B-149833, JAN. 2, 1964

B-149833, JAN. 2, 1964

TO THE SECRETARY OF COMMERCE:

OUR REVIEW OF THE FEDERAL-AID HIGHWAY PROGRAM IN THE STATE OF CALIFORNIA, AS ADMINISTERED BY THE BUREAU OF PUBLIC ROADS, DISCLOSED THAT BUREAU POLICY GOVERNING THE EXTENT OF FEDERAL PARTICIPATION IN THE COST OF RELOCATION OF UTILITY FACILITIES NECESSITATED BY THE CONSTRUCTION OF FEDERAL-AID HIGHWAY PROJECTS HAS NOT BEEN APPLIED ON A BASIS CONSISTENT WITH THE CONTROLLING PROVISIONS OF FEDERAL-AID HIGHWAY LEGISLATION. THIS MATTER WAS DISCUSSED IN DETAIL ON PAGES 44 TO 49 OF A DRAFT REPORT BY THIS OFFICE ON OUR REVIEW OF SELECTED ACTIVITIES OF THE FEDERAL-AID HIGHWAY PROGRAM IN CALIFORNIA, TRANSMITTED TO THE FEDERAL HIGHWAY ADMINISTRATOR ON MARCH 13, 1963.

SECTION 123 OF TITLE 23, U.S.C. WHICH WAS DERIVED FROM SECTION 111 OF THE FEDERAL-AID HIGHWAY ACT OF 1956, 70 STAT. 383, AS AMENDED BY SECTION 11 OF THE FEDERAL-AID HIGHWAY ACT OF 1958, 72 STAT. 94, PROVIDES:

"/A) WHEN A STATE SHALL PAY FOR THE COST OF RELOCATION OF UTILITY FACILITIES NECESSITATED BY THE CONSTRUCTION OF A PROJECT ON THE FEDERAL- AID PRIMARY OR SECONDARY SYSTEMS OR ON THE INTERSTATE SYSTEM, INCLUDING EXTENSIONS THEREOF WITHIN URBAN AREAS, FEDERAL FUNDS MAY BE USED TO REIMBURSE THE STATE FOR SUCH COST IN THE SAME PROPORTION AS FEDERAL FUNDS ARE EXPENDED ON THE PROJECT. FEDERAL FUNDS SHALL NOT BE USED TO REIMBURSE THE STATE UNDER THIS SECTION WHEN THE PAYMENT TO THE UTILITY VIOLATES THE LAW OF THE STATE OR VIOLATES A LEGAL CONTRACT BETWEEN THE UTILITY AND THE STATE. * * *

"/B) THE TERM "UTILITY," FOR THE PURPOSES OF THIS SECTION, SHALL INCLUDE PUBLICLY, PRIVATELY, AND COOPERATIVELY OWNED UTILITIES.

"/C) THE TERM "COST OF RELOCATION," FOR THE PURPOSES OF THIS SECTION, SHALL INCLUDE THE ENTIRE AMOUNT PAID BY SUCH UTILITY PROPERLY ATTRIBUTABLE TO SUCH RELOCATION AFTER DEDUCTING THEREFROM ANY INCREASE IN THE VALUE OF THE NEW FACILITY AND ANY SALVAGE VALUE DERIVED FROM THE OLD FACILITY.'

SECTION 123 SPEAKS OF UTILITY RELOCATION COSTS ON A PROJECT BASIS AND SETS FORTH THE CRITERIA FOR REIMBURSING COSTS RELATED TO INDIVIDUAL UTILITY RELOCATIONS. TWO LIMITATIONS ON THE EXTENT OF PARTICIPATION IN RELOCATION COSTS ARE ESTABLISHED: REIMBURSEMENT FOR UTILITY RELOCATION COSTS CANNOT BE MADE WHERE THE PAYMENT OF SUCH COSTS VIOLATED STATE LAW OR A LEGAL CONTRACT BETWEEN THE UTILITY AND THE STATE, AND REIMBURSEMENT CANNOT BE MADE FOR COSTS IN EXCESS OF THE "COST OF RELOCATION" AS DEFINED IN THE STATUTE.

