Section 9: Fee in Lieu of Mitigation

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Agreement Development and Approval

R/W-PD or ROW Division HQ must determine whether an "in lieu fee" (ILF) agreement is appropriate when compensatory mitigation is required for a project. This decision should generally be made after a careful comparison and evaluation of the cost of an ILF agreement versus the cost of an actual land acquisition (including maintenance/management for 20 years), or the cost of redesigning the project to avoid the impacts that required compensatory mitigation.

The evaluation process begins with a search for an appropriate mitigation bank, preserve, fund, or other suitable ILF option. Since agreements typically exist between third parties and resource agencies, the applicable resource agency(s) should be the primary contact for locating possible third parties capable of participating in an ILF agreement. Texas Parks and Wildlife Department may also be able to participate in ILF agreements both as the regulating agency and as an operator of a preserve, fund, bank, or other recognized compensatory mitigation method. Environmental Division will also provide assistance in locating alternatives.

When a prospective third party is identified, R/W-PD or ROW Division HQ should next obtain a copy of any existing agreement between the resource agency(ies) and the third party. The agreement, if not previously reviewed, must be reviewed by Environmental Division to ensure that the agreement will result in TxDOT's mitigation obligations being properly met.

Typically, an ILF agreement is based on acres of compensatory mitigation agreed upon by R/W-PD or ROW Division HQ. The resource agency requiring the compensatory mitigation generally has procedures established for negotiating the acreage. The acreage required in compensatory mitigation drives the cost-benefit analysis required to determine if an ILF agreement is TxDOT's best option to provide compensation. In addition, R/W-PD should establish a ROW CSJ associated with the project CSJ for mitigation agreements required by a highway project. This ROW CSJ will be the basis for payment when an agreement is finally concluded. For mitigation agreements associated with Aviation Division projects, funding, CSJ designations, processing, and payment are all executed within Aviation Division. Likewise, non-right of way facility construction mitigation agreements will be funded using Maintenance Division capital improvement funds and processed by Maintenance Division.

Not all compensatory mitigation will be based on acres and real estate values. For example, an incidental "take" statement from the U.S. Fish and Wildlife Service (USFWS) may require habitat manipulation or enhancement rather than replacement. The agreement might call for TxDOT to pay into a fund whose goal is enhancement of an existing preserve. In those cases, R/W-PD or ROW Division HQ must establish a reasonable basis for determining when it is best to use an ILF instead of trying a different mitigation approach.

When an agreement with the resource agency covering the amount of acreage or other basis for compensatory mitigation has been reached, the cost to TxDOT must be determined. For instance, if the required mitigation is 20 acres and the preserve to be used charges a flat fee of $5000 per acre for an ILF agreement, TxDOT’s cost would be $100,000. Likewise, for an enhancement ILF, the likely basis would be the differential cost if the project had to be redesigned to avoid the incidental "take." Additional costs, such as maintenance funding for the agreed lifespan of the commitment, should also be added. The total fee estimate and a description of the process used to derive that estimate are then provided to R/W-PD. The appraisers will use general property value information already available to determine whether the negotiated fee is within an acceptable range of the cost that TxDOT would have to pay to acquire and maintain the property or a conservation easement (factoring in a minimum of 20 years maintenance/management costs).

If the proposed fee is reasonable, R/W-PD or ROW Division HQ will prepare a memo to ROW Division HQ and Environmental Division outlining the proposed agreement and describing the cost comparison. Upon the concurrence of both directors, ROW Division HQ will authorize the agreement for funding. If the proposed fee is determined to be unreasonable, R/W-PD or ROW Division HQ will attempt to either renegotiate the cost or proceed to another mitigation option.

Once funding is authorized, R/W-PD or ROW Division HQ should proceed in executing a final agreement. For those projects where letting will not occur for some time, the final agreement must provide for payment at the time of construction. The agreement shall be executed in two copies (three if an original is required by the resource agency). The original copy will be held by ROW Division HQ for projects it funds. Reproduced copies will be provided to Environmental Division and R/W-PD (when appropriate).

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Administrative Procedures for Payments for Fee in Lieu Agreements

The following steps will be taken, when appropriate, to process payment for a Fee in Lieu (ILF) agreement when right of way funds the ILF:

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  • ROW CSJ: If there is no ROW CSJ already available for the project, the R/W-PD project manager will coordinate with ROW Division HQ to obtain one. The final ILF payment will be charged to this CSJ.
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  • Invoice from Third Party: Once an agreement is ready for execution, request an invoice from the third party (the actual manager of the mitigation bank, preserve, fund manager, etc.) for the agreed amount.
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  • Payment Memo and Required Enclosures: Upon receipt of the invoice, R/W-PD or ROW Division HQ will prepare a memo to ROW Division HQ to fund the fee. The district TPD Director, division project manager, or appropriate R/W-PD or ROW Division HQ finance officer will sign the memo. Form ROW-A-15 will be prepared as an enclosure to the memo for agreements to be paid with ROW funds. The fee should be charged to comptroller object 7348, expenditure object 366 with function code 400 in Segment 76, mapped to Strategy 102, Right of Way Acquisition. A copy of the final ILF agreement, the permit, or other document (i.e., USFWS Biological Opinion) requiring the ILF agreement, the invoice, and a copy of the approved cost analysis mentioned in Attachment 1 will also be enclosed. The memo should clearly identify the date by which payment is due, and should be sent to ROW Division HQ. Copies without enclosures will be sent to appropriate other parties. Designated district offices and Environmental Division will always receive copies.
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  • Payment: Payments are normally made 30 days after the receipt of an invoice due to TxDOT’s scheduling of payments rules. If a faster payment is required, please make it clearly known in the memo and follow up with telephone contact to ROW Division to ensure expedited handling. The preferred method of payment is by electronic transfer (direct deposit). All payees are required to have a Payee Identification Number (PIN) in order to be paid. ROW Division HQ accounting office or Finance Division Claims Management staff can assist in setting up a PIN for those payees that do not already have one. If payment is made by warrant, it may be delivered directly or by correspondence. Payment confirmations are not required.
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