Appraisers' Free Forum

Situation

A prairie where most of the land has been converted first to pasture and croplands, and now is being developed into smaller and smaller tracts, an airport, etc.

About 20 years ago someone decried the loss of true prairie habitat and pushed to preserve the remaining acreage that has native unplowed prairie grass. A 20 acre tract (the Stump prairie) has given an easement. Another 60 or so comprised tract 2 - purchased outright by the state heritage commission. The only other more or less original tract (excepting part of the airport which still has a small buffalo wallow on it.) is about 20 acres and has been used for hay for generations.

Now the owner, in his 80's, is hoping to parlay the 20 acres into some cash and since it joins the 60 ac. parcel (the Chesney Prairie), in my opinion, the HBU is for its natural preservation...but..intuitively, the maximally productive use is to develop into small residential tracts....ok.

How do you make the case that the public good outweighs private gain in a HBU analysis...and, intuitively, no one expects the tract to sell for less than what it would if a developer attempted to buy it.

What would you do to explain HBU?

I've been wondering the same thing for the last five years. I never did ask the question as well as you did, though.

I think the answer requires a better definition of HBU. "Maximally productive of what?" would be a good place to start.

Then we can deal with financial feasibility once we know what the land is supposed to produce.

As it is now worded, I think the writers meant maximum money returned to the owner. (The "last screaming nickel" theory I posted on AF.) Pina Colada may have some views on this.

Sounds like a conservation easement discusiion. Is there a trust around that will buy the development rights, thereby equating the two values in terms of $$? Those things are tax nightmares, but if there is enough value involved and a trust to buy it, they can be a pretty godd solution to the kind of debacle of which you speak. I guess the answer is maximum productive is measured in $ value to the owner or prospective owner.

Quite a few cattle ranches in the mountains are staying afloat by selling these development rights and it is having the effect of preserving some significant open space among the condominimums. Colorado has state tax system that allows the owner of tax credits who doesn't need them, such as a rancher, to sell them to a person who needs tax credits, such as an NFL football star. Would that work for you?

How do you make the case that the public good outweighs private gain in a HBU analysis

You can't. Social value is not market value.

You can't. Social value is not market value.

This came up before where 2 CG's valued a high school building in a small town. The building was being replaced but the site and building was convenient to the town and the town wished to buy it. One CG was on the state board. There was about 50% difference in the value. According to the paper board member argued that her higher value reflected a market value which related to the higher value for its social value. That is, a public building was more valuable than if it fell into private hands.

But at sometime you have to consider that the needs of society should outweigh the needs of private interests. In my mind, the appraisal of the property at a HBU as subdivision does not reflect what is likely to happen to the property..i.e.- is it feasible when the seller is not going to allow it? On the other hand, you have to leave the area to find any such prairie property which has sold, so appraising it as conservation land would reflect values that have no relationship to the neighborhood influences.

Further, as time goes along and the rarity of the prairie is recognized, its value to society may well exceed any alternative use it could be put to (such as that subdivision.) But like the library or Museum, putting a "market value" on it is difficult indeed. Also, obviously, one cannot mere alter the value definition because the state agency buying the property has explicit instructions to appraise the 'market value'.

It seems you are saying its HBU is NOT to preserve it and you value it at a HBU which will not be possible....which conflicts with the very definition of HBU.

Terrel,

I have to agree with the pineapple. Social value, as you recognize, is difficult, if not impossible to measure in $$, mostly because nobody ever bought one. I guess you can try and add up all of the costs that will be incurred if we turn the entired country into an ant hill. Your conlusion, however, will be very speculative. For that reason there are ways to measure development value-what some one would pay the owner to develop the land or what he could realize over time if he developed it himself. Development rights are marketable, social rights are not. That is as close as you can come to the measure of the social value. And society should pay it whether they pay the owner for his property or not.

But at sometime you have to consider that the needs of society should outweigh the needs of private interests. In my mind,

sure, but that's not an independent third-party analyst talking. That's a political agenda.

According to the paper board member argued that her higher value reflected a market value which related to the higher value for its social value. That is, a public building was more valuable than if it fell into private hands.

That's not market value either.

