Uneconomic Remnant Valuation
Welcome
Presented By: Gregory G. Johnson, MAI, SR/WA
Discussion
This is a discussion of a valuation issue that receives little,
if any attention; however, based on research, it is estimated
that approximately 66,000 uneconomic remnant parcels
are held in the Florida public domain.
Presentation
1) Identify the issues
2) Discuss valuation procedures
3) Open the issues for discussion among participants
4) Close – 1 Hour
We need to be finished in an hour and there’s a lot to
cover are we ready?
What is an uneconomic remnant?
Remnant Definition:
“A remainder that has negligible economic
utility or value due to its size, shape or other
characteristics; also called uneconomic remnant.”
Four characteristics of value:
Demand
Utility
Scarcity
Transferability
Uneconomic remnants are so constrained, that
they have no or little utility. Therefore,
they have little or no “Market Value” or “Value
in Exchange”.
However, uneconomic remnants can have significant
Value-in-Use
Measuring Value in Use
Analysis Questions:
1) Can the utility of the remnant parcel increase if it
is assembled with an adjoining property?
2) If so, what market value would it add to the
adjoining property?
3) What is the annual cost of holding the property
in the public domain.
In this case, these answers were as follows:
Additional Market Value to adjoining owner:
$23,500
Annual holding cost of the property to the public.
Real estate taxe loss - $470.00
Maintenance
- $720.00
Cost / Benefit Analysis
What are the costs and benefits that accrue to the
property owner and the public?
Property Owner Costs:
1) Increased property tax ($470.00/Year)
2) Increased maintenance cost (Nominal)
Property Owner Benefits:
1) Increased “market value of property” ($23,500)
2) Additional area for expansion of existing use
3) Peace of mind in knowing how the property would
be used in the future.
Cost / Benefit Analysis (Cont.)
Public Costs:
1) Loss of property tax revenue ($470 / Year)
2) On-going maintenance cost ($720 / Year)
3) Potential liability costs
Public Benefits:
1) Increased property tax revenue
2) Eliminate on-going maintenance cost
3) Eliminate potential liability costs
Comparative Values
Property Owner
$23,500
Public
$16,380 *
* Note: PV ($470 Tax Loss; $720 Maintenance Cost = $1,190/Yr @ 6%,
30 Years, Annual Conversions)
Why is this important?
This case involves a small residential remnant that
when combined with the adjoining parcel, increased
its market value by $23,500. The public was
benefited by adding the property to the tax roll and
eliminating on-going costs of maintenance and
liability with a present value estimated to be
$16,380.
There are an estimated 66,000 remnant parcels in
public ownership in Florida. Many of these are
considerably more valuable than this parcel;
however, if we considered a public benefit of
$15,000 per remnant parcel and a market value
addition for each adjoining property of $20,000; the
range of taxable to market value added by this type
of transaction would be $990 Million > $1.32 Billion.
Questions and Discussion
Comparative Values
Property Owner
$23,500
Public
$16,380 *
THANK YOU!