Billboard Valuation: What’s the Issue? National Alliance of Highway Beautification Agencies Annual Conference August 28, 2006 – Cleveland, Ohio NAHBA Annual Conference – Presented by J. Allen Smith

The Law Pertaining to Billboard Valuation Fifth Amendment “Nor shall private property be taken for public use, without just compensation.” NAHBA Annual Conference – Presented by J. Allen Smith

Highway Beautification Act “Just compensation shall be paid upon the removal of any outdoor advertising sign, display, or device lawfully erected under State law…” Billboard Valuation Law 23 U.S.C.A. § 131(g) NAHBA Annual Conference – Presented by J. Allen Smith

Uniform Real Property Relocation and Acquisition Act “…just compensation to be paid for any building, structure, or improvement…” “…outdoor advertising structures… are ‘structures’ or ‘improvements’ within the meaning of [§ 4652].” “…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 NAHBA Annual Conference – Presented by J. Allen Smith

Distinguishing Valuation Methods: Taxation vs. Eminent Domain

Wisconsin Supreme Court Opinion dated July 13, 2006 Addresses the proper distinctions and approaches to valuation of billboard interests in eminent domain and taxation scenarios. Most recent case that addresses these issues. Adam’s Outdoor Adver., Ltd. v. City of Madison Billboard Valuation Law NAHBA Annual Conference – Presented by J. Allen Smith

The Court Confirmed Three Billboard Property Interests to be Valued: 1.Leasehold 2.Billboard Structure 3.Permit Adams, 2006 WL , ¶ 89. Adam’s Outdoor Adver., Ltd. v. City of Madison NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

The Nature of Permits… 1.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, 2006 WL , ¶ 85. Adam’s Outdoor Adver., Ltd. v. City of Madison NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

A billboard permit is real property “because a billboard permit is a right or privilege appertaining to real property…” Adams, 2006 WL , ¶ 59. “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.” Adams, 2006 WL , ¶ 84. Adam’s Outdoor Adver., Ltd. v. City of Madison NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

Three methods of valuation are equally applicable to establishing fair market value in eminent domain cases: 1.Income 2.Cost 3.Sales Comparison Adams, 2006 WL , ¶ 87. Adam’s Outdoor Adver., Ltd. v. City of Madison NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

“ 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.” Adams, 2006 WL , ¶ 88. Adam’s Outdoor Adver., Ltd. v. City of Madison NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

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.” Adams, 2006 WL , ¶ 88 (citing Vivid, Inc. v. Fiedler, 580 N.W.2d 644, 650 (Wis. 1998)). Adam’s Outdoor Adver., Ltd. v. City of Madison NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

“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.” Adams, 2006 WL , ¶ 88. Adam’s Outdoor Adver., Ltd. v. City of Madison NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

“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.” Adams, 2006 WL , ¶ 90. NAHBA Annual Conference – Presented by J. Allen Smith

Nat’l Adver. Co. v. Nevada Dept. of Transp., 993 P.2d 62 (Nev. 2000). Florida Dept. of Transp. v. Powell, 721 So. 2d 795 (Fla. Ct. App. 1998). City of Scottsdale v. Eller Outdoor Adver. Co., 579 P.2d 590 (Ariz. Ct. App. 1978). Louisiana Dept. of Transp. and Dev. v. Chachere, 574 So.2d 1306, 1311 (La. Ct. App. 1991). Illinois Dep. Of Transp. v. Drury Displays, Inc., 764 N.E.2d 166 (Ill. App. Ct. 2002). Minnesota v. Weber-Connelly, Naegele, Inc., 448 N.W.2d 380 (Minn. Ct. App. 1989). Missouri ex rel Missouri Highway & Transp. Comm’n v. Quiko, 923 S.W.2d 489 (Mo. Ct. App. 1996). New Hampshire v. 3M Nat’l Adver. Co., 653 A.2d 1092, 1094 (N.H. 1995). Pa. Morgan Signs, Inc. v. Pennsylvania Dept. of Transp., 723 A.2d 1096, 1099 (Pa. 1999). Other States Include: Arkansas, Virginia, Washington, & Wisconsin Condemnation Cases Consistent with Wisconsin Supreme Court NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law Other States

Government Argument: Movable structures should not be compensable. Taxation vs. Eminent Domain NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law

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. United States v. Seagren, 50 F.2d 333 (D.C. Cir. 1931). NAHBA Annual Conference – Presented by J. Allen Smith 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.” Seagren, 50 F.2d at 335. United States v. Seagren, 50 F.2d 333 (D.C. Cir. 1931). NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law Contract Clause 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.” Seagren, 50 F.2d at 355. Billboard Valuation Law Contract Clause United States v. Seagren, 50 F.2d 333 (D.C. Cir. 1931). NAHBA Annual Conference – Presented by J. Allen Smith

“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.” Biggar, 873 S.W.2d at 13 (citing Armstrong v. United States, 364 U.S. 40, 49 (1960)). NAHBA Annual Conference – Presented by J. Allen Smith The Government’s Fiduciary Duty Billboard Valuation Law

“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.” NAHBA Annual Conference – Presented by J. Allen Smith Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922) Billboard Valuation LawU.S. Supreme Court

NAHBA Annual Conference – Presented by J. Allen Smith Billboard Valuation Law Questions & Answers