I would suspect in many jurisdictions the law specifies market value for public aquisitions and a checks-and-balances control. Otherwise pols would start buying property for the government by paying their friends inflated social value prices.

Otherwise pols would start buying property for the government by paying their friends inflated social value prices.

duh...isn't that already happening? Half the speculative land along the Arkansas River was owned by three people. Sen. Robert S. Kerr (OK); Senator McClellan (AR; and Rep. Wilbur Mills (AR) also famous for taking a dip in the Washington DC tidal pool with a stripper named Fanny Fox the Argentine Firecracker... that was during construction of the Kerr-McClellan Navigation System.

I missed the part where the public bought the land based on social value appraisals.

Is "maximally productive" always measured in Dollars?

Yes.

Ter Shields wrote:Now the owner, in his 80's, is hoping to parlay the 20 acres into some cash and since it joins the 60 ac. parcel (the Chesney Prairie), in my opinion, the HBU is for its natural preservation...but..intuitively, the maximally productive use is to develop into small residential tracts....ok.

How do you make the case that the public good outweighs private gain in a HBU analysis...and, intuitively, no one expects the tract to sell for less than what it would if a developer attempted to buy it.

What would you do to explain HBU?

Is natural preservation the use that produces the greatest income to the land or highest value? If not, then your opinion of HBU is incorrect.

However, you may of overlooked a couple of items that could make it so. First, legal use, if zoning or other legal moves made the tract unavailable for housing, then preservation could become maximally productive. Also, and perhaps more importantly in this case, is the value of tax savings. Most of the conservation land I am aware of was donated, either in whole or in part. So, it might be possible for the owner to make a donation and take a tax break on the difference between what a developer would pay and what the conservationists can pay.

I don't make a case that the public good outweighs private gain. I don't think that is part of the appraiser's job... I leave that up to politicians and conservationists.

I miss Wilbur Mills. Sorta quaint that strippin and dippin.

Maybe there is a greater good than maximum income production but opting for that good is a decision for the user not the appraiser, right? They ask what the market value is, you give your opinion in the context of that definition, then they weigh how that income looks as they contemplate St Peter, their legacy, Fanny Fox.

Most of the conservation land I am aware of was donated, either in whole or in part. So, it might be possible for the owner to make a donation and take a tax break on the difference between what a developer would pay and what the conservationists can pay.

The owner does not need the tax break. He simply wants to sell off some land. The Commission has had an eye on this prairie because they know its the last true native prairie grass on the Lindsley Prairie and there is no more within 20 miles.

Preserving the land for the sake of the environment is a noble enough cause. To me the HBU as such is equal to any reasonable cost of development. "As is", I would argue that its best use would be conservation...."As if vacant" however suggests a future hypothetical use....which is somewhat ironic considering that it is already "vacant"..

I would argue that its best use would be conservation

But conservatio isn't a use. The basic definition of conservation is to set something aside and not use it. When texts explain the bundle of rights, use is listed separately from doing nothing.

Preserving the land for the sake of the environment is a noble enough cause

Noble cause? Is that anything like a political agenda?

Ter Shields wrote:The owner does not need the tax break. He simply wants to sell off some land.

Terrel, why can't he just sell it off to someone who is willing to pay what the market says and then take it out of development? In other words the new owner owns the thing in fee and they can dcecide what the future brings. I don't understand what is so difficult about that.

Or is he agenda to get him to donate it?

No, you misunderstand. The issue is not anything to do with the landowner. But in my analysis, is the HBU conservation?

conservatio isn't a use

i disagree. Indeed it is as much 'use' as the lawn of a building.

But it is not the maximally productive use of the land...which would be to build a house or houses on it. except..

HBU also implies that it has to be a likely use and the most likely use will be conservation.. so is the HBU conservation? or something else.

The value of the property should be what it is, and comparables of similar conservation acreage are not available and certainly none that have sold, so the comparables HAVE to be sites where an equal competing utility is at work that are within the competitive market of the site.

I feel like i have to use comparables that A - vacant B - are not comprised of native prairie but are comprised on non-native species, and, C-are similar topography and equally valuable if sought to purchase for building a house. There are no native prairie comparables.