Property owners forced to move their business locations through condemnation for the Metropolitan Council’s Southwest Light Rail Transit project are generally entitled to compensation on two fronts—first, they are entitled to just compensation for the taking of their real property; second, they are entitled to relocation benefits for the costs and expenses of moving their business operations to new business premises. Navigating the weird amalgam of federal statutes, federal regulations and state statutes governing “relocation reimbursement” can be confusing and frustrating for these business owners.
Consider a business client of ours requiring both warehouse and office space that relocates after condemnation to a building once occupied by a manufacturing business. The city insists that the new and different use required by the business—warehousing as opposed to manufacturing—requires installation of a new water line to accommodate sprinkler system modifications for the former manufacturing space that will now become warehouse space. The cost? $90,000.
Can the business owner receive relocation reimbursement from Metropolitan Council for this necessary modification to carry on the business in the new location? It may depend on whether that cost is considered an “actual moving expense” or a “business reestablishment expense.” Why does it make a difference? Because the law caps “business reestablishment expenses” at $50,000—not a difficult lift to reach for an established, successful small business possessing a large inventory that is forced to relocate. But there is no monetary limit on “actual moving expenses,” other than that the expense must be “reasonable.”
In the example of the sprinkler modifications, the regulations are less than clear. On the one hand, the relocation regulations state that, “modifications necessary to adapt utilities at the replacement site, to the personal property …” can be reimbursable as an actual reasonable moving and related expense. Application of this rule would exclude the water utility expense from the $50,000 cap. On the other hand, the relocation regulations also state that, “[r]epairs or improvements to the replacement real property as required by Federal, State, or local law, code or ordinance …” may qualify as a reestablishment expense. Application of this rule would subject the expense to Minnesota’s $50,000 cap on reestablishment expenses. The Metropolitan Council rejected the business owner’s $90,000 expense for reimbursement, concluding that it was a reestablishment expense subject to the $50,000 cap, which the owner had already exhausted through reimbursement of other expenses.
Where does that leave the business owner? The allowable recourse to the Metropolitan Council’s final determination is appeal to an Administrative Law Judge. The process ultimately could wind up in the Minnesota Court of Appeals if the administrative hearing process leads to an unsatisfactory outcome.