LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE 75th Regular Session April 2, 1997 TO: Honorable Fred M. Bosse, Chair IN RE: House Bill No. 2740 Committee on Land and Resource Management By: Uher House Austin, Texas FROM: John Keel, Director In response to your request for a Fiscal Note on HB2740 ( Relating to the preservation of the rights of property owners through a uniform assessment of market value in condemnation proceedings.) this office has detemined the following: Biennial Net Impact to General Revenue Funds by HB2740-As Introduced The bill would make no appropriation but could provide the legal basis for an appropriation of funds to implement the provisions of the bill. The bill would amend Section 21.042 of the Property Tax Code, relating to the determination of the value of property in condemnation proceedings. Note: The bill refers to Section 21.042 of Property Tax Code. This fiscal note assumes the bill would amend Section 21.042 of the Property Code. FISCAL IMPACT: Based on information provided by the Texas Department of Transportation (TxDOT), the major impact of the bill is to make certain elements of damage compensable--elements which have by prior court decisions been ruled to be non-compensable. The bill attempts to make compensable three of the factors determined by the Texas Supreme Court in State v. Schmidt to be non-compensable. Those factors included in this bill are circuity of travel, diversion of traffic and visibility. The proposed changes to the Property Code as set forth in this bill would allow an owner to receive damages based on the Schmidt factors. In fiscal year 1996, approximately $45,000,000 was spent by TxDOT to acquire parcels through condemnation. Of that figure, approximately $31,500,000 was attributable to condemnation cases for property in the Fort Worth, Houston, Austin and Dallas Districts. Damages based on the Schmidt factors arise most often in urban areas. While the Schmidt case was pending a ruling from the Supreme Court of the State of Texas, appraisals were prepared which included Schmidt and non-Schmidt factors. The Schmidt factors increased the appraisals by approximately 75%. Therefore, assuming conservatively that one-half of those cases in the urban districts named above included Schmidt factor damages, the proposed legislation would result in a $11,812,500 annual increase in the cost of acquisition as a result of condemnation. The bill also includes new compensable factors other than Schmidt factors. One of these will likely cause a major fiscal impact. The "productivity and convenience" factor relates to the compensability of lost profits which has never been a compensable factor under Texas law. In several Texas cases owners have alleged damages based on loss of business profit. In those cases, as well as the recent case of City of Austin v. Westgate, compensation for lost profits would have increased the award by approximately 25%. In fiscal year 1996, approximately $45,000,000 was used for the purchase of property acquired through eminent domain. This amount only reflects the cost of the property. Of that figure, $31,500,000 was attributable to cases in urban areas as noted above. It is assume that the majority of lost profits claims would arise in urban districts. Therefore, if one-half of the cases in the urban areas included claims for lost profits, then the fiscal impact would be $3,937,500. Source: Agencies: 601 Department of Transportation 302 Office of the Attorney General 304 Comptroller of Public Accounts LBB Staff: JK ,BB ,BR