You asked for a description of the procedures state agencies follow when they purchase or lease real property. This memo describes the procedures of the Department of Public Works (DPW), which buys and leases property for most agencies, and the Department of Transportation (DOT), which has its own procedures. DOT rarely leases property, although it often acquires temporary easements in connection with construction projects.

In addition to these agencies, the Department of Agriculture purchases the development rights to selected farms under the farmland preservation program, which is described in OLR Report 2007-R-0616. OLR Report 2004-R-0383 describes the procedures state agencies must follow when their programs (including property acquisitions) displace people or businesses.

Much of the information about DPW's purchasing procedures is based on a 2001 study by Program Review and Investigations committee staff, available online at www.cga.ct.gov/pri/archives/2001pwreport.htm (the procedures have not changed significantly since then). Information about DPW's leasing procedures is available at www.ct.gov/dpw/lib/dpw/LeasingManualNov2905INTROREVjul2004and103007.doc.

SUMMARY

In most cases, state agencies seeking to purchase real property must submit their written requests to DPW. Based on the request, a DPW purchasing agent seeks suitable properties. The requesting agency decides which properties are acceptable and once the search is narrowed to one or two proposals, the purchasing agent arranges for site appraisals. If the property is valued at more than $100,000, two appraisals must be conducted.

Based on the appraisals and other relevant information, DPW property acquisition staff may enter into verbal negotiations with the property owners. Once a tentative agreement is made, the purchasing agent may draft a nonbinding offer letter to the property owner. The offer is reviewed by the client agency, the DPW commissioner, the Office of Policy and Management (OPM), and the State Properties Review Board (SPRB).

Once the requesting agency and the property owner come to an agreement, the requesting agency must obtain OPM approval on the deal. Next, SPRB examines the offer's terms and conditions. The board may recommend changes to the terms and conditions of the deal before approval. If the changes affect the sale price, the deal must be resubmitted to all parties for reconsideration and approval. The purchasing agent forwards a draft of the board's approved transaction to the Office of the Attorney General for final approval.

If an agency wants to continue leasing space or move to new leased space when its current lease expires, it must submit a request to DPW. DPW reviews the request to verify that the space requested by the agency has been included in the state's Facility and Capital Plan and meets the agency's needs. If the request has not been included in the plan, the request must be approved by OPM.

DPW analyzes the agency's request to determine whether existing state-owned or leased space could meet the agency's needs. The request is then reviewed within DPW (and OPM if the space will be used for new staff).

Once DPW (and where applicable OPM) approves the request, DPW's leasing unit starts the search process. If the agency needs more than 2,500 square feet, the request must be advertised in a newspaper. Property owners have between 14 and 30 calendar days to respond to the advertisement. Once the closing date has passed, DPW's procurement unit forwards the responses to DPW's leasing unit. The leasing supervisor reviews the responses and gives them to the property agent, who selects the locations that meet the advertisement's general requirements. The agent and one or more representatives of the requesting agency conduct initial site inspections. Once the sites have been reviewed and visited, the agency completes an initial site evaluation proposal form indicating its preferred site.

Negotiations begin at this point. The owner must submit a proposal to DPW's leasing unit, which is reviewed by the property agent. The property agent can propose counteroffers if the owner's proposal is too costly or does not conform to the agency's requirements. Negotiations between the property owner and the agent continue until an agreement is reached or an impasse forces the agent to seek other sites.

Once there is an agreement between the property owner and the property agent, agent must discuss the site selection with the leasing supervisor and draft a lease. After review by the administrator of leasing and property transfer and the leasing supervisor, the lease is sent to the property owner for signature and then to the agency, DPW Commissioner, and OPM for review and signature.

Once OPM approves and signs the lease, it goes to the SPRB for its review and approval. When the board approves the lease and accompanying documents, it signs the lease and sends it to the Attorney General's office for final approval.

DOT can acquire property for a wide range of purposes, including the construction of state highways, local roads, and transit facilities and has its own property acquisition procedures. DOT is also subject to federal law for acquisitions in projects that involve federal funding, as most do.

DOT begins its acquisition process by sending the property owner a certified letter identifying the property to be acquired and the project for which it must be obtained. The property must be appraised if it is worth more than $10,000; if DOT anticipates that the value will be $250,000 or more, two appraisals must be done unless this requirement is waived by the rights of way administrator. The appraisals can be done by DOT staff who are licensed appraisers or by licensed contractors. Among other things, the appraiser must identify and inspect comparable properties and examine the neighborhood around the property. The appraisal must be reviewed by DOT's review appraisers for conformity to state and federal standards and accepted appraisal techniques. Finally, the appraisal is reviewed by a panel of managers in DOT's Office of Rights of Way.

