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SC Administrative Law Court Decisions

CAPTION:
National Advertising Company, d/b/a Outdoor Systems, Inc. vs. SCDOT

AGENCY:
South Carolina Department of Transportation

PARTIES:
Petitioners:
National Advertising Company, d/b/a Outdoor Systems, Inc.

Respondents:
South Carolina Department of Transportation
 
DOCKET NUMBER:
99-ALJ-19-0192-CC

APPEARANCES:
Petitioners & Representative: National Advertising Company, d/b/a Outdoor Systems, Inc., Donald B. Clark

Respondents & Representative: S.C. Department of Transportation, Barbara Wessinger
 

ORDERS:

FINAL ORDER AND DECISION

I. Introduction



National Advertising Company, d/b/a Outdoor Systems, Inc. (National) seeks permission from the South Carolina Department of Transportation (DOT) to allow National to repair a damaged sign used as an advertising billboard. DOT opposes National's position and asserts that the sign cannot be repaired, but must be removed as an illegal structure. DOT's disagreement with National places jurisdiction in the Administrative Law Judge Division (ALJD). See S.C. Code Ann. § 57-25-110 et seq.; 25A S.C. Code Ann. Regs. 63-341 et seq. After considering the evidence and arguments presented at a hearing of this matter on June 30, 1999, I find the sign may be repaired.



II. Issues



Is the damage to National's sign less than fifty percent of the replacement cost as of March, 1999 (the date of the damage) so as to allow the repair of the sign under S.C. Code Ann. Regs. 63-350(C)(4)?(1)

III. Analysis



Sign Repair



1. Positions of Parties



Regulation 63-350(C)(4) states that "[i]n the event a non-conforming device is partially destroyed by wind . . . or other catastrophic occurrences, the Department must determine whether to allow the sign to be rebuilt." While DOT agrees that National's non-conforming sign was destroyed by severe winds, DOT argues that the controlling determination of whether to allow rebuilding turns upon two decisions. First, DOT argues the specific language of Regs. 63-350(C)(4) prohibits rebuilding a non-conforming sign if the damage to the sign exceeds fifty percent of the sign's replacement cost. Second, DOT argues the evidence in this case establishes that the damage to the sign exceeds fifty percent of the sign's replacement cost. Thus, DOT asserts no repair is available.



While National agrees with DOT's framework of analysis, National does not agree with DOT's conclusion. Rather, National argues the evidence demonstrates that the damage to the sign is less than fifty percent of the replacement cost. Accordingly, National asserts Regs. 63-350(C)(4) does not prohibit the sign repair.



2. Findings of Fact



I find by a preponderance of the evidence the following facts:



a. Background



In 1980, National applied for a permit to erect a billboard in Darlington County, South Carolina. The permit request was approved, permit 05-16-677810 was issued, and the sign was erected soon thereafter. However, due to later changes in the applicable law, DOT determined that the sign was a non-conforming sign and began holding National to the requirements of Regs. 63-350(C).



DOT found that the repair requirements of Regs. 63-350(C) were applicable in early March, 1999 due to National's sign being severely damaged by high winds during that month. As a result of the damage, and in compliance with Regs. 63-350(C), National submitted an application to DOT on March 12, 1999 seeking permission to repair the sign.



Permission was denied by DOT on April 12, 1999. On that date, DOT informed National that no repair would be allowed since DOT believed the damage to the sign exceeded fifty percent of the sign's replacement cost. National disagreed and this case resulted before the Administrative Law Judge Division.



This case turns upon deciding the cost of the sign damage, deciding the replacement cost, and then deciding if the damage exceeds fifty percent of the sign's replacement cost.



b. Sign Damage



The evidence demonstrates that the parties do not agree on the cost of repairs. After considering the testimony and exhibits, I find a proper estimate of the total repair cost is $2,443.02(2) as listed below:





Item Quantity Cost Total

Class 2 - 50' poles 6 250.00 1500.00

Lumber - 2" x 6" x 20' 8 13.20 105.60

Plywood - 4' x 10' 5 58.00 290.00

Formetco 1 35.00 35.00

Edging 4 18.00 72.00

Sakrete 30 2.85 85.50

Light fixtures - mercury vapor 2 118.00 236.00

Light bulbs - mercury vapor 6 15.00 90.00

Electric Cable - 12 gauge 50' .20' 10.00

Bolts - 3/4 x 4" 6 1.65 9.90

Metal Strapping 1/10 of coil 90.20 9.02



Total Repair Cost $2,443.02



c. Replacement Cost



The parties also failed to agree on the replacement cost of the sign. DOT asserted that the replacement cost was the sign's value of $4,380 in 1980. National asserted that the replacement cost must be determined by estimating the cost of actually replacing the sign. National argued that such a cost would be $8,463. Again, after reviewing the testimony and exhibits, I find the replacement cost to be $7,003.86(3) as established below:





Item Quantity Cost Total

Class 2 - 50' poles 6 250.00 1500.00

Lumber - 2" x6" x 20' 36 13.20 475.20

Plywood - 4' x 10' 20 58.00 1160.00

Marine plywood - 2' x 8' 10 21.00 210.00

Formetco 12 35.00 420.00

Braces 12 62.00 744.00

Edging 12 18.00 216.00

Sakrete (sacks) 30 2.85 85.50

Light fixtures - mercury vapor 6 118.00 708.00

Light bulbs - mercury vapor 6 15.00 90.00

Meter base 1 20.00 20.00

Breaker Box 1 75.00 75.00

Breakers 6 15.00 90.00

Ballast 4 110.00 440.00

Astronomical dial 2 237.00 474.00

Electrical cable - 14 gauge 500' .18' 90.00

Electrical cable - 12 gauge 50' .20' 10.00

Bolts - 3/4" x 4" 12 1.65 19.80

Bolts - 3/4" x 12" 12 7.18 86.16

Strapping - metal coil 1 90.20 90.20



Replacement Cost $7,003.86



d. Damage Percentage



Having determined the sign damage to be $2,443.02 and the replacement cost to be $7,003.86, I find the damage to the sign is only thirty-five percent of the replacement cost.



3. Conclusions of Law



Based on the Findings of Fact, I conclude the following as a matter of law:



The sole issue presented in this case is whether the fifty percent rule of Regulation 63-350(C)(4) has been satisfied. That rule states the following:



In the event that a nonconforming device is partially destroyed by wind . . ., the Department must determine whether to allow the sign to be rebuilt. If the Department determines that the damage to the sign was greater than 50 percent of its replacement cost as of the time of the damage, the sign . . . may not be erected again."



Here, while all agreed that the sign is a non-conforming device, the parties significantly disagreed on the method of determining replacement cost. DOT asserted that replacement cost was equivalent to fair market value, while National argued that replacement cost was best measured by the cost to reconstruct the sign. I agree with National.



While not entirely clear, DOT apparently argues that the term "replacement cost" is intended to require DOT to determine the fair market value of the sign. From the fair market value premise, DOT appears to argue that since signs always depreciate, the fair market value of the sign will never exceed its original value determined as of the date the sign was constructed. Thus, DOT argues that a conservative estimate of replacement cost for the sign here under review is the fair market value of the sign at the time of original construction in 1980. I cannot agree with DOT's approach to determining the meaning of replacement cost for at least two reasons.



First, the regulation does not seek to measure the fair market value of the sign. On the contrary, the plain meaning of "replacement cost" does not measure fair market value. Rather the term is "the present cost of replacing the improvement with one having the same utility." Black's Law Dictionary, 1299 (6th ed. 1990). Thus, the best measure of replacement cost is presented by evidence explaining what costs are incurred in replacing the sign so that the sign performs as it did before the damage. In this case the best evidence of replacement cost was presented by National.



Second, DOT's view miscasts the role of replacement cost in measuring fair market value. Indeed, before fair market value can be established by using replacement cost, such cost must be reduced by depreciation. See The Appraisal of Real Estate, p. 321, Appraisal Institute (10th edition, 1992) (where determination of fair market value requires that replacement cost be reduced by "all accrued depreciation in the property from that cost"). Thus, a regulation that solely seeks replacement cost cannot logically seek fair market value. Rather, to seek fair market value, the regulation would need to be rewritten so as to state that replacement cost must be reduced by accrued depreciation. Obviously, a judge should not add words to a legislative pronouncement, but instead a judge should only apply the language given by the General Assembly. Banks v. Columbia Ry., Gas & Electric Co., 113 S.C. 99, 101 S.E. 285 (1919). In short, had the regulation intended to reduce the replacement cost by depreciation, it could have easily done so.



Based on all of the above, DOT failed to provide persuasive evidence that the damage to the sign exceeded fifty percent of the replacement cost. Accordingly, DOT has no basis to deny National's request to repair the sign or to cancel National's permit.



IV. Order



Based upon the Findings of Fact and Conclusions of Law, it is hereby ordered:



The South Carolina Department of Transportation shall re-issue sign permit number 05-16-677810 and National shall be allowed to repair the sign consistent with the estimated cost of repair identified in this order.







AND IT IS SO ORDERED.







RAY N. STEVENS

Administrative Law Judge



Dated: July 22, 1999

Columbia, South Carolina

1. This issue is the only issue argued. Certainly, to assure proper decisions, "[o]f necessity, [judges] must have the freedom to depart from the particular arguments urged on us by adversary parties . . ." Bartles v. Livingston, 282 S.C. 448, 319 S.E.2d 707,717 (Ct. App. 1984). However, judges should be reluctant to reach issues not raised. Thus, other potential positions supporting or refuting the repair are not addressed.

2. The repair cost does not include paint ($1,000), labor ($270), or the equipment to replace the poles ($300), as these items were not included in National's prepared written estimate and they appeared too subjective to warrant inclusion. Were these costs to be added to the repair cost total, they would also have to be added to the replacement cost total. Although doing so would increase the percentage of the repair cost in proportion to the replacement cost, from thirty-five to forty-seven percent, that percentage still would not exceed fifty percent.

3. As noted in footnote one, the replacement cost does not include paint ($1,000), labor ($270), or the equipment to replace the poles ($300), as these items were not included in National's prepared written estimate and they appeared too subjective to warrant inclusion.


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