BUREAU POLICY STATEMENTS IMPLEMENTING THE PROVISIONS OF SECTION 123 PRESCRIBE IN SOME DETAIL THE PRINCIPLES AND PROCEDURES TO BE FOLLOWED IN DETERMINING THE "COST OF RELOCATION," AS DEFINED BY THE STATUTE, WHICH WILL BE ELIGIBLE FOR FEDERAL PARTICIPATION. HOWEVER, BUREAU POLICY PROVIDES ALSO IN PARAGRAPH 1 (C), OF THE BUREAU OF PUBLIC ROADS' POLICY AND PROCEDURE MEMORANDUM 30-4 THAT:

"WHERE STATE LAW OR REGULATION PROVIDES AGREEMENT AND PAYMENT STANDARDS MORE LIBERAL THAN THOSE ESTABLISHED BY THE PROVISIONS OF THIS MEMORANDUM, THE PROVISIONS OF THIS MEMORANDUM SHALL GOVERN. CONVERSELY, WHERE STATE LAW OR REGULATION PROVIDES MORE RESTRICTIVE AGREEMENT AND PAYMENT STANDARDS, THE STATE STANDARDS SHALL GOVERN. THE DIVISION ENGINEER SHALL DETERMINE WHICH PROCEDURES WILL GOVERN AND WILL NOTIFY THE STATE ACCORDINGLY.'

IN THE APPLICATION OF THIS PROVISION, THE DETERMINATION BY THE BUREAU'S DIVISION ENGINEER IN EACH STATE IS MADE ON A STATE-WIDE RATHER THAN ON A PROJECT BASIS, THE TEST BEING WHICH AGREEMENT AND PAYMENT PROVIDED BY BUREAU POLICY--- CAN BE EXPECTED TO PRODUCE, IN THE AGGREGATE, THE LESSER AMOUNT OF PARTICIPATING UTILITY RELOCATION COSTS. AS A RESULT, IN THOSE STATES IN WHICH IT HAS BEEN DETERMINED THAT STATE PAYMENT STANDARDS GOVERN, FEDERAL FUNDS PARTICIPATE IN ALL UTILITY RELOCATION COSTS PAID BY THE STATE, IRRESPECTIVE OF THE FACT THAT ON SPECIFIC FEDERAL-AID PROJECTS, THE AMOUNT PAID MAY EXCEED THE "COST OF RELOCATION" AS DEFINED IN THE STATUTE AND BUREAU POLICY IMPLEMENTING THE STATUTE. THE EFFECT OF THE APPLICATION OF BUREAU POLICY IN THIS RESPECT IS ILLUSTRATED BY INFORMATION DISCLOSED BY OUR REVIEW IN CALIFORNIA.

