Scott,

You have stated,

"My own current understanding (given all the assumptions in my earlier response) is that 'present worth' is a mathematical expression, the sum of values in future periods, each discounted to the date of analysis ('present') to reflect the time value of money.".

Unfortunately, this definition is still circular recursive. You have defined "present worth" as a function of value while previously defining value as a function of "present worth".

You have also stated,

"I suspect your real concern is with equivalence and how it is estimated. You've suggested that these approaches are merely "instrumental preference ranking" and are flawed. I've suggested that the wider range of values you seem to be advocating are merely a wider range of preferences, perhaps re-ranked.

If that is the case, your mission - you seem to have accepted it - is to have society accept different preferences. If on the other hand your objection is more fundamentally that monetary equivalence is flawed or impossible your mission is much more difficult...to have societies abandon an economic or monetary decision making model.

In the mean time appraisal attempts to serve the current societal need for monetary equivalents as a guide to decision making."

Congratulations, you nearly snatched the grain of rice from the palm of my hand. While all economic valuations are indeed "instrumental preference rankings" they are not inherently flawed as a result. Markets do indeed function at certain levels to determine societal preference rankings = instrumental value. However, as is well documented in the natural resource economics field, market value is not always accurate. All beneficiaries are not represented and all externalities are not internalized. The Trunk Formula Method is flawed on this level, not because it is a monetary equivalent, but because it attempts to project a theoretical market value for a non-market entity. This can be done, as in the case of pollution credits, transferable development rights, or wetland banking, but it requires some type of regulatory structure. Not simply the opinion of a horticultural specialist.

As per your second suspicion - that I also question the appropriateness of a monetary decision model (instrumental valuation) to biotic life forms - you are correct. The argument is based upon a logical model of intrinsic value. However, I suspect this forum would not react favorably to a discussion of this topic, despite the fact that it lies at the core of the whole question of value and trees.

A final consideration; tree valuation, as currently practiced, does not serve a "societal need". It merely meets a demand for a service. The demand for that service and "societal needs" are not necessarily equivalent. To provide two extreme examples; there is a demand for child pornography and in Nazi Germany there was a demand for gas in concentration camps. Companies have met both these demands. Did they serve a "societal need"?

Bob, are your students writing this down?

Reply to post by Kevin-H, on March 31, 1999 at 23:12:06:

Not wanting to seem unkind, but, I'm not so sure Bob's students would want to write it down!.

"The Trunk Formula Method is flawed on this level, not because it is a monetary equivalent, but because it attempts to project a theoretical market value for a non-market entity. This can be done, as in the case of pollution credits, transferable development rights, or wetland banking, but it requires some type of regulatory structure. Not simply the opinion of a horticultural specialist."

I can't help but agree to some extent with you. On the other hand, even if it's a stick with a stone attached, you need to go with the tools that you have, they are a step above nothing. Julian has expressed sincere interest in the need for a credible quanitification of biotic value, and a way to translate that to monetary value. Let's all work on ways to do that, bearing the KISS principle in mind (Keep It Simple Somehow).

As for: "A final consideration; tree valuation, as currently practiced, does not serve a "societal need"."

I can't disagree more! Society is only just beginning to appreciate it's need for trees, and forest cover. In biological terms, people need trees to survive. Human habitat has consistently gravitated to a forest canopy as a means of shelter. Add to shelter an integrated food chain, and all the stuff of life that goes with it, and one can view trees for not only biological contribution, but societal as well.

Today, the task at hand is to integrate that human need into terms (language) that modern society can handle. One way of translating the need for humans to have trees around is to translate that value to society into terms of cash. Granted, it's crude. But it is effective.

