No. 41384 (New Rule): Rule R907-80. Disposition of Surplus Land

(New Rule)

DAR File No.: 41384
Filed: 03/23/2017 02:32:27 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This new rule is being proposed to give the Department authority and procedures for disposing of land the executive director has declared surplus by three different methods: public sale auction, negotiated sales, and negotiated exchanges. Without this proposed new rule, the Department is without a procedure for selling surplus land by public sale auction. The public sale auction is the Department's preferred method of disposing of its surplus property because it maximizes transparency, opportunities for persons and entities wishing to obtain the Department's surplus property, fairness and impartiality in the disposal process and it fosters competition, which maximizes the value the Department receives for its property.

Summary of the rule or change:

This proposed new rule establishes procedures the Department may use to: 1) publish notices of proposed sales and exchanges and then advertise to encourage maximum participation in the auctions and maximum transparency for the negotiated sales and exchanges; 2) conduct public sales auctions; 3) conduct negotiated sales; 4) conduct negotiated exchanges; 5) notify holders of first rights of refusal about the sales and provide them opportunities to exercise or waive their right; and 6) conduct closings.

Statutory or constitutional authorization for this rule:

• Section 72-5-117
• Section 72-5-111
• Section 72-5-404

Anticipated cost or savings to:

the state budget:

The Department anticipates that this proposed new rule will result in significant aggregate savings for the state budget. The Department anticipates the public sales auctions will result in higher prices for surplus land sales. The additional money gained will go into one of the Department's funding mechanisms and reduce the demand for state funds for new transportation projects. However, the Department is not able to accurately quantify the amount of additional money it will gain from selling surplus land using public sales auctions before it actually starts conducting such sales auctions. The Department is optimistic such will be the outcome over time because public sales auctions are and used as a method of maximizing prices for land by other state agencies throughout the country and in Utah for years.

local governments:

The Department does not anticipate that this new rule will lead to additional costs for local governments. But, the Department cannot reasonably anticipate whether this new rule will lead to any cost savings for local governments before it has been in use for a while. The Department has conducted exchanges of its surplus land for land owned by local governments for years and intends to continue this practice into the foreseeable future. This new rule streamlines the process the Department follows to negotiate land exchanges with local governments, and makes the process more transparent. The Department believes this improved process will lead to savings and other benefits for local governments over time but cannot quantify those gains at this time.

small businesses:

The department does not anticipate that this new rule will lead directly to any new costs or savings for the budgets of small businesses. The rule does not require anything of small businesses in the form of fees or burdensome actions. The Department does anticipate that the new rule will provide more opportunities for owners of small businesses to purchase its surplus land if they wish, for whatever purpose they wish. Additional opportunities to purchase the Department's surplus land could lead to opportunities for small business to grow, profit, or create new jobs. But, the Department is not able to reasonably quantify such opportunities at present.

persons other than small businesses, businesses, or local governmental entities:

The department does not anticipate that this new rule will lead directly to any new costs or savings for the budgets of persons other than small businesses, businesses, or local government entities. The rule does not require anything of such persons in the form of fees or burdensome actions. The Department does anticipate that the new rule will provide more opportunities for all interested persons to purchase its surplus land if they wish, for whatever purpose they wish. Additional opportunities to purchase the Department's surplus land could lead to opportunities for persons to profit. But, the Department is not able to reasonably quantify such opportunities at present.

Compliance costs for affected persons:

Persons affected by this new rule are those desirous of buying the Department's surplus land. Those persons may be required to pay higher prices for the Department's surplus land than they would without the new rule. The Department is hopeful that benefits such as the additional transparency and opportunities to purchase its surplus land that will result from making this new rule will outweigh any additional purchase price buyers will need to pay.

Comments by the department head on the fiscal impact the rule may have on businesses:

I do not believe this new rule will have a negative impact on businesses. It may provide businesses additional opportunities to profit.

Carlos Braceras, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Transportation
Administration
CALVIN L RAMPTON COMPLEX
4501 S 2700 W
SALT LAKE CITY, UT 84119-5998

Direct questions regarding this rule to:

• Christine Newman at the above address, by phone at 801-965-4026, by FAX at 801-965-4338, or by Internet E-mail at [e-mail]
• James Palmer at the above address, by phone at 801-965-4000, by FAX at 801-965-4338, or by Internet E-mail at [e-mail]
• Linda Hull at the above address, by phone at 801-965-4253, by FAX at , or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

05/15/2017

This rule may become effective on:

05/22/2017

Authorized by:

Carlos Braceras, Executive Director

RULE TEXT

R907. Transportation, Administration.

R907-80. Disposition of Surplus Land.

R907-80-1. Authorities.

