High Voltage Transmission Lines and Montana Real Estate Values Hosted by: Montana State University...

High Voltage Transmission Linesand

Montana Real Estate ValuesHosted by:

Montana State University ExtensionMarch 21, 2012

EconLit, LLCPhoenix, Arizona

Chalmers & Associates, LLC406.861.1642

[email protected]

Land Decision Resources, LLCBillings, Montana

Thomas Appraisal Services, Inc.Lewistown, Montana

Research Study Team Contributors:

mailto:[email protected]

Introduction• Article on impact of Massachusetts /

Connecticut Transmission Lines on real

estate values appears in The Appraisal

Journal, Summer 2009 Issue and

crosses Pat Asay’s desk at

NorthWestern Energy.

• Any research like this done for

Montana?

• One of the authors, Jim Chalmers, lives

in Montana.

• Discussions with Chalmers &

Associates begin in Fall 2009, with a

contract signed in March 2010.03/21/2012 2High Voltage Transmission Lines and

Montana Real Estate Values

Introduction

The impact of High Voltage Transmission Lines (HVTL) on real

estate values is prominent in the professional literature.

• General conclusions:

– About half of studies find no effect; about half find some.

– When found, effects are generally small (3% to 6%).

– When found, effects dissipate rapidly with distance and are usually gone

at 200 to 300 feet.

• Studies span 40 years and conclusions have remained consistent over time.

• Most of the studies involved developed residential property in urban areas.

• HVTL are viewed negatively, but apparently aren’t given enough weight in the

purchase decision to have a consistent, material effect on price.

03/21/2012 3High Voltage Transmission Lines and Montana Real Estate Values

Introduction

How relevant is the literature to Montana?

• Land value is a larger proportion of total property value.

• Natural features and amenities may be more important determinants of overall property value.

• Western viewsheds are often more open to visual intrusion than those of urban properties.

• Many properties represent a mix of agricultural, residential and recreational uses.

• Buyers of these properties presumably have different criteria.


Introduction

Dr. Chalmers and his team are well-qualified to carry out the

proposed research.• James A. Chalmers, Ph.D. in Economics and Certified General Real Estate

Appraiser– Directed the damage assessment for the NRC at Three Mile Island.

– Directed the social and economic assessment of oil shale development on Colorado’s West

Slope for 36 shale developers, 6 counties, 21 municipalities, the State of Colorado and

various Federal Agencies.

– Directed the assessment of the Yucca Mountain High Level Nuclear Waste Repository for

the State of Nevada.

– Directed many assessments of pollution (carbon-based, VOC’s, metals, pesticides) on real

estate values.

– Directed many assessments of physical facilities and infrastructure impacts on real estate

values including transmission lines, highways, pipelines and power plants.


Introduction

Dr. Chalmers retained key subcontractors with a combination of technical expertise

and deep Montana-based experience.• Land Decision Resources, LLC – Bruce Burger

– Over 12 years experience in rural property markets, providing real estate-based consulting services

for ranches, recreational properties and agricultural lands in transition.

– Experienced in rural land development planning and feasibility, with unique expertise in open-space

oriented, conservation development projects.

– Knowledgeable in applying GIS and valuation methodologies in rural land use applications.• Thomas Appraisal Services, Inc. – Dave Thomas, MAI

– Montana Certified General Appraiser #416; over 18 years experience.

– Has appraised over 280 separate parcels for transportation ROW acquisition since 2003.

– Past President, Montana Chapter of the Appraisal Institute.• EconLit, LLC – Frank Voorvaart, Ph.D.

– Extensive experience in statistical analysis of impacts on real estate values from physical facilities

and infrastructure such as transmission lines and highways.• Stewart Title of Bozeman – Samantha Matlack-Folkman

– Senior Title Officer, 17 years experience in title and recorded documents research statewide.


