Recently, my Blue Spruce tree (DBH of 16.8"; about 45 feet) was killed by a gas leak caused by my local (New Jersey) gas company. Using the "trunk formula method" they offered to pay me $4,900 to resolve my claim, including the $600 cost of removing the dead tree. My question relates to certain of the figures they used in their calculation. This is how they valued the tree:
1)Replacement Cost: $900
2)Basic price of repl tree: $27.00 per sq in
3)Diff in trunk area of appraised & repl trees:
3A) Appraised tree trunk area - area of 16.8" tree -------- 221.6 sq in
3B) Repl tree trunk area - area of 4" tree ------------------ 12.56 sq in
3C) Difference in trunk areas --- 209.04 sq in
4)Multiply Price Diff - $27 per sq in times 209.04 sq in = $5,644
5)Species Rating .9 = $5,080
6)Basic Value = $900 + $5,080 = $5,980
7)Condition .9 = $5,382
8)Location .8 = $4,305
9)Add $600 for dead tree removal = $4,905

Specifically, my question relates to the $900 replacement cost, the $27 basic price per sq in of a replacement tree, and whether the calculation should add an amount for installing a new tree (or does the $900 include this). Are these figures/methodologies reasonable?

My goal is to replace the 45' dead tree with a 30' replacement Blue Spruce, and I'm told that $4,905 won't be enough.

Reply to post by Doug Rayvid, on October 01, 2001 at 16:55:52:

A 30 ft spruce would need to be frost balled and crane planted to get a good enough ball on it. You are looking at $7000-9000 in MKE WI.

With any tree this size, you will be getting a major maintinace cost along with it. Regular waterings and root stimulants. Repair of the yard after the instalation equipment leaves.

I would recomend going with a smaller plant, maybe several if they can be fit into the property, it would be easier on you and you could cull the less desireable plants as time goes by.

Reply to post by JPS, on October 01, 2001 at 16:55:52:

Thanks JPS for your input. Still looking to see whether anyone out there can help me get a sense check on the "trunk formula" appraisal I set forth on my original note.

Reply to post by Doug Rayvid, on October 01, 2001 at 18:58:55:

I'm sure Scott or Russ will weigh in on this sometime soon. If you look at the lag in some of these posts you will see that it takes some time. It will be worth the wait.

Reply to post by Doug Rayvid, on October 01, 2001 at 16:55:52:

The numbers are generally in the right ballpark, but may be out of date and arguable.

The Trunk Formula that was applied was the Eighth Edition- the current is the Ninth Edition of the Guide for Plant Appraisal. The Species rating for Picea pungens in New Jersey is 80% - 100%; they took the middle of the range, which is fair enough.

Replacemnt Cost was listed as $900 in 1994 in the Species rating Guide for Trees in New Jersey, 10/1993. I do not have a more recently published number. The size of the largest transplantable tree is 4". The 1994 Basic Price was $25; They used $27, but I don't have a more recent number.

The Location rating sounds fair for a residential area with good homes. Could arguably be rated higher, perhaps. The Condition rating is, of course, something the appraiser has to determine based on observation of the tree. Form and shape, growth rates, insect or disease problems, all go into this rating. The number assigned, again, sounds fair.

So it looks like their appraiser applied the formula in a cookbook fashion, taking old published numbers and plugging them into the old formula. The right ballpark, but maybe a foul ball, not a homer.

A note about the Ninth Edition- a few changes were made, and the values are generally a little less with the same numbers (your tree works out to $4370).

The question is whether the Trunk formula is the best method for this situation, and if so, are the right numbers being used. Is a direct weighted replacemnt cost more appropriate?

I suggest you have a consulting arborist help you with this. The American Society of Consulting Arborists can recommend highly qualified arborists and consultants in your area. Their web site and database is at

http://www.asca-consultants.org

or contact the main office at

American Society of Consulting Arborists
15245 Shady Grove Road
Suite 130
Rockville, MD 20850
(301) 947-0483

Reply to post by Russ Carlson, on October 01, 2001 at 16:55:52:

Russ has pretty much covered the technical review of your appraisal. I'd add three things.

1) NJ is a diverse state... in terms of development patterns, demographics, property values and landscape costs. (Remember that Trunk Formula is a depreciated replacement cost approach to value). $25 might be a measure of central tendancy state wide, but my experience in the Northern NY suburbs over the last 5 years os so has been that installed unit costs fall in a much higher range, say $70-90. If TFM is the method of choice you might want to actually price out 4" trees from three sources and calculate a unit cost for your area.

2) A possible problem with TFM is that conifers are frequently sold on a height rather than caliper (diameter) basis. That could distort things a little,

3) The biggest issue is that TFM is a surrogate for actual replacment cost data. As such it should result in costs, which when extrapolated to larger sizes fairly match the actual data. It sounds like the TFM curve you were presented with falls well below the actual curve... at least at the size for acrtual replacement you were quoted.

It really comes down to common sense. If the tree you lost was x size, a new tree of x size would make you whole. If you get a tree of 0.5x size you are only 0.5x whole. If you have an actual replacment cost of y for 0.5x size, does it make much sense that a TFM cost of 0.5y makes you whole? Even applying the Species, Condition and Location depreciation ratings (which Russ indicates conform to the NJ consensus) the TFM cost seems low. In general, IMO, TFM results are inferior to supportable actual replacment results.

An entirely separate issue is what statute, regulation or case law allow in NJ.

Reply to post by Scott Cullen, on October 03, 2001 at 00:04:47:

I forgot to add that Russ has graciously linked my article "Tree Appraisal: What is the Trunk Formula Method?" here on Knothle. Look for the link at the top of the Valuation page. You may find it helpful.