Monday, October 29, 2007

The "Highest & Best Use" approach

Not to suggest that I retrieve all of my best information from Wikipedia, but in this case it does offer a shotgun blast of the concept of highest and best use. Click here for their website.

The reason behind a concept like Highest and Best Use is to prevent disorganized and erratic growth. If a city defines an area to become its future downtown core, they attach the necessary zoning that prevents junkyards from moving next to City Hall. The highest and best use for the property next to City Hall may be something akin to a strip mall or office complex - not a junkyard. So, when an appraiser looks at the five acre parcel next to a City Hall, they determine valuation based upon the optimal use of that parcel, like a strip mall or office complex. Any developer interested in building a junkyard must look elsewhere because the highest and best use would not include his business. The cost per square foot would remove him from the equation - as it should be.

Now imagine the situation at the Maintenance and Transportation site. The highest and best use for that piece of land does not include the storage of buses or stockpiling of dirt, wood or building materials. The City of Lynnwood has been trying for years to successfully rezone the site to drum up additional sales tax revenues and force the District to a new home. If the site were vacant today, the District wouldn't be considering its purchase because it would be too expensive. What is the difference with their new site?

If the District's appraiser went about determining a value for the New Administration site knowing what was to be constructed and determined that it was consistent with zoning, why would anyone fault the valuation? If the seller's appraiser claims that it is possible to build a thirty story high rise and generate untold billions in revenue, then the District should have kept looking for a new home. The Raskin site would not have been a reasonable fit given their programming needs.

To put this much more simply, the District was in the market for an automobile. The District only needs to drive between points without a lot of fanfare while remaining focused on their mission statement - educating our children. Why then would they purchase (by the seller's appraisal's own determination) an $85,000 Porsche when a $30,000 Nissan would be as effective? Both parties hired mechanics. The District's mechanic inspected the car and determined that it looks and performs like all of the other $30,000 Nissans in town. The owner of the car called in his brother-in-law, who sold cars part time, to offer an opinion as well. Of course, his figure was considerably higher. A figure that would normally cover the cost of an exotic German import.

1 comment:

Anonymous said...

The determination of “highest and best use” for the New Administration site reminds of the premise of an old Saturday Night Live sketch, “What if Spartacus Had a Piper Cub?” The sketch speculated how the slave revolt against the Romans might have unfolded if Spartacus had a 20th Century Piper Cub airplane (impossible, but hilarious for late night television). Raskin’s appraiser incorporated the same type of speculation just as the budget analyst who calculated the current student enrollments. Improbable, but a not so funny outcome for the taxpayers.