Approach

General Approach to the Study

• Study recent sales along an existing HVTL corridor

• Examine a range of property types

• Utilize a variety of methods

– Interviews and Sales Comparison

– Paired Sales

– Multivariate Statistical Analysis


Approach

03/21/2012 High Voltage Transmission Lines and Montana Real Estate Values 8

Route of 500kV Transmission Lines Across Montana

Approach


Parallel Single Circuit 500kV lines on 120’ to 130’ guyed steel lattice towers (Colstrip to Townsend)

Double Circuit 500kV lines on 185’ self-supporting steel lattice

towers (Townsend to Taft)

Approach

Study Procedure

1. Identify every real estate parcel for which any part lies within 500’ of the 500kV infrastructure centerline.

2. Aggregate the parcels into common property ownerships and retain title companies to capture all recorded documents with respect to transfer of these ownerships.

3. Assemble chain of title for these ownerships.

4. Review each chain of title and identify all transactions occurring in year 2000 or later that appear to be arms-length transfers between unrelated parties.

5. Physically inspect the properties involved in these arms-length transactions.


Approach

Study Procedure (cont)6. Contact parties to the transactions and confirm as many details of

the transaction as possible including price, buyer/seller

motivations, and effects of the 500kV lines on the sale.

7. Conducted analysis based on comparable sales, paired sales or

statistical analysis to determine whether market evidence

appears consistent with the interview results.

8. Summarize findings by property type in one of three formats:

– Sale Analysis Report

– Interview Summary Report

– Subdivision Study


Approach

Sale Analysis Report


Transaction Details:• Date and Conditions of Sale• Parcel Size / Property Extent• Location on HVTL Route

Property Attributes:• Property Type / Highest and Best Use Category• Access Characteristics• Built Improvements (if any)• Land Class Mix (if applicable)• HVTL Location and Impact• Descriptive Notes (physical features, locational attributes, site

character, natural amenities, etc.)

Approach

Sale Analysis Report (cont)


Interview Notes:• Buyer and/or seller comments• Broker, developer or other third party clarifications

Analysis of Comparable Sales Outside the HVTL Area of Influence:

Sale 1

Sale 2

Subject

Sale 3

$0 $50 $100 $150 $200 $250 $300

Native Range Lands

Adjusted Land Price Per Acre

Approach

Sale Analysis Report (cont)


Conclusions:

• Evaluate property attributes data, interview results and comparable sales analysis.

• Draw conclusions with respect to effects of the HVTL on the transaction based on the above.

Approach

Interview Summary Report

• Same general format as Sale Analysis Report, but no comparable sales analysis because sale price of subject could not be confirmed.

• Summarizes useful input obtained through buyer, seller or broker interviews.

• Conclusions are purely qualitative, due to absence of verifiable sale price data to check against available market evidence.


Approach

Subdivision Studies

Applied when the object of analysis was a subdivision rather than an individual property.

• Aspen Valley Ranches – Statistical analysis applied to a 156-lot rural subdivision in

Jefferson County.

• Sanders County subdivisions– Paired sales analysis applied to several rural subdivisions

along the Hwy 200 corridor from Thompson Falls to Plains.


ApproachSubdivision Studies: Aspen Valley Ranches Statistical Analysis


ApproachSubdivision Studies: Sanders County – Paired Sales


ApproachField Research Summary


ApproachFinal Step

The 57 Cases were grouped into one of seven property types

1. Production Agricultural Lands (19 cases)

2. Agricultural Lands w/Recreational Influence (4 cases)

3. Agricultural Lands w/High Amenity Recreation and Natural Features (3 cases)

4. Rural Residential Subdivision – Lots less than 5 acres (6 cases)

5. Rural Residential Subdivision – Lots 5 or more acres (7 cases)

6. Large Acreage Rural Residential Tracts (4 cases)

7. Rural Recreational Tracts / Cabin Sites (14 cases)


FindingsIntroduction

This study IS NOT

• A study of the effects of a transmission line corridor being

imposed on an existing property owner.

It IS• A study of market response to properties where transmission

lines are already in place.



This study DOES NOT

• Provide a set of formulas that define damages for various

property types.

