Fiscal Note - SB 0217 - Billboard Regulations Are Revised
L.R. NO. 0799-01
BILL NO. SB 217
SUBJECT: Transportation Department: Roads & Highways
TYPE: Original
DATE: January 27, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
State Road Fund ($17,361 to ($20,833 to ($20,833 to
Unknown*) Unknown*) Unknown*)
Total Estimated
Net Effect on All ($17,361 to ($20,833 to ($20,833 to
State Funds Unknown*) Unknown*) Unknown*)
*Assumed to be less than ($100,000) annually.
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government (Unknown) (Unknown) (Unknown)
FISCAL ANALYSIS
ASSUMPTION
Officials of the Department of Transportation (DOT) assume that this proposal
would result in increased costs to the Department in acquiring property
containing billboards. They indicate that the proposal would require the
Department to compensate billboard owners the greater of comparable sales
value or replacement cost. Currently DOT compensates owners replacement cost
less depreciation. Under this method the current average compensation is
$7,500 per billboard, including an average depreciation allowance of 10%.
The Department acquires an average of 25 billboards per year to allow for
various highway projects; therefore, the average annual cost is currently
$187,500 ($7,500 x 25). Officials indicate that "replacement cost" only
would eliminate the reduction for depreciation and would cost the Department
an additional $18,750 per year ($187,500 x 10%). However, DOT officials
assume that "comparable sales" value would be greater than "replacement
cost." They base this assumption on recent judicial proceedings involving
the outdoor advertising industry, wherein "comparable sales" includes
applying an income multiplier to gross sign income in determining
compensation. Officials assume that this method would add significantly to
the Department's cost of acquiring billboards, but are unable to determine an
estimated additional cost.
Oversight assumes that the application of "replacement cost" in determining
compensation to billboard owners would result in approximately $20,833 in
additional costs to DOT, based on their assumptions of an average of 25
billboards acquired annually, average costs of $7,500 inclusive of a
depreciation allowance, and average depreciation of 10% (calculated at
$187,500 actual costs with depreciation deducted divided by 90% equals
$208,333 costs before depreciation deduction, less $187,500 actual costs
equals a difference of $20,833). Oversight assumes "comparable sales"
compensation could exceed "replacement cost" but assumes that the amounts are
unknown. Therefore, a range of additional costs of $20,833 to an unknown
amount (assumed to be less than $100,000 annually) is reflected.
Oversight also assumes that local governments could incur additional costs in
the form of compensation to billboard owners as a result of the proposal.
Any amounts of additional costs are unknown.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
STATE ROAD FUND
Costs-Department of Transportation
Additional compensation to advertising
companies in purchases of properties ($17,361 to ($20,833 to ($20,833 to
containing billboards Unknown*) Unknown*) Unknown*)
*Assumed to be less than ($100,000) annually.
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
CITIES AND COUNTIES
Costs-additional compensation to advertising
companies in purchases of properties
containing billboards (Unknown) (Unknown) (Unknown)
FISCAL IMPACT - Small Business
Small advertising companies could be fiscally impacted as a result of
increased compensation when properties containing their billboards are
acquired by the Department of Transportation or local governments.
DESCRIPTION
This proposal would require that the Department of Transportation and any
local government requiring the removal of legally erected outdoor advertising
compensate the owner of the sign based on its market value as determined by
comparable sales or replacement cost, whichever is greater.
The proposal makes various other changes to outdoor advertising law,
including provisions for signs for commercial caves, re-defining commercial
and industrial areas, and provisions for local ordinances governing billboard
regulation.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Transportation
This Fiscal Note is not an official copy and should not be quoted or cited.