Best regards,
KWK

Reply to post by Kevin-H, on March 31, 1999 at 23:12:06:

Kevin,

RE: PRESENT WORTH AND VALUE. Webster, 1982. New World Dictionary, 2nd. Function (math.) = "a quantity whose value dpends on that of another quantity or quantities." Yes PW is a function of value; the discounting of benefits anticipated over future periods to the date of analysis. We started this discussion some months ago with the proposition that "the PW of fututre benefits" is the quantity that appraisal attempts to identify, i,e. appraised value. Value is not a function of PW, except in the abstract, computational sense that it is the inverse...run the equation(s) the other way and you'll get back where you started. Value is a function of benefits. That is the essence of the definition. The PW portion serves to demonstrate or define a) the time value of money and b) that value comes from anticipated, future benefits...the past is gone.

Benefits may come from function (not the math. definintion this time, but "the normal or characteristic action of anything"), utility, existence. We may quantify these benefits in various ways. We may estimate or indicate the value of these benefits in various ways. Probably all imperfect ways.

RE: VALUE & BENEFICIARIES. At the heart of good appraisal practice is a definition of the appraisal problem which includes a (relatively) precise definition of a) the specific beneficiary or beneficiaries and b) the specific type of value and benefits being considered. If the result of any appraisal is represented to be or misconstrued to be a "true value" applicable to all beneficiaries and all possible benefits it will be flawed from one perspective or another.

RE: MARKET VALUE. Yes indeed, market values can be inaccurate. Most particularly if they are ascribed to non-market goods. TFM is not by definition a market approach to value (click on the TFM reprint in Russ's header above). It is a cost approach to value. In its essence a cost approach assumes that benefits are whatever they are, they are inherent in an appraised object. In this sense you might say the benefits are intrinsic. The value of these benefits, whatever that might be if we attempted to estimate them by a benefits approach, can be replaced or restored by replacing the object. So we estimate the costs of that replacement. Yes, the costs are market derived and may vary from time to time, provider to provider. But the replacement of benefits should be as nearly as possible, constant. The assumption is that the appraised value which results will in fact replace benefits and will in fact be used for replacement not put into the stock market. If we took a benefits approach we might find that the replacement cost is less that the value of benefits. If actual replacement is made we don't care. If replacement is not made or underperforms, then the valuation is low.

DEPRECIATION in TFM may attempt to relate cost to market (through the location factor). This may be appropriate if the definition of value is market value. It may be inappropriate if the definition of value is replacement cost. CTLA practitioners may indeed be unclear on this distinction. If the real goal is an estimate of market value, TFM may not be the best tool.

RE: NATURAL RESOURCE ECONOMICS. I think we've explored this before. If the goal of analysis is to understand broad scope issues...on a regional, contiental or global scale... and set poilicy or make decisions on that scale, then both the analytical tools and the assupmptions will be different from those used on an individual tree or individual property basis to guide individual decision makers in transactional rather than policy settings.

RE: INSTRUMENTAL vs INTRINSIC VALUE. I'm not sure that the participants here are unwilling to discusss or explore these issues. I think the issue (as introduced in the preceding paragraph) is whether broad scope, environmental philosophy and policy theories belong here in a small scale appraisal topic or in another - equally meritorious - one.

RE: SOCIETAL NEEDS. Again the scale issue comes into play. Appraisal serves the needs of certain segments of society - indeed expressed as a demand for service - which fall well within the current ethical/legal/moral norms. Child pornography and genocide are abhorent and by virtually universal norms unacceptable and undefesible. They hardly equate to performing individual tree appraisals which may not conform to an emerging, broad scope environmental ethic, even if that ethic is sound and well reasoned.

Reply to post by Kevin-H, on March 31, 1999 at 23:12:06:

Boy, I hope not Kevin!!!!!

If they do I'll have to try to explain it to them.

Bob

Reply to post by Kerry, on March 31, 1999 at 23:12:06:

KWK,

I agree with you! There is a definite need for society at large to begin to understand the value of forest cover! Modern society has created a false dichotomy between our species and the rest of the biosphere. Our relationship to vegetative systems is an integral component in how we define ourselves as a species. In addition, research has clearly demonstrated the correlation between our individual psychological well being and exposure to vegetation.