The Department of Transportation makes this rule pursuant to Utah Code sections 72-5-111, 72-5-117, 72-5-404, and 78B-6-521, which authorize the Executive Director to prescribe the terms and conditions for the sale or exchange of surplus right of way, and to make rules to ensure that the value of the real property is consistent with the proposed price and other terms of the purchase, sale, or exchange.

 

R907-80-2. Definitions.

1. "Appraisal" means the same as it is defined in Utah Code section 61-2G-102(1)(a).

2. "Confirmable Delivery Method" means any method of delivering documents that provides a way to confirm they were delivered to the intended party or location.

3. The "Department" means the Utah Department of Transportation.

4. The "Director" means the Executive Director of the Utah Department of Transportation or the Executive Director's designee.

5. "First right of refusal" means the same as "right of first refusal" and "right of first consideration."

6. "Minimum acceptable selling price" means a price established by the Department based upon the market value of the property as established by an appraisal or other means; plus costs associated with preparing the property for and executing the sale, such as the costs of advertising, appraising, performing environmental assessments, and processing the transaction.

7. As used in this rule, "surplus land," "surplus property," or "land" mean an estate in real property to which the Department is the owner and the Director has declared to be surplus.

8. The "Transportation Commission" or "Commission" means the Utah Transportation Commission.

9. A "Utah Public Entity" means a political subdivision of the State, an agency of the state, a county, a municipality, or a special services district of the state, a county, or municipality.

 

R907-80-3. Sales or Exchange Initiation Process.

In determining the appropriateness of a parcel of surplus land for sale or exchange, the Department may consider nominations by interested parties.

 

R907-80-4. Sales Deposits.

Should the Department evaluate a parcel of surplus land for sale or exchange due to a nomination by an interested party, the interested party making such nomination may be required to deposit funds in an amount determined by the Department to be used to offset costs incurred in preparing the parcel for sale. In the event the interested party making the deposit is the successful buyer of such Land, the Department will subtract the deposit amount from the total of the purchase price and fees charged to the buyer for preparing the Land for sale. In the event the person making the deposit is not the successful buyer of such property or the property is not offered for sale, the Department will refund the deposit.

 

R907-80-5. Methods of Sale.

1. The Department may sell Land or assets using one of the methods described below:

(a) A public sale auction pursuant to R907-80-7,

(b) A negotiated sale pursuant to R907-80-9, or

(c) A negotiated exchange pursuant to R907-80-10.

2. The Department will execute sales and exchanges pursuant to rule R933-1-4.

 

R907-80-6. Public Sale Notice and Advertising.

1. At least 14 days prior to a public sale, the Department must send notice by Confirmable Delivery Method to:

(a) Persons holding a first right of refusal per Utah Code section 72-5-111, 78B-6-520.3, and 78B-6-521(2)(a); and

(b) Lessees and permit holders of record on the subject property.

2. The Department may notify the public about the sale of surplus property by commercially feasible methods, including publication of a notice in one or more newspapers of general circulation in the county in which the sale is proposed at least 30 days before the deadline to submit bids.

3. The notice and any associated advertising will include a general description of the parcel including township, range, and section, and any other information that may create interest in the sale. The Department must also identify the desired form of payment, whether money, in-kind, or both.

4. The Department may advertise public sales using any other methods the Director has determined may increase the potential for additional competition at the sale.

 

R907-80-7. Public Sale Auctions.

The public sale auction is the Department's preferred method of disposing of its surplus property because it maximizes transparency, opportunities for persons and entities wishing to obtain the Department's surplus property, fairness and impartiality in the disposal process and it fosters competition, which maximizes the value the Department receives for its property. Public sale auctions will be conducted as follows:

1. The Comptroller's Office of the Department will accept sealed bids by any means of delivery until 5:00 P.M. the day prior to the auction.

2. The officer conducting the auction will accept sealed bids by personal delivery on the day of the auction up until the beginning of the auction.

3. A sealed bid must contain funds in an amount equal to at least 10% of the total bid amount offered to purchase the subject property and may be required to consist of certified funds. Bids and bid deposits must be a specified dollar amount. The Department has the right to reject any bid however submitted.

4. The Department may require buyers who have defaulted on certificates of sale in the past to make larger deposits or submit sealed bids in the form of certified funds even if such a requirement is not contained in the notice of sale.

5. The officer conducting the auction will open all sealed bids after declaring that the auction has started. After determining which are the highest three bids, the officer will allow the persons submitting the three highest bids, and bids that are within 20% of the third highest sealed bid, to enter into oral bidding. Oral bids must be for more than the amount of the highest sealed bid, subject to those terms and conditions set forth in R907-80-7(6). Persons who submit sealed bids eligible to participate in the oral bidding will also be allowed to participate by telephone, subject to the terms and conditions of R907-80-7(6).