THE BUREAU DIVISION ENGINEER FOR THE STATE OF CALIFORNIA DETERMINED, IN AUGUST 1958, THAT THE AGREEMENT AND PAYMENT PROVISIONS PROVIDED BY STATE LAW AND REGULATION WERE MORE RESTRICTIVE THAN THOSE PROVIDED BY BUREAU POLICY AND ACCORDINGLY ADVISED THE STATE THAT THE STATE'S PROCEDURES WOULD GOVERN THE EXTENT OF FEDERAL PARTICIPATION IN UTILITY RELOCATION COSTS. ONE OF THE PRIMARY CONSIDERATIONS IN THE DIVISION ENGINEER'S DETERMINATION WAS THE FACT THAT CALIFORNIA LAW REQUIRES THAT IN ANY CASE WHERE THE STATE IS REQUIRED TO PAY THE COST OF A UTILITY RELOCATION NECESSITATED BY HIGHWAY CONSTRUCTION, AND WHERE A NEW FACILITY IS CONSTRUCTED TO ACCOMPLISH THE RELOCATION, THE STATE SHALL RECEIVE A CREDIT IN AN AMOUNT BEARING THE SAME PROPORTION TO THE ORIGINAL COST OF THE DISPLACED FACILITY AS ITS AGE BEARS TO ITS NORMAL EXPECTED LIFE. THE CORRESPONDING PROVISION OF BUREAU POLICY REQUIRES THAT IN INSTANCES WHERE THE REPLACEMENT (NEW) FACILITY WILL REMAIN IN USEFUL SERVICE BEYOND THE TIME WHEN THE OVERALL (OLD) FACILITY, OF WHICH IT IS A PART, WOULD HAVE REMAINED IN USEFUL SERVICE OR WOULD HAVE BEEN REPLACED, A CREDIT BE GIVEN AGAINST PROJECT COSTS FOR THE INCREASE IN VALUE DUE TO THE EXTENSION OF SERVICE LIFE. THE CREDIT FOR EXTENSION OF SERVICE LIFE IS TO BE IN AN AMOUNT WHICH BEARS THE SAME PROPORTION TO THE REPLACEMENT COST OF THE FACILITY AS THE AGE OF THE REPLACED FACILITY BEARS TO ITS TOTAL ESTIMATED SERVICE LIFE. THE POLICY STATEMENT CLEARLY ESTABLISHES THAT WHERE AN EXTENSION OF USEFUL SERVICE LIFE OCCURS, THE PROPER MEASURE OF THE RESULTING INCREASE IN VALUE, WHICH MUST BE GIVEN CONSIDERATION TO COMPLY WITH SECTION 123 (C) OF TITLE 23, IS TO BE MADE BY REFERENCE TO THE REPLACEMENT COST OF THE FACILITY, RATHER THAN TO THE HISTORICAL OR ORIGINAL COST OF THE FACILITY.

IN MAKING THE REQUIRED DETERMINATION, THE BUREAU DIVISION ENGINEER CONCLUDED THAT SINCE THE CREDIT PRESCRIBED BY STATE LAW, ALTHOUGH CALCULATED BY REFERENCE TO ORIGINAL COST, WAS REQUIRED IN EVERY INSTANCE WHERE THE RELOCATION INVOLVED THE CONSTRUCTION OF A NEW FACILITY OR PORTION THEREOF, AND THE CREDIT PRESCRIBED BY THE BUREAU WAS APPLICABLE ONLY WHERE SUCH REPLACEMENT EXTENDED THE USEFUL LIFE OF THE FACILITY, THE STANDARD PROVIDED BY STATE LAW WOULD GENERALLY RESULT IN THE LESSER PARTICIPATING COSTS.

AS SHOWN ABOVE ALL UTILITY RELOCATIONS IN THE STATE OF CALIFORNIA ARE LUMPED TOGETHER UNDER ONE DETERMINATION AS TO WHICH METHOD SHALL BE USED RATHER THAN MAKING SEPARATE DETERMINATIONS FOR EACH RELOCATION. THIS PRACTICE RECOGNIZES ONLY THE FIRST OF THE ABOVE-STATED LIMITATIONS IN THAT FEDERAL REIMBURSEMENT OF STATE PAYMENTS IS LIMITED ONLY BY STATE LAW WITHOUT CONCERN AS TO WHETHER A PORTION OF THE INCREASE IN VALUE OF THE NEW FACILITY HAS BEEN DEDUCTED TO ARRIVE AT "COST OF RELOCATION" AS DEFINED IN THE STATUTE AND BUREAU OF PUBLIC ROADS IMPLEMENTATION THEREOF. IN SHORT, THE DEFINITION OF "COST OF RELOCATION" HAS BEEN IN PART, READ OUT OF SECTION 123 SO FAR AS CONCERNS UTILITY RELOCATIONS IN CALIFORNIA. WE FIND NO BASIS FOR SUCH AN INTERPRETATION.

