Admissions of Value in Cost Studies and Budget Reports

During the precondemnation process, public agency staff may be asked to make written estimates of the value of properties that are needed for an upcoming project.  Similarly, a budget for a proposed project may call for such estimates.  Often these estimates are well above market value because they include acquisition costs as well as unrelated contingencies to assure sufficient funding to complete the project. If uncovered, property owners may later attempt to use such estimates against the condemnor as an admission of value in an eminent domain action.  For this reason, staff should be careful not to use a dollar figure which may be construed as an admission or appraisal of market value or severance damages.

To avoid this situation, in a multi-parcel project staff should, where possible, estimate the lump sum acquisition cost of all parcels together, and not the cost of each separate parcel. In a single-parcel project, staff should avoid putting anything in writing (e.g., in an internal staff memo) which purports to place a value on the required parcel.

Practice Tip:  Where the estimate of land acquisition costs must be listed separately and cannot be lumped in with non-land related costs, or for reasons of policy must be disclosed in the budget request, include language similar to the following:

It is estimated that acquisition costs for required real property—including all environmental studies, engineering, acquisition, potential legal costs, and overhead—will be $___________.  As the [name of the public entity] is considering several sites (alternative projects), no estimate was made of the acquisition cost of a particular site; and no appraisal was made of the market value of or severance damages to a specific site.  Rather this estimate is based upon gross land acquisition costs in general, including costs of acquisition by eminent domain, contingencies, and overhead unrelated to the market value of any individual sites under consideration. This estimate is for budgetary purposes only.

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