Once the appraisal process is completed and money for the acquisition is made available, a DOT property agent contacts the owner to discuss the purchase. If the owner qualifies as a displaced person or business under state and federal laws, the agent will discuss the types of relocation assistance that may be available. The property owner may accept the offer or negotiate with the agent for a different amount. Such negotiations usually involve the owner submitting his own appraisal for DOT to review.

If the owner accepts DOT's offer, he or she must sign a land payment voucher agreement. If the amount exceeds $5,000, SPRB must approve it. If the agreement exceeds $ 100,000, a state trial referee must approve it.

DEPARTMENT OF PUBLIC WORKS

Purchases

In most cases, state agencies looking to purchase space must submit their written requests to DPW. The request may be sent to the DPW commissioner or directly to the property acquisition staff. The request should be accompanied by a letter an approval by the OPM secretary stating that sufficient funding is in place to acquire the property.

The agency's request typically states the reason and purpose for the acquisition. This information helps the property acquisition staff identify suitable parcels. The purchasing agent advertises for proposals but is not statutorily required to do so. The agent drafts the advertisements based on the information provided by the requesting agency. The responses are received by DPW's bidding office and forwarded to its property acquisition staff.

The purchasing agent also seeks suitable properties by investigating available parcels in the specified location and may also be aware of property available from prior proposals. All proposals meeting the agency's requirements are explored. The purchasing agent and an agency representative conduct site visits of all potential properties.

The requesting agency decides which properties are acceptable, although it does not formally evaluate each property. Once the search is narrowed to one or two proposals, the purchasing agent arranges for site appraisals. Appraisals are conducted by outside appraisers selected by the purchasing agent from a list of previously used appraisers. Agents

select appraisers on their proximity to the property, expertise and knowledge of area, and availability. If the property is valued at more than $100,000, two appraisals must be conducted. The property agent negotiates with the appraisers for their fee.

The purchasing agent reviews the appraisals and sends a copy to the agency. In addition to a description of the property, the appraisal will contain a market analysis. The purpose of the appraisal is to estimate the market value of the proposed property. In assessing market value, the appraiser may consult data from sources such as building assessors, town clerks, zoning and tax collectors records, property owners, real estate brokers, and publications including multiple listing services and local newspapers.

Depending on the specifications of the property needed, an environmental study might also be required. If so, any needed evaluations are prepared internally by the appropriate staff in other divisions of DPW. The property agent also requests a title search be prepared from the Office of the Attorney General.

Based on this information, the DPW property acquisition staff may enter into verbal negotiations with the property owners. Occasionally, the deputy commissioner may get involved in larger negotiations. In all cases, the purchasing agent keeps the deputy commissioner informed of all progress and any problems.

Once a tentative agreement is made, the purchasing agent, authorized by the DPW deputy commissioner, may draft a nonbinding offer letter to the property owner. The draft, together with related documents, is reviewed by the client agency, the DPW commissioner, OPM, and SPRB. The related documents are the request letter from the agency, the appraisal, and any relevant background information or materials such as maps or environmental studies. All parties must sign off and approve the offer prior to execution.

The requesting agency must obtain OPM approval on the negotiated deal. OPM's asset management staff check the state-owned inventory for any suitable and available options. If none exists, OPM assesses the agency's budgetary condition, determines what the agency can afford, and approves proposals fitting its program budget. If OPM rejects the proposal, the agency may attempt to re-negotiate or re-bid. Once OPM has granted approval, the SPRB will examine the offer's terms and conditions. The SPRB may visit the proposed property. It will consider the appraisal, check the offer against comparable sales in the area, explore any other available options, and request additional information or documentation if warranted. Although a formal presentation to the SPRB is not made, the board may ask for a meeting with DPW staff or a client agency representative to answer questions. The board, at its discretion, may recommend changes to the terms and conditions of the deal before approval. DPW staff attempt to address the board's concerns before resubmittal. If the changes affect the sale price, then the deal must be resubmitted to all parties for reconsideration and approval.

