N.H. 1995).• Missouri ex rel Missouri Highway & Transp. Comm’n v. Quiko, 923

S.W.2d 489 (Mo. Ct. App.1996).• Pa. Morgan Signs, Inc. v. Pennsylvania Dept. of Transp., 723 A.2d 1096,

1099 (Pa. 1999).• Nat’l Adver. Co. v. Nevada Dept. of Transp., 993 P.2d 62 (Nev. 2000). • Illinois Dep. Of Transp. v. Drury Displays, Inc., 764 N.E.2d 166 (Ill. App.

Ct. 2002).• Harris County Flood Control Dist. v. Roberts, 52 S.W.3d 667, Tex.App.-

Hous. (14 Dist.) (2008).Other States Include: Arkansas, Virginia, Washington, & Wisconsin

Condemnation Cases Consistent with Wisconsin Supreme Court


Billboard Valuation Law Other States

Taxation vs. Eminent Domain



Government’s Argument:

Movable structures should not be compensable.


• Federal Court of Appeals Case• Long term lease on filling station• Lessee installed underground

tanks, piping, etc.• Lease provided that the Lessee

could remove the structures upon termination of the lease.

United States v. Seagren, 50 F.2d 333 (D.C. Cir. 1931).NAHBA Annual Conference – Presented by J. Allen Smith

Contract Clause for Removable Structures

• “The United States contends that the tenant here has lost nothing by the taking of the property.”

• “He reserved the right to remove his structures whenever the landlord should terminate the tenancy; now that the United States has terminated his tenancy by taking the land, he may exercise his right and remove his structures.”

• “Nothing has been taken from him, only his performance of an inevitable obligation has been accelerated.” Seagren, 50 F.2d at 335.


Billboard Valuation Law Contract Clause

Government Claims:

• “But much the same argument could be made in support of murder for all that any murderer ever did was to accelerate the debt that every mortal owes to nature.”

• “If the structures here in question have been built by the landlord, they would have been taken and paid for by the government without question, as the government concedes they are now part of the realty. Is the tenant’s reserved power of removal as against the landlord’s termination of the lease to work a forfeiture in favor of the government? We think not.” Id.



Federal Court Finds:

Federal Court Orders:“and so the agreement for removal

made by these parties at another time, for another purpose and affecting no interest but their own, must be rejected here as irrelevant when set up by the United States to control its condemnation proceedings against the tenant’s interest in the land.” Id. at 355.



• “When condemning the land, the government is in a better position than the average purchaser because it is able to compel the sale. To balance the transaction and to ensure the property owner is not burdened with the cost of community benefits, our constitution requires the property owner receive just compensation for his property.” State v. Biggar, 873 S.W.2d 11, 13 (Tex. 1994) (citing Armstrong v. United States, 364 U.S. 40, 49 (1960)).


The Government’s Fiduciary Duty


“A strong public desire to improve the public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the change.”


Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922)

Billboard Valuation Law U.S. Supreme Court



Questions & Answers

The author wishes to thank Bradley McLain and Kristina Kiik for their assistance.

These materials have been for educational and informational purposes and do not constitute legal advice or services.

Regulatory Impact on the Value of Billboards - Missouri …€¦ · · 2011-05-16Regulatory...

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