FISCAL NOTE

Date Requested: February 02, 2018
Time Requested: 02:04 PM
Agency: Highways, Division of
CBD Number: Version: Bill Number: Resolution Number:
2359 Introduced SB466
CBD Subject: Courts, Roads and Transportation


FUND(S):

State Road

Sources of Revenue:

Special Fund

Legislation creates:

Decreases Existing Expenses



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government. The Division of Highways supports the passage of this bill (SB466) as it will substantially reduce the current interest rate obligation associated with condemnation actions and ensure that future interest obligations in condemnation proceedings are consistent with other civil actions. As such, the bill will significantly reduce expenses associated with the taking of property that is necessary for the design, development, and construction of roadway projects. Further, it is anticipated that the reduction in interest obligations as proposed in the bill will promote revenue enhancement that can be used for the development of additional roadway projects.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2018
Increase/Decrease
(use"-")
2019
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 250,000 500,000 500,000


Explanation of above estimates (including long-range effect):


Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years. Existing law imposes a 10 percent annual interest obligation on certain condemnation awards. The bill proposes to reduce the current interest obligation to 4.5 percent for FY 2018 and thus the bill will reduce the Division of Highways’ interest obligation by 5.5 percent until the interest rate is otherwise amended by the West Virginia Supreme Court. While it is a challenge to predict the precise amount of the reduction in the Division of Highways’ future interest obligations due to the uncertain nature of property management negotiations and the necessity for condemnation litigation, historical data reflects that at least 50 condemnation cases were closed in FY 2016; at least 43 condemnation cases were closed in FY 2017; and at least 21 condemnation cases were closed the first half of FY 2018. Based on the historical data and assuming a 7 percent interest rate that was in effect in 2016 and 2017 as determined by the West Virginia Supreme Court, it is anticipated that if the bill was in effect during these years the Division of Highways’ interest obligation would have been approximately $1 million less in 2016 and approximately $500,000 less in 2017. As such, it is estimated that the Division of Highways’ interest obligation would have been reduced by approximately $1.5 million and thus the Division would have experienced a likely $1.5 million revenue enhancement for these two years. It is impossible to provide a reliable estimate of the anticipated amount of the Division of Highways’ interest obligation for 2018 but it is likely that the reduction in the Division’s interest expense would be substantial. Looking forward, because we cannot predict the number of condemnation cases that will be closed largely because of uncertainty about the number of cases that will require condemnation litigation, it is anticipated that the influx of condemnation cases as a result of the Governor’s Road to Prosperity Program will increase significantly. As such, it is anticipated that the bill will reduce the Division’s interest obligation to historic levels that should promote further additional revenue enhancement for future roadway projects.



Memorandum


Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form. For your reference, below is historical data: FY 2016 (7/1/2015 – 6/30/2016) Total Closed = 50 • Initial Deposit Total = $3,702,827 • Final Order Deposit Total = $37,084,294 • Difference of = $33,381,467 • 10% of Difference = $3,338,147 • 7% of Difference = $2,336,703 • Difference btw 7% and 10% = $1,001,444 Please Note: The large difference is due to a Case #11-C-36 with a total awarded amount of $31,424,195 FY 2017 (7/1/2016 – 6/30/2017) Total Closed = 43 • Initial Deposit Total = $8,069,186 • Final Order Deposit Total = $24,306,282 • Difference of = $16,237,096 • 10% of Difference = $1,623,710 • 7% of Difference = $1,136,597 • Difference btw 7% and 10% = $487,113 FY 2018 (7/1/2017 – 12/31/2017) Total Closed = 21 • Initial Deposit Total = $1,065,410 • Final Order Deposit Total = $1,381,770 • Difference of = $316,630 • 10% of Difference = $31,636 • 7% of Difference = $22,145 • Difference btw 7% and 10% = $9,491



    Person submitting Fiscal Note: Lorrie Hodges
    Email Address: Lorrie.a.hodges@wv.gov