Translating this value into a monetary equivalent is a powerful tool for swaying opinion. This is a form of "survival environmentalism" - "look what trees do for us, they provide x amount of services that would cost us 100x to replace with an engineered solution! We need to protect them!"

Unfortunately, the perpetuation of neo-classical landscapes (turf & trees) is counter productive from both an ecological perspective and a tree health perspective. As arborists if we perpetuate this type of non-sustainable, energy intensive aesthetic by providing support services, we are ultimately damaging the very resource we wish to protect. Please note; this is NOT an indictment of all arboricultural procedures. There are valid reasons to intervene in biotic systems.

One of the reasons I contest the Trunk Formula method is the inherent bias towards these types of landscapes and the assumption that tree value is partly a function of the location of a plant in one of these ecological disasters. As a basic example; my property contains primarily naturally revegetating species which, from a "proper" horticultural standpoint have little landscape value,- things like black locust and mulberry. I place great value on the ecological benefits associated with these species, from cavity nest sites to wildlife food production. These early successional species are already laying the foundation for future ecological succession and enrichment of my property. However, if I receive a "tree valuation" from my local tree "expert" he /she will invariably place a higher value on a cutleaf Japanese maple than on a large mulberry. Incidentally, when I moved in I quickly terminated the existence of that high - maintenance, non-native, "centerpiece" weed.

From a pragmatic standpoint, I recognize the value of survival environmentalism in changing the direction of our society. If we need to place a value on trees lets look to ecosystem-type approaches or replacement value or perhaps legislation. Using a formula that is inherently biased towards "aesthetic" value is ultimately counter-productive to the resource itself. Contrary to some of the opinions expressed on the list, whenever you produce a valuation report based upon this formula you are acting as a de-facto advocate for these inherent assumptions.

Reply to post by Scott, on March 31, 1999 at 23:12:06:

Wow! Did you really compose this before 8 AM? Good points. My response however, will need to wait until my blood sugar levels return to normal (and after I get some real work done)!

Reply to post by Kevin - H, on April 01, 1999 at 00:55:29:

Wellllllll,

I don't think we're quite on the same track. I have a little bit of trouble with the notion of going all the way back - to nature, as you seem to suggest. We really do need to consider human needs on a residential home site as our primary interest in the site.

I think if one limits the site to natives, the utility, aesthetic value, and survivability of the plants go way down. My intent in this discussion certainly is not to limit quantifiable functions of the trees, but to expand them. If we take as narrow a view as you appear to have expressed, we won't get very far.

Certainly we must look at tree appraisal from the perspective of multiple and diverse sites. We should be looking at the ecology on the site. I sure don't think the ecology of the site is limited to wildlife. What kinds of plants can grow there and interact in a beneficial way. What's the soil ecology like? Do we have incompatible species - plant/microbe/animal trying to coexist on the site. What groups are we going to select for?

I must say, with my experience with black locust and mulberry, it may be that the wrong weeds were removed at your house. When we consider the vegetation on a site for function - all desired functions, the use of the site (an ecology that includes the needs of humans), and species compatibility; then maybe we are getting somewhere.

Best regards,
KWK

Reply to post by Kerry, on March 31, 1999 at 23:12:06:

Kevin & Kerry,

There are a number of interesting issues touched on in your posts that might be clarified as follows.

BENEFITS & BENEFICIARIES. It is not very meaningful to either attack or embrace particular estimates or opinions of value or methodologies without some specification. E.G. if the analysis is to consider ecological function (carbon sequestration, particulate interception, erosion control, whatever) particularly to many rather that single beneficiaries, then a large mulberry will likely be more valuable than a small Acer palmatun dissectum - all other things being equal. But if the analysis is to consider landscape function, particularly for a specific beneficiary then reverese is more likely.