The terms or conditions approved by the board cannot be changed or modified without its consent. Final board decisions are returned to DPW for execution. The purchasing agent forwards a draft of the board's approved transaction to the Office of the Attorney General for review. The assistant attorney general assigned to handle DPW property transfers will examine the transaction for legal sufficiency and submit it to the Attorney General for final approval. When necessary, the DPW team project manager prepares an agenda item for the State Bond Commission once the project has been approved by SPRB.

Leases

DPW notifies an agency 18 months before its existing lease expires, and requests that the agency indicate whether it wants to remain at the leased facility, find an alternative space, or pursue other options. If the agency continues to need leased space, it must forward a request for space form to DPW's facilities planning unit. The form tells DPW the number of staff to be located in the leased space, the number of parking spaces needed, and the agency's special requirements (such as hearing or conference rooms). DPW reviews the form to verify whether the space requested by the agency has been included in the state's Facility and Capital Plan and meets the agency's needs. If the request has not been included in the plan, the requesting agency must prepare an emergency certification statement justifying the need for the space. These requests must be approved by OPM.

DPW analyzes the agency's request for space to determine whether existing state-owned or leased space could meet the agency's needs. If the request contains space for vacant or proposed positions, DPW sends the space analysis to OPM's budget division to confirm the staffing levels. Then, DPW sends the entire package to the requesting agency's commissioner for review and approval. The administrator of DPW's leasing and property transfer unit then reviews and if appropriate signs the request. Next, the DPW commissioner reviews the material and upon his approval, if the request is within the state plan or requires less than

10% more space than approved under the plan, DPW sends the approved request and space analysis to DPW's leasing office. If the requested exceeds 10% or is not in the plan, DPW forwards it to OPM's assets management unit for their review and approval. Upon their approval, the request is sent to the OPM secretary for final decision. If the secretary denies the request, DPW and the agency must work to develop a proposal that is acceptable to OPM.

Once DPW (and when applicable OPM) approves the request, DPW's leasing unit starts the search process. If the agency needs more than 2,500 square feet, it must place an advertisement in a newspaper (CGS § 4b-34). For smaller leases, the property agent researches the space inventory file to determine the availability of suitable space. If no suitable space exists, a newspaper advertisement is prepared and placed.

Property owners have between 14 and 30 calendar days to respond to the advertisement. Late proposals are not considered unless all other proposals have been considered and rejected. Once the closing date has passed, DPW's procurement unit forwards the responses to DPW's leasing unit. The leasing supervisor reviews the responses and gives the responses to the property agent, who then selects those locations which meet the general requirements of the advertisement. The agent and one or more representatives of the requesting agency conduct an initial site inspection.

Once the sites have been reviewed and visited, the agency completes an initial site evaluation proposal form indicating its preferred site and whether or not the site offering appears to be acceptable or unacceptable. The form is signed by the agency and forwarded to DPW's leasing unit. The property agent reviews all agency comments and meets with the leasing supervisor to discuss the proposed sites. The agency and DPW's leasing unit make the final decision regarding sites to be given further consideration. The objective is to narrow down the field of competition to two or three sites that are generally acceptable to the state for the agency's contemplated use.

Negotiations begin at this point. For new locations, the agency develops a proposed layout as well as plans and specifications outlining the agency's needs (alternatively, the property owner can do this to help it prepare a firm proposal). If renovations costing over $500,000 would be needed, DPW staff must be consulted to provide architectural, engineering, energy or code assistance.

The general terms and conditions of the proposed lease are discussed with the owner. The owner must submit a proposal to DPW's leasing unit, which is reviewed by the property agent. The property agent can propose counteroffers if the owner's proposal is too costly or does not conform to the agency's specific requirements. Negotiations between the property owner and the agent continue until an agreement is reached or an impasse forces the agent to seek other sites.

The property agent is responsible for ensuing that the agency is informed of progress on the lease negotiations, but the agency may not deal directly with the owner or visit the site without DPW's authorization. Violation of this provision is a Class A misdemeanor (CGS. § 4b-27).

Once there is an agreement between the property owner and the property agent and the agent has discussed the site selection with the leasing supervisor, the agent drafts a lease using the standard lease form. After review by the administrator of leasing and property transfer and the leasing supervisor, the lease is sent to the property owner for signature and then to the agency, DPW commissioner and OPM for review and signature. Once OPM approves and signs the lease, the agent prepares the lease summary package, which includes supporting documents such as the space analysis, plans and specifications, and code compliance review. The leasing supervisor and the administrator review the package for completeness, signed it, and send it to SPRB for its review and approval.