6. Bids less than the minimum acceptable selling price will be disqualified and the bidder will not be eligible for oral bidding even if such bids would otherwise meet those requirements in R907-80-7(4) or (6).

7. All bids, whether sealed or oral, constitute a valid offer to purchase. An attempt to withdraw a sealed bid after the first sealed bid has been opened, or an attempt to withdraw or amend an oral bid may result in the forfeiture of the bid deposit and any other remedy afforded the Department at law or equity.

8. At the conclusion of the auction and subject to the terms of R907-80-8, the successful bidder must sign a written offer agreement prepared by the Department that states the terms included in the public sale notice.

9. If the successful bidder defaults on the offer agreement, or otherwise fails to meet the requirements of R907-80-11, and upon approval by the Director, the property may be offered for sale to the person whose bid was second highest at the auction provided that the terms of the sale meet or exceed the minimum acceptable selling price established for the subject property. The second highest bidder will have 30 days from the date of the Department's offer to submit the purchase price balance plus costs required by R907-80-9(5).

10. Third parties owning authorized improvements on the parcel at the time of the sale will be allowed 90 days from the date of the sale to remove the improvements. This provision is not applicable when such improvements are permitted under a valid existing right of record when such right survives the sale of the parcel, or the improvements are subject to a separate lease agreement.

 

R907-80-8. First Right of Refusals.

1. The Department will notify individuals holding a first right of refusal at the close of the auction about the auction pursuant to Utah Code sections 72-5-111, 78B-6-520.3, 78b-6-521.

2. The Department will notify the holder of a first right of refusal by registered mail of the amount and terms of the highest offer as soon as practicable after the end of a public sales auction. The holder of the first right of refusal will have 90 days after being so notified to inform the Department, in writing, whether the holder agrees to the amount and terms of the highest offer or to waive the right. If the Department does not receive such written notification at the end of 90 days, the Department will consider the right waived.

3. If a holder of a first right of refusal waives the right, the bidder making the highest offer at the close of a public sale auction will enter into a purchase contract with the Department.

4. If a holder of a first right of refusal exercises the right, the holder will enter into a purchase contract with the Department for a price and at terms not lower than the highest offer made at the close of a public sale auction, and the Department will notify the bidder making the highest offer of the holder's decision to exercise the right.

5. Closings will be executed according to the requirements of R907-80-13.

 

R907-80-9. Negotiated Sales, Justifications, Procedures, and Public Notice.

1. The Department may dispose of surplus land by negotiated sale when the Executive Director determines such a sale serves the best interests of the State. The Department may sell surplus land or other property by negotiated sale if:

(a) The buyer is a Utah public entity, and the property is being transferred for a public use, or

(b) The buyer of the surplus land also owns adjoining land.

2. Before the Department may close on a negotiated sale, the Department must publish a Notice of Negotiated Sale. The Notice of Negotiated Sale must include:

(a) A general description of the subject property including the street address and a brief description of the location of the subject property;

(b) Contact information of the Department office where interested parties can obtain more information;

(c) The identity of and contact information for the Utah Public Entity buying the property;

(d) The public purpose for which the Utah Public Entity will use the property; and

(d) The terms of the sale.

3. The Department must publish a Notice of Negotiated Sale on the Department's Internet website, on the Utah Public Notice website, or in a newspaper of general circulation as defined by Utah Code section 45-1-201 for 14 consecutive days before the sale.

4. In the event a party submits a competing offer to purchase the property from the Department, the Department must evaluate the offer and accept the offer that best serves interests of the State. A written justification statement that articulates the reasoning used to determine the offer that best serves the interests of the State must be a part of all negotiated sales files.
5. The Department may require a buyer of surplus land purchased through a negotiated sale to reimburse the Department for costs incurred in preparing the parcel for sale. These costs may include, but are not limited to costs for advertising, appraisal, environmental assessments, and a sale processing charge.

 

R907-80-10. Negotiated Exchanges.

1. The Department may exchange real property for other real property with a Utah Public Entity, an individual, business, private enterprise, or not-for-profit organization.

2. The Transportation Commission must approve exchanges made to acquire land the Department needs for highway use.

3. Real property exchange transactions are not subject to competitive solicitation procedures.
4. Exchanges of surplus real property must comply with state law. Exchanges of real property involving the Department and a Utah public entity must follow the requirements of the Interlocal Cooperation Act, Utah Code sections 11-13-101 through 608.

5. The financial consideration received for any real property exchange to an individual, business, private enterprise, or not-for-profit organization must be equal to or higher than the current market value of the Department's real property, as determined by any reasonable means.

