Well, there have been some well considered opinions on the Species Factor and in earlier threads on the Location factor as being extremely important to the reliability and credibility of TFM. The draft 9th Edition was very strong on the all but exceptional reasonable relationship of TFM values to FMV of the real estate.

So, how do you reconcile such imperative needs with the lack of Species and Location depreciation in Cost of Cure? Does that mean opinions of value need to be reasonable - vis a vis real estate, species characteristics or otherwise - in TFM but not in Cost of Cure? Or does it mean Species and Location don't matter after all? But we can't backtrack on TFM so we'll just quietly ignore the factors in Cost of Cure.

Are the assumptions different? Is the definition of value different? If they are does that mean TFM and CoC are not applicable to the same situations? If they are not applicable to the same situations why has Cost of Cure assumed such a predominant position in the 9th Edition draft text?

Come on out of the woodwork guys. Let's hear from you.

Reply to post by Scott Cullen, on April 06, 1999 at 14:10:27:

O.K., I'll bite;

While I can't say I am convinced totally of my own arguements, I'll toss a few things in to add fodder for discussion. I am sure that I have not considered adequately, all of the possible applications of each, or both methods, but here goes.

The trunk formula has, as you have pointed out some elements which are based in theory. C of C is a little more direct. I think C of C is limited in that the replacement plants must be of a readily available, and replaceable size.

Reasonableness still does exist, and in my opinion is still compared to market value of the land as a cross check. If you tell me you want to replace that 36" oak, you have a replacement lined up 40 miles away, and you intend to move that plant onto the site; I'm going to do a little bit of figuring related to the cost of the move, warranty, etc. as compared to the value of the land.

If that land use is one which justifies the expense of such a project, an amusement park for instance, I might buy in. The income approach might come in to play in that case though.

In cost of cure, theoretically, you're calculating the cost of moving enough small material in to compensate for the loss. Ya, ya, you'll have some landscaping, etc. involved too. The point is: everything you put into the bid on a cost of cure is a readily available item, readily transported to the site and set up on the site in a manner which is routine.

Big trees aren't moved 40 miles routinely, at least not in this nick of the woods.

The species rating in routinely available stock is reflected in pricing at the nursery, and as per our discussion of species ratings, is theoretically reliable.

Location could get a little bit messed up. The replacement plants are not necessarily going back into the same hole. Their function is a little bit different, in that they are compensating for the loss of a specific function, and last but not least; they can be placed perfectly. In fact, I think the expectation would be that they are placed perfectly.

In direct answer to one of your questions: C of C and trunk formula probably are not often applicable to the same situations. Not only should the appraisal be reasonable, it should make sense too. I'm sure there will be some cases where the plant material is larger than is normally transplanted, but reasonable to make the effort. Presentation of both methods might be appropriate there, complete with information about the replacement's chances of survival.

Once transplanting costs start getting much higher than what calculations using the trunk formula method yield, in my opinion, it starts getting to be time to question whether the idea of transplanting a large plant makes sense. I ask myself: "Would that guy move that tree onto the property if he didn't have someone to sue?" Would it be a normal part of the land use? At Disneyland, the answer could well be yes, since they have a history of moving large trees onto the site. The Federal Government could reasonably be expected to do such a thing on high profile, public use sites such as the capitol grounds.

The little shack surrounded by weeds, old cars, etc.; probably not.

Best regards,
KWK

Reply to post by Scott Cullen, on April 06, 1999 at 14:10:27:

Hi Scott: I believe the assumptions are different, and because of that, Species and Location matter little in CoC.

The assumption is that in Trunk Formula the tree will not be replaced, and with Cost of Cure the tree (plants) will be replaced with the same or similar species, and in their original location.

Reply to post by Favero Greenforest, on April 06, 1999 at 14:10:27:

That's not always the case, Favero. Many times I will use Cost–of–Cure, when the trees will not or cannot go back to the same place.

Cost–of–Cure looks at the costs to reasonably restore the landscape to its former level of benefits. If the exact same species is not available, alternatives can be used, and an adjustment made if necessary. Location adjustments are seldom used this way, but a species rating might apply in some cases.

Reply to post by Scott Cullen, on April 06, 1999 at 14:10:27:

Well, I guess it's time to jump back in here before the thread gets stale.

I'm not sure the underlying logic of CoC should be related to situations. Application probably should be.

If we start with the simplest case - replaceable size plants - the principal differences between RCM and CoC are
a) that CoC considers other classes of damage (soft and hardscape) besides the value of the particular plant being appraised. CoC could be applied to simply turf and hardscape damage, but for simplicity lets say the task at hand is to appraise a particular plant and that other damage is incidental.
b) that RCM depreciates the plant by the Location Factor (8th ed. p. 50) and CoC does not (CoC Form 1997).

If the Location Factor in RCM is 100% the result should be the same as CoC. But if Location Factor in RCM is less than 100% Either CoC value will be higher for the same situation or the appraiser must make an implicit Location adjustment and use a smaller plant or different cost basis to arrive at the same value as RCM.

In a more complex case say the plant is beyond replaceable size. TFM extends replcement cost to that size and depreciates by both Species and Location factors (8th ed. p.59) while CoC does not (CoC Form 1997). If the appraiser uses a greater number of plants to approximate the lost benefit of the larger appraised plant the undepreciated reults may be similar. But if TFM Species and/or Location are less than 100% then then the CoC result will be higher. To avoid this the appraiser would need to make implicit adjustments by using fewer or smaller plants.

Russ is right, replacing lost benefits is the key, but it is the key in all methods. That's what depreciation does. It says that the cost of a new idealized object is X but the benefits provided by the old object were less than X. The species was crummy. Or the species was great but it was located a mile from the house behind a ridge and across the swamp, no one new it was there.

The same considerations must be applied to CoC. A good appraiser may make reasonable judgments about benefits and just use smaller or fewer plants but how does the appraisal user know that the adjustment was intended. How does the appraiser compare the benefits and adjustments of the two methods? An ill-trained appraiser might say OK One 50 foot tree gets replaced by 5 ten foot trees. Done. What if it's a short lived species in a low value location? The method does not force the adjustment on the appraiser nor alert the user that maybe the adjustment was needed.

In my opinion 1) methods should rest on the same theoretical basis, 2) data inputs and adjustments should always be explicit not implicit and 3) adjustments and techniques should as much as possible be consistent across methods.

This is not to say that adjustments should be arbitrary or uniform. That's what the adjustments allow or could allow: a range of percentages based on appraiser judgment. Or in CoC a choice of size parity with adjustments less than 100% or explicitly smaller plant material and higher %ages. Or maybe two runs, one using %age depreciation the other size adjustment. But always explicit.