The board's executive director reviews all items before them to the board. If the board has questions or concerns about the proposal, it may direct the staff to seek additional information. The board may also request the presence of relevant DPW staff. The board may conduct a site visit if necessary. If the board still has concerns it may return the package to the DPW's leasing and suspend its approval. The leasing supervisor must then review the file with the property agent to go over the board's concerns and comments. Appropriate action is taken to address the concerns and the package is then resubmitted for final approval.

When the board approves the lease package it signs the lease. The lease is sent to the assistant attorney general assigned to DPW for review and final signature by the Attorney General as to form.

Upon return of the completely executed lease, the original document is sent for recording to the clerk of the town where the leased space is located. Additional copies are sent to the requesting agency and the SPRB. Any renovation work that is required to be completed by the lessor can be started at this time. If there is no renovation work required, or if the renovation work has been completed and inspected by the property agent and found to be complete, the property agent prepares a rent control card that is sent to the agency's business office or the DPW financial management unit if the leased space is in Hartford. This card is the indication to the agency that the lease has started and rent will be processed for payment.

DEPARTMENT OF TRANSPORTATION

DOT can acquire property for a wide range of purposes. These include:

1. constructing state highways and highway maintenance storage areas or garages,

2. constructing urban roads and public transportation facilities,

3. constructing commuter parking facilities,

4. eliminating billboards and other signs along highways and buying out the right to erect such signs, and

5. eliminating certain junkyards or scrap metal processing facilities that cannot be screened from the highway.

Each highway or other road project has a rights of way coordinator, who is responsible for working with DOT planning and design staff.

DOT must pay fair market value for any property it acquires. Generally this means the market value of the property considering all partial takings, damages, and benefits to the remaining land. The value must be determined considering three common valuation approaches (comparable sales, cost, and income). If DOT needs only part of a parcel of land, the amount it offers the owner generally will be the difference between the parcel's fair market value before and after acquisition.

DOT attempts to purchase property it needs for a project before exercising its condemnation power. Initially, it sends the property owner a certified letter identifying both the property to be acquired and the project for which it must be obtained. If the property is worth less than $10,000, DOT prepares an estimate of value; if it is worth more the property is appraised. If DOT anticipates that the value will be $250,000 or more, two appraisals are required unless this requirement is waived by the rights of way administrator. DOT has separate appraisal requirements for small parcels of unimproved land, single family homes worth up to $1 million, and complex acquisitions. DOT's Appraisal Division contacts the property owner to schedule a time for the appraisal(s).

Either independent appraisers, who are paid a fee for their services, or DOT staff who are state-licensed appraisers may conduct appraisals to determine DOT's offer. The property owner may accompany the appraiser and point out any special features that may affect the property's value. Among other things, the appraiser must identify and inspect comparable properties, examine the neighborhood around the property, and determine whether there are any underground or hidden facilities on the property. The appraisal must be reviewed by DOT's review appraisers for conformity to state and federal standards and accepted appraisal techniques. This review may involve a site visit. Finally, the appraisal is reviewed by a panel of managers in DOT's Office of Rights of Way. DOT's Bureau Records Center prepares a file consisting of the appraisal, appraisal review, and certification of registered value (the price DOT is willing to pay for the property).

Once the appraisal process is completed and money for the acquisition is available, a DOT property agent contacts the owner to discuss the purchase. If the owner qualifies as a displaced person or business under the Uniform Relocation Assistance Act or other state and federal laws, the agent will discuss the types of assistance that may be available. The purchase offer is made both verbally and in writing. Under federal law (49 CFR 24.102), DOT must give the property owner a statement describing the basis of the offer if the project is federally funded. The property owner may accept the offer or negotiate with the agent for a different amount. Such negotiations usually involve the owner submitting his own appraisal for DOT to review. There may be several contacts between the DOT agent and the property owner. If this process reveals that the state's offer is inadequate due to a specific set of facts, DOT can negotiate a different amount that reflects this situation. For federally funded projects, if there has been a material change of circumstances in the character or condition of the property or there has been a significant delay in acquiring the property, DOT must reestablish the property's fair market value.

If the owner accepts DOT's offer, he or she must sign a land payment voucher agreement. If the amount exceeds $5,000, SPRB must approve it. If the agreement exceeds $100,000, a state trial referee must approve. Once these approvals are granted DOT schedules a closing with the owner to transfer title to the property.

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