ARBITRARY VS OBJECTIVE VS SUBJECTIVE. These are not necessarily easy concepts in any arena and they are more difficult in valuation. If we understand monetary value (the goal of appraisal analysis) to be a human perception, then - as Julian and others have pointed out - it is Subjective with regard to the beneficiary. Appraisal should, to the extent possible, be an Objective exercise, i.e.: it should be based on facts and avoid Subjectivity with regard to the analyst. We must recognize that the perceptions and opinions of beneficiaries are among the facts to be considered. Social scientists - economists, sociologists, historians, etc. - are accustomed to this. Physical scientists - chemists, physicists, engineers, etc. - are less comfortable with it. Plants people - arborists, foresters, horticulturists, etc. - tend to be trained in the physical sciences. Based on this training and to avoid charges of subjectivity there is a tendancy - seen in many of the CTLA exercises - to make the plant appraisal process "Objective." The fact remains that value is not a physical property and cannot be directly measured. Many of these so called Objective inputs to the analysis are in fact merely Arbitrary. For the horticulturist to say either that black locust is a weed or that cutleaf maple is a gem, without reference to the facts of the case is Arbitrary. For the ecologist to say that "neo-classical suburban landscapes" are dysfunctional and ecologically unsound without reference to the facts of their desired function, performance and place within larger ecosytems is Arbitrary. Indeed, I understand Ecology to be the study of the interaction of organisms with their environment and that the human organism is an element which cannot be ignored and which perhaps should not always be subordinated.

The CTLA methods have long struggled with concepts like the Species factor - what's a weed and what's not - and seem to be headed in the 9th Edition to have given up trying to make it work by abandoning it. The struggle may well have been becasue it tried to impose Arbitrary ratings or ratings ranges in the guise of Objectivity. The weakness, in my opinion, was the failure to address the concepts of Benefits, Beneficiares, Function and so forth. Eliminating the Species factor will not necessarily improve analyses if the basics are still ignored in an effort to KISS. (Not particularly intended to play off your use of the term here Kerry..... it's a long standing issue).

These analytical considerations are of course framed by the broader ones of scope, policy, concensus and so forth.

Reply to post by Scott, on April 01, 1999 at 00:55:29:

Hi Scott,

A couple of things:

I question the notion that species ratings should be realitive to the facts of a given case. I think that would be evidence of arbitrary, even capricious decision making. Ultimately, (we're not there yet) the ideal species profile will include data on ecological interactions, broken down by a widely varied series of growing conditions. We will also have good information related to what species are compatible with what kinds of uses (other than landscape & ornamental function, but including them).

The latest word I recieved from the CTLA (Mar. 1, 1999) indicates that the council has reinstated the species rating for the 9th Ed. Clearly to me, the idea of letting a wildly fluctuating market price serve as a surrogate for plantsmen's opinions would not work. You think the species rating system is arbitrary?! Wait until the latest trendy recommendations start creating market fluctuations in supply and demand. Think about adverse weather conditions creating huge shortages in high demand species. Whooooh, that would be arbitrary.

I guess maybe I don't get quite into the detail that others appear to, but my recommendations for species rating are far from arbitrary. My rating checklist includes 102 considerations for rating a species. I would also argue that my recommendations are objective, but must concede that the perspective of my objectivity is biased from a tree maintenance angle. Unlike L.A.'s and designers, a maintenance guy has to deal with the consequences of poor decision making.

All of us need to become more aware of the consequences of common maintenance and construction practices on a simple modern landscape design. Bear with me Kevin; say we take just the mess of an ecology that exists in a manmade deal. Most modern cultural and chemical practices enhance the hostility of that environment for all the life there. What's wrong with that picture? Aside from appearing to be a completely different subject from this thread, it's just the tip of the iceberg of the reasons we don't have a good handle on how trees and people interact with their respective and shared environments.

There are a whole bunch of things we don't have our arms around, I'll grant ya both that, but I'm reluctant to throw the baby out with the bath water. In the interim, let's keep thinking and studying ways to add depth to the tools we have in place. While we're at it, let's keep the common arborist prominantly in mind, with the idea of bringing them into a better understanding of any progress that is achieved.

