I have been given the task of appraising trees located in a soon to be ROW. There are 73 trees in this swath comprised of various species. The State has made an offer based upon the total value of the property, multiplying this value by 15% (value of all the woodlands) and assigning this piece to be taken as 25% of that total or $22,000. Because this is an arboretum (trees are tagged, mapped, well maintained and used by the public) their value should be somewhat greater than the 15% value assigned by the State. Any comments on this?

Reply to post by Terry Flatley, on March 27, 2000 at 21:10:01:

The State seems to have taken a typical "fair market value" approach and perhaps generously in their eyes offered to pay twice for the 15% contribution of the trees to that FMV.

That may, by the way be better than what is supported by law in your jurisdiction, but you should research that.

Another approach is "replacement cost," whether by trunk formula, cost of cure or direct replacement with large trees. Fairly standard.

Finally is an "income" or "benefits" approach. What do these trees really do for the public? Are they simply nice trees in a maintained setting and tags? OK, maybe add the price of the tags to other estimates... and maybe some unamortized planning and set up costs. Or are they truly significant (rare, large size, etc.) specimens that have educational or cultural value in excess of common specimens.

Any of the approaches come back to answering the question: what are the damages... what will the users be deprived of? If the FMV + 15% premium cannot buy and set up a similar piece with similar benefits to the users it is inadequate compensation.

Reply to post by Scott Cullen, on March 27, 2000 at 21:10:01:

State says entire property worth is $585,500. Landscaping contribution to that is 15% or $87,825. 25% of the landscaping is to be acquired (damages). Contributory value of acquired landscaping is $22,000. Additional items (land, fencing) brings total to $37,900. There are some very nice specimens but nothing too unusual or rare, e.g. European Larch, Ginkgo and some 30 foot Junipers. The public comes to view and see what these species look like in the natural setting similar to any arboretum. This area is part of the larger arboretum of about five acres. Not sure what you meant by "...pay twice for the 15% contribution of the trees to the FMV".


It seems that we should be using values for trees that are being moved from larger and larger size classes as their seems to be market values for these as such big tree moves become more common, no? (this is a side issue really).

Beyond the area of acquisition there are no other trees of similar species. So even though the trees are not unusually rare, upon removal, there won't be others to view like them in the arboretum.

I liked your last statement.

Reply to post by Terry Flatley, on March 28, 2000 at 06:50:29:

RE: 15% x 2. I had assumed state was acquiring part of the land. Typically in eminent domain the owner must be paid FMV for the land (per acre or per sq.ft of $585k). The 15% landscape contribution is part of that. So if they pay the pro rata part of FMV + the 15% that applies to the 25% taken they are really paying the 15% twice. If however they are not paying for the land (already own it, only getting easement, whatever) then they might just be offering the landscape portion.

The 15% contribution probably comes from the handful of studies that have been done on single familiy residential properties. If this is a special purpose (arboretum) property trees may be essential to use and contribute more. They key would be the loss in value on the remainder... how much less functional is it? One way to measure that is asking what would it cost to put the lost species back into the remaing acreage.

So if that can actually be done with large trees that's an approach. Technically, moving large trees should be no different that Trunk Formula... come up with a cost figure and apply depreciation. The only things that differ are a) the source of cost data and b) inclusion of ancillary costs. The "market" figure you describe is actually not a "market price" in the appraisal... you can't buy that tree off the lot and enjoy it the way you could move right into a new house or drive home a new car. It is actually an experience based Replacement Cost for producing a cure or replacement in place... it requires time, materials, labor, equipment, expertise, transport, aftercare, site work, overhead and profit all coordinated and assembled specifically for the one project.

The "fact" that it can be done physically and that there are experience based costs (rather than formula based extrapolations) does not in and of itself make it "value." The same Species, Condition and Location depreciation factors must apply. The "fact" that a site might not accomodate the actual accomplishment of the work (no room to dig, access impossible, whatever) on the other hand does not mean the experienced based cost do not indicate value. Same depreciation factors apply and it's the resulting value or benefit lost that's the key.

Reply to post by Terry Flatley, on March 28, 2000 at 06:50:29:

Here's a question based on your statement that beyond the area of aquisition, there are no other trees of these species in the Arboretum. To me the first thing that comes to mind is "Collection damage" but that is a museum concept. Is there any standing for saying that the removal of a certain group of trees degrades a botanical collection by X % and then figuring valuation as a percentage of the whole?

Placing collection value is something we do all of the time, and make decisions based on those considerations, but does it have any validity outside of the museum community?