6. Real property received in an exchange must be free from all liens, encumbrances, and clouds on title unless the Director determines after review that accepting the property is in the best interests of the State. The Director's justification for accepting property with a lien, encumbrance, or cloud on title must be in writing.

 

R907-80-11. Contracts of Sale or Exchange.

1. The Department will prepare and deliver a contract of sale to the buyer following a public auction sale or upon concurrence of the parties in a negotiated sale or an exchange. This contract must contain the legal description of all subject property or properties, and include:

(a) Information regarding the amount paid or the values of the properties exchanged;

(b) The identities of buyer of the land or the entity or entities participating in the exchange with the Department;

(c) Provisions for remedies the Department may elect in the event of a default; and

(d) Any other terms, covenants, deed restrictions, or conditions that the Department considers appropriate.

2. Buyers or persons participating in a property exchange must execute contracts of sale or exchange and return them to the Department within 20 days from the date the Department delivers the contract. If the Department does not receive the contract within the 20-day period, the Department will send notice by a confirmable delivery method to the buyer or exchanging party giving notice that after 10 days the transaction may be canceled with all monies received by the Department, including any deposit made, will be forfeited to the Department. Notification of this forfeiture provision must accompany the transmittal of the contract.

3. The Director must sign a contract of sale or exchange after the buyer has signed and returned the contract to the Department. The contract may not be final and no rights may vest in the buyer until the Director signs the contract. The Department must reserve the right to cancel a sale or exchange of surplus land for any reason prior to execution of the contract by the Director.

4. A contract of sale or exchange may be assigned to any person qualified to purchase surplus lands, provided that the assignment is approved by the Director, and that no assignment is effective until the Director approves the assignment in writing.

5. An assignment of a contract of sale or exchange must be consistent with these rules, executed by all necessary parties and acknowledged, and must clearly set forth the contract of sale or exchange number, the Land involved, and the name and address of the assignee.

6. Assignment of a contract of sale or exchange does not relieve the assignor from any obligations under the original contract of sale.

7. The Department will issue a quit claim deed to the appropriate person upon payment in full or all amounts owed to the Department and surrender of the original contract of sale or exchange for any tract of land sold or exchanged.

 

R907-80-12. Competition Protection.

1. Collusion between bidders or between a bidder and an employee or agent of the Department to affect a public sale auction is prohibited. Anyone having reason to believe that a public sale auction conducted under this rule may have been affected by collusion between bidders or between one or more bidders and an employee or agent of the Department must report that information to the attorney general as soon as reasonably possible.

2. Should an adjudicative body determine that collusion intended to affect a public sale auction conducted under this rule has occurred, the resulting sale will be voidable by the Department.

 

R907-80-13. Closings.

1. All auction sales, negotiated sales, or negotiated exchanges must go through this closing process.

2. Transactions must be closed within 30 days after the date of the contract unless good cause exists to delay the closing. Information intended to show that good cause that warrants delaying a closing exists must be provided in writing to the Director within 30 days after the date of the contract. The Director must determine if good cause to delay exists.

3. A minimum of 3% security deposit on a negotiated sale will be required to be held in escrow.

4. If closing does not complete within 30 days after the date of the contract, the deposit money becomes non-refundable if the Director decides good cause to delay does not exist.

5. If closing is not complete within the 30 days after the date of the contract and the Director determines that good cause to delay does not exist, the buyer still wishes to buy the property, and the Department agrees to allow the buyer more time to complete the purchase, the buyer must provide an additional 7% security deposit to the Department to be held in escrow and the parties will have an additional 30 days after the date of the contract to close.

6. If the buyer does not provide the additional 7% security deposit required by R907-80-13(5) within 5 business days after the date the Department agrees to allow the buyer more time to complete the purchase, the purchase contract is voidable and the Department may contact the next highest bidder who will then have an opportunity to purchase the property.

7. If closing is not complete within the additional 30 days allowed by R907-80-13(5), all deposit money becomes non-refundable, the contract becomes voidable and the Department may provide the next highest bidder an opportunity to purchase the property.

8. The closing of a real property transaction may be conducted at a title company provided the buyer pays for all related costs. If a title company is used for closing, the Department will instruct the company to record the deed, and after recording, send it to the Department of Transportation, Director of Right of Way.

9. Only the Executive Director is authorized to sign closing papers, real property contracts, or deeds.

10. The Executive Director must approve all property sales or exchanges in writing prior to completion of the closing.

 

KEY: surplus land, negotiated exchanges, public sales auctions, negotiated sales

Date of Enactment or Last Substantive Amendment: 2017

Authorizing, and Implemented or Interpreted Law: 72-5-117; 72-5-111; 72-5-404

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