Best regards,
KWK

Reply to post by Kerry, on April 03, 1999 at 10:02:37:

Kerry,

Glad to hear CTLA may be backing away from scrapping the Species rating. I think, and voiced that opinion on the draft, that it would have been a mistake. Glad also to hear of a rational process in assigning the rating rather than picking from a regional list.

I think the biggest problem in abandoning the species rating would have been that prices for wholesale stock may vary not at all with species or may vary widely based on supply and demand and neither has much to do with long term performance. It has to do with production costs.

I do think Species may often be an over-emphasized factor and that 100% species factors are often warranted. Incidentally, dropping the rating would have had the same effect, but would have made it arbitrary across the board, not a function of appraiser judgment. There was a thread on this a while back.

Maintenance burden may or may not reflect a reduction in value. From a cost approach it might just as easily be characterized as an additive to value...part of the cost of producing the benefits. At worst it's a wash. An indication that the tree provides enough enjoyment or other benefit to justify the burden. From a benefits approach, maintenance burden - in the form of expenses - would be a deduction from benefits. But we don't know that net benefits (total benefits less expenses) would be less than production cost unless we do a complete benefits analysis. We're not there yet.

As you say, we are presented with the picture which exists. If the landscape is a tough environment and the species present require a lot of care that may affect the life of the plants and the expense of the benefits. But the beneficiaries may enjoy those benefits over whatever the life may be and value them. If we can replace them (TFM fo example) then the life in that environment is what it is. Should we depreciate replacement cost for an ideal environment or the case in point?

Scott

Reply to post by Scott, on April 03, 1999 at 15:58:44:

Oh, I think we need to look at the environment that we're replacing the plant in. Certainly we need to depreciate location and condition based on the replacement site, but I'm not convinced we should adjust the species rating based on a case's peculiarities. Now, one thing we could look at is a scale of suitability for a given site environment and series of uses. For instance, Kevin's Black Locusts may well be ideally suited for a livestock shelter in a droughty region. Maybe, given that circumstance, the growing conditions there etc. would be conducive to a higher rating than would be considered for a residential site.

One thing that contemplating revisions to the guide did for me, was to enhance my understanding of how species issues are considered by the location and condition ratings. I currently use the contribution rating under location to adjust for the variables mentioned above. In my mind, a portion of a third of a third of a percentage can more accurately reflect the real differences in functionality of a given species. One can be prone to fluctuate the value of the casualty plant by 20-40 percent otherwise, which might be a bit much.

Black Locust and Siberian Elm are great examples of trees that could offer a good deal of controversy for our discussion. On one hand, in urban areas here in the Inland Pacific Northwest, where irrigation is present, these trees quickly become weeds. On the other hand, in drier areas, where irrigation is not readily available, these species are sometimes the only things that can survive and begin to build groves.

I still think regional lists are valuable, but one of the things that came to the fore during contemplation of guide revisions was the need for much more localized consensus. In the PNW for instance, a wildly variant series of growing conditions exists (AK, B.C., WA, OR, ID). There is a big difference between coastal growing conditions and inland. Southern Oregon and Idaho experience much differnt climates than Northern British Columbia and Alaska, for that matter, there are huge differences between SE Alaska and parts north of there.

The Western Chapter has 6 or 8 different regions within the chapter (NV & CA). In short, I was impressed with the need for consensus in like climates. I think there is some credibility added to consensus development. It's pretty easy to pick good judgement that stands alone - apart.

Just some thoughts on a stormy Saturday.

Best regards,
KWK

Reply to post by Kerry, on April 03, 1999 at 16:49:18:

RE: SPECIES. The problem with concensus lists is that they can be poor substitutes for informed judgment. Your example of regional lists failing to account for sub-regions is a good one. Many of the regions have given ranges which allow for that judgment (by individuals or sub-regional groups). Louisiana came up with a fixed, "this is it to the nearest .01%, no judgment allowed" list based on concensus on "objective" criteria.

