03-29-10 Special Called Regular Meeting of the Fiscal Affairs Committee

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SUM:MARY APPRAISAL REPORT 3 Two types of data are accumulated relevant to the appraisal of the property; general data and specific data. The general data relates to facts about conditions in the region, the city and the neighborhood and all elements outside of the property which affect its value. The specific data inCludes information about the title, the improvements (if any) and the physical site. This data is then classified, analyzed and reconciled within three approaches to value. These three approaches are the Cost Approach, the Sales Comparison Approach, and the Income Approach. The final step is a reconciliation of all these indications into a final opinion of value. SCOPE: Any property is valued principally by means of one or more of the three approaches to value: Income, Sales Comparison" and Cost. The indications of these analyses and the weight accorded to each lead to an opinion of value. The three approaches are defmed briefly as follows: Income Approach: This approach entails an analysis of the property in terms of its ability to provide a sufficient net ammal return on investment capital. The analysis can be on the actual level income at the time of the appraisal, a forecast for the first year of the investment, a forecast of income over a specified holding period, or a stabilized, average annual, income over a specifieq holding period. This income stream is then converted into a value indication using either Direct Capitalization or Yield Capitalization. In the Direct Capitalization method, ~ single year's income expectancy is converted into a value indication by either dividing the income estimate by an overall capitalization rate or by multiplying it by an appropriate factor. In Yield Capitalization, ~ommonly referred to as Discounted Cash Flow Analysis, the incomy is projected for a series of years and then convelied to a present value with an appropriate discount rate. Sales Comparison Appr()ach: This approach is based on the principle of substitution. That is, when a property is replaceable in the market, its value tends to be set at the cost of a~quiring any equally desirable substitute property, assuming no costly delay occurs in making the substitution. Since no two properties are ever truly identical, the necessary adjustments for differences in quality, location, size, services, and market appeal between the appraised property and comparable (substitute) propeqies are a function of the appraiser's experience andjudgmeIlt. Cost Approach: The Cost Approach involves an analysis of the physical value of the property. That is, the current market value of the land, assumed to be vacant, plus the depreciated cost of the improvements present on the site. Depreciated cost is based on the estimated cost of replacing the structural and site improvements, less any accrued depreciation from physical deterioration, functional obsolescence, and or external obsolescence, as described hereinafter. The subject property is a vacant tract of land and in its analysis the appraiser has used the sales Comparison Approach only. The Cost Approach was not used since the subject includes no significant structural improvements. The Income Approach was also not used The Bilicek Company ~~-~----~~ -- - - - --- - --~-~~___ ____~_~.k~___._'"____,_~"