Wayne

Reply to post by Wayne, on March 28, 2000 at 21:32:35:

Collection Value is one alternate method of assigning value. Does it have relevance outside? I think it does. It relates the relative set of benefits to the owners and users. It surely is not the only way to assign the value to the collection or parts of it, but it may actually be more relevant than, say, TFM or Replacement Cost on an individual basis.

Reply to post by Russ Carlson, on March 30, 2000 at 17:46:08:

I think Wayne and Russ are both right, but it's time to sharpen terms again.

"Collection Value" is a DEFINITION OF VALUE. It differs significantly from "market value" (i.e. the contribution of the trees as ordinary landscape plants to the market value of typical residential property). It is indeed a contribution (or loss) of benefits to the "use value" of the arboretum as an institution.

The definition of value is the key, threshold determination in approaching the appraisal problem. Once defined the apprasier has to decide HOW to estimate or indicate value.

TFM or RCM are METHODS, both within the Replacement Cost APPROACH. If the arboretum has available land remaining and the specimens can be re-inserted into the collection then Collection Value is recovered (and there might be some miscellaneous interim loss of use or extra expense). If, however the specimen is rare and cannot be replaced in kind or quality or the space does not exist a replacement cost approach using an ordinary plant may understate value when considering the loss in benefits to the collection.

We have the least developed tools when it comes to benefits approaches. Will the collection loss reduce gate receipts or grant income? Will there be an invaluable loss in world species diversity? Will there be a loss in institution prestiege? The appraiser would somehow have to estimate such losses and present them as an estimate of damages. Or some assumptions would have to be made about making additions to the TFM or RCM estimates which understate value.

Some of the understatement might be made up in using less depreciation (higher species and location factors) as compared to ordinary landscape plants, but once you get to 100% replacement these methods have no provision for adding more value.

The point is the proper comparison is that one DEFINITION of VALUE might be more relevant than another. Or one METHOD may be more applicable than another. But it's apples and oranges to say that one DEFINITION is more or less relevant than one (or more) METHOD or APPROACH.

Reply to post by Terry Flatley, on March 27, 2000 at 21:10:01:

Didn't the Morton Arboretum in Lisle, IL go through this same deal a few years ago? I think they ended up with a brand new research facility, compliments of the state. You might check with Gary Watson or someone there as to how they settled this.

Reply to post by Scott Cullen, on March 30, 2000 at 21:20:22:

Location factor is another tricky call in this situation. Because of the rural character of the site and surrounding lands (agriculture, park and university lands) it is difficult to assign 100%. The nearby highway (less than 100 feet away) makes the trees valuable in this space more than the trees in the next 100 feet. However, the maximum location factor I might use may be only 70%. While the trees have the maximum/optimum space for growth, it's an arboretum, they block the view of the highway from the rest of the property, they are still more wild than my tree in the front yard and more numerous. It's a very interesting case and I will keep you posted as things develop further.

Reply to post by Terry Flatley, on March 31, 2000 at 06:41:11:

I think Location (in fact all three factors) may be somewhat misunderstood.

They should be understood as 'depreciation.' In appraisal terms (different from accounting terms) that means a deduction in the initial indication of value (most typically by a replacement cost approach, TFM, RCM, CoC) to reflect actual benefits which may be overstated in the initial indication.

It is not a deduction that comes from an arbitrary or standard list... say the Guide or an ISA Chapter. This is the tricky part... if it's too intuitive it can be characterized as "subjective." That's why the pick lists have appeal, they can be characterized as "objective." But they are merely arbitrary if unsupported by facts or in conflict with facts. If your case is strong that the loss in benefits or use or "collection value" is high and that excess deductions for "rural" location will result in understaing value then you may objectively be able to say that Location is 100%. Even at 100% you may find that a replacement approach understates "collection vlaue."

The key is facts. Usage rates for the arboretum. Impact on use from loss. Alternatives for replacing lost benefits (maybe drive 100 miles to see a specimen similar to what was lost???).

Value in a case like this comes from use. If it takes 100% ratings to replace lost use(fulness) then there's a case for 100%. A more urban arboretum might have higher use and higher benefits... but the same replacment cost might replace lost use there too. In that case there is a spread between the benefits and the cure... an efficiency if you want... the cost of the benefits is less than the benefits themselves. A rural arboretum might be less efficent in replacement... the spread between cost and benefits might be less, but if 100% replacement cost does replace the benefits and does not overstate value or benefits then it's supportable. The rural arboretum should not get a lower Location rating than the 100% urban one just because of relative locations. It's about the relationship between the actual benefits and the actual replacment.