I think that a distinction must be made between objectively ratable species performance for ornamental or ecological or management function and species depreciation in appraisal. The starting point in TFM is Replacement Cost. The assumption is that the benefits inherent in the appraised plant can be replaced by the cost of the hypothetical replacement plant. If appraised tree of a given species can be replaced for X, why should the replacement tree of the same species be worth
A property has an "attractive" landscape: it has curb appeal, the brokers say it will sell; the owner tells you they love it, each tree is cherished; it has won several neighborhood beautification awards. All the trees are black locust. The landscape architect, by the way, loves the fact that turf thrives in the only lightly filtered sunlight. And they are N fixing so the turf does not rob nutrients from them. Assume they have at least 50 years remaining SULE and will be naturally regenerating through that period without inordinate maintenance burden. A vandal comes along and girdles all the trees... total loss. It will cost the same (hypothetically by TFM) to replace these trees as any others - say whatever you consider high species rated. Why should these trees be highly depreciated for species?

Say a property has a mixture of native species. A neighbor strays over a boundary and cuts down a 70 year old black birch. It has been well maintained and is in quite good condition at the moment. This species has a relatively short SULE, say 85 years, however. So this tree is quite likely to go into decline. Is full replacement cost (TFM) appropriate if the replacement would have a quite limited SULE as of the date of appraisal? Probably not. The appraiser could reflect species determined life expectancy in the species factor or alternatively in the condition factor (but not both, at least not at the same rate; and life expectancy was eliminated from the condition checklist somewhere around the 6th or 7th Edition).

In either situation, appraiser judgment based on case facts is involved. So the species factor remains an important element of the analysis, but keeping it in the model should not be confused with requiring that species depreciation must always be made (i.e. that the species factor must always be <100%).

Happy Easter

Reply to post by Scott, on April 03, 1999 at 20:29:31:

It wouldn't make sense, in my mind, to eliminate the species rating (100%). On one hand, a regional meeting serves as a tool to help get tree appraisers on the same page. On another hand, we must recognize that the market and good judgement seperate groups of tree species on a basis of realitive value. We would certainly want to base out trunk formula base values on high value, commonly available plants. If that patented variety of Norway Maple is running generally $275.00 for a 4" B&B, it doesn't make sense to use that figure for calculation of a Lombardi Poplar which sells for $70.00.

Hey, leave some of the Easter Eggs for the kids,
Best regards,
KWK

Reply to post by Kerry, on April 04, 1999 at 08:53:37:

I agree. Replacement Cost (in RCM or TFM) should be based on the cost for the appraised species whenever available. There are a number of issues from that point forward in the analysis.

1. Sometimes wholesale nursery costs do not vary much if at all among many species and that's why it's important to retain the species factor.

2. Sometimes low rated species - indiginous material like non-hybrid Acer rubrum, wild or black cherry, black locust - are not available as nursery stock at all. So it may be appropriate to use a wholesale cost for a high value species and use the species factor to adjust that cost downward.

3. Even if there is a wholesale cost difference by species, the installation cost is not likely to vary by species, particularly as you move to large sizs in TFM. This is one element where the typical 2-3X markup is not species sensitive. If that's how work is actually priced then the result should be pretty representative, pre-depreciation. Species factors however may penalize the non-variable installation cost along with the plant material. Another reason that high, even 100%, species factors can be justified.

4. I'm not so sure appraisers should all, always be on the same page about species ratings in the abstract. That encourages comfortably picking from a list. Appraisers need to get on the same page about methodology which is sensitive to the facts of cases, about what the cost approach represents and when and why the initial indication of value is depreciated.

Reply to post by Kerry, on April 04, 1999 at 08:53:37:

Hey, Kerry, the rest of those guys must still be out hunting for Easter eggs.

Reply to post by Scott, on April 04, 1999 at 13:27:37:

Just recovering from a chocolate overdose....

I've continued this thread under a new subject-
See Species Rating continued 4/5/99