THIS MATTER WAS SPECIFICALLY BROUGHT TO THE ATTENTION OF THE FEDERAL HIGHWAY ADMINISTRATOR IN OFFICE LETTER DATED JULY 2, 1963, COPY ENCLOSED, WITH THE ADVICE THAT OUR OFFICE WILL BE REQUIRED TO STATE EXCEPTIONS IN THE ACCOUNTS OF THE CERTIFYING OFFICERS INVOLVED FOR ANY REIMBURSEMENTS, PAST AND FUTURE, FOR UTILITY RELOCATIONS WHICH WE FIND ARE IN EXCESS OF THE AMOUNT ALLOWED BY SECTION 123, AS CONSTRUED THEREIN. THE CONCLUSION STATED IN THAT LETTER, AND IN THE DRAFT OF THE REPORT FORWARDED TO THE FEDERAL HIGHWAY ADMINISTRATOR, WAS CHALLENGED BY THE GENERAL COUNSEL OF THE COMMERCE DEPARTMENT IN LETTER DATED OCTOBER 1, 1963, TO THE GENERAL COUNSEL OF THIS OFFICE. IT IS THE VIEW OF YOUR GENERAL COUNSEL THAT OUR OFFICE HAS RAISED AN ADMINISTRATIVE RATHER THAN A LEGAL QUESTION. WE HAVE FULLY CONSIDERED THE CONTENTIONS SET FORTH IN HIS LETTER IN SUPPORT OF THIS VIEW, AND WHILE IT MAY WELL BE THAT THE BUREAU OF PUBLIC ROADS COULD HAVE ADOPTED OTHER PROCEDURES FOR THE IMPLEMENTATION OF THE STATUTE SUCH FACT DOES NOT ALTER THE PRESENT SITUATION NOR JUSTIFY A DEPARTURE FROM THE CLEAR INDICATION IN SECTION 123 THAT THE "COST OF RELOCATION" IS TO BE DETERMINED ON THE BASIS OF A SPECIFIC PROJECT AS DISTINGUISHED FROM A STATE-WIDE DETERMINATION. IT IS A WELL-ESTABLISHED RULE THAT THE POWER OF AN ADMINISTRATIVE OFFICE TO ADMINISTER A FEDERAL STATUTE AND TO PRESCRIBE RULES AND REGULATIONS TO THAT END IS NOT THE POWER TO MAKE LAW--- THE REGULATION MUST BE IN HARMONY WITH THE STATUTE. MANHATTAN GENERAL EQUIPMENT CO. V. COMMISSIONER OF INTERNAL REVENUE, 297 U.S. 129. IT IS NOT THE CONTENTION OF OUR OFFICE THAT PARAGRAPH 1 (C), OF BUREAU OF PUBLIC ROADS' POLICY AND PROCEDURE MEMORANDUM 30-4 IS NOT IN HARMONY WITH SECTION 123. HOWEVER, WHEN SUCH POLICY IS APPLIED, AS IN THE CASE OF CALIFORNIA, ON A STATE-WIDE BASIS, THERE IS NO ASSURANCE THAT THE STATUTORY PROVISION LIMITING FEDERAL PARTICIPATION TO THE "COST OF RELOCATION" WILL BE GIVEN EFFECT WITH RESPECT TO SPECIFIC HIGHWAY PROJECTS. THE CONCLUSION THAT THE BUREAU OF PUBLIC ROADS POLICY GOVERNING THE EXTENT OF FEDERAL PARTICIPATION IN THE COST OF RELOCATION OF UTILITY FACILITIES NECESSITATED BY THE CONSTRUCTION OF FEDERAL-AID HIGHWAY PROJECTS HAS NOT BEEN APPLIED IN THE STATE OF CALIFORNIA ON A BASIS CONSISTENT WITH THE CONTROLLING PROVISIONS OF FEDERAL-AID HIGHWAY LEGISLATION IS THEREFORE AFFIRMED.