It DOES• Provide a guide to which types of properties are most

vulnerable to transmission line impacts.



This study SHOULD NOT

• Create a presumption of effect, or lack of effect, for any specific

property.

It SHOULD

• Alert us to situations where the likelihood of effects is either larger or

smaller.

Determination of impacts to a specific property, MUST

• Be based on an in-depth analysis of how that particular property

would be affected by imposition of a new transmission line corridor:– In its current use, with consideration of mitigation opportunities.

– In potential future uses, with consideration of mitigation opportunities.03/21/2012 28High Voltage Transmission Lines and


FindingsProduction Agricultural Lands


FindingsProduction Agricultural Lands

Conclusions

• No evidence of price effects.

• Acquisitions are dominated by productivity and operating cost considerations, property access and assemblage.

• Nuisance factors are more significant for farming than grazing.

• No adjustment is made for the easement encumbrance in sale price.


FindingsAgricultural Lands with Recreational Influence


FindingsAgricultural Lands w/ Recreational Influence

Conclusions

• No evidence of price effects.

• Recreational use is small (and speculative) for the four properties studied

relative to agricultural use; hence agricultural productivity is still the

dominant consideration for the market.

• All four properties are large (i.e. 3,000 acres or more in size), which

decreases potential for conflicts and dilutes overall impact on recreational

use.

• For these types of properties, the larger the property and the smaller the

recreational influence, the less the likelihood of price effects and extended

marketing periods.03/21/2012 32High Voltage Transmission Lines and


FindingsAgricultural Lands w/ High Amenity Recreation & Natural Features


FindingsAgricultural Lands w/ High Amenity Recreation & Natural Features

Conclusions

• Probability of HVTL effects on these properties is low because:– The properties tend to be large.

– The properties tend to have unique combinations of natural features and attributes, making them scarce with few substitutes.

– There are so many property attributes important to their buyers that the transmission line effects become diluted.

• There do not appear to be any transmission line effects in the three transactions studied here.


FindingsRural Residential Subdivision – Lots less than 5 acres


FindingsRural Residential Subdivision – Lots less than 5 acres

Conclusions

• High probability of HVTL effects on these properties because:– Use is purely residential,

– Properties are small, and

– There are substitutes available which are very similar other than their proximity to the transmission lines.

• Three of the four Sanders County subdivisions showed significant price effects and two of the four showed significant absorption effects.


FindingsRural Residential Subdivision – Lots 5 or more acres



Conclusions

• These properties are vulnerable to both price and absorption effects.

• Probability of HVTL effects will increase with:

– Visual intrusion of transmission lines,

– Constraints on building site flexibility, and

– Availability of comparable substitutes not affected by the transmission lines.

• Analysis of properties in two Missoula area subdivisions indicate:

– One case where price effect may be on the order of 20% to 25%; an extended

marketing period is also evident.

– In the other case there does not appear to be any price or absorption effect.

• Two of the three Sanders County subdivisions showed price effects and one

showed an adverse effect on marketing time.03/21/2012 38High Voltage Transmission Lines and



Conclusions

• Although the AVR lots are 20 acres in size, the subdivision is relatively vulnerable to transmission line effects– There is often little flexibility in building site location due to access and topographic

constraints.

– The lots are relatively homogeneous and with 156 lots, there plenty of substitutes.

– Although there are some unique recreational uses (e.g. horse amenities, exclusive access to adjacent public lands, etc.), a residential homesite is still the predominant, and in most cases, exclusive use of the lots.

• Statistical analysis shows a discount in sale price of the AVR lots within 1,000’ of the HVTL centerline of about 15%, but none beyond that.

• The analysis shows no absorption effect, implying that pricing of the lots must have accurately reflected the market’s perception of relative strengths and weaknesses of the individual lots.


FindingsLarge Acreage Rural Residential Tracts


FindingsLarge Acreage Rural Residential Tracts

Conclusions• These properties are less vulnerable to transmission line effects than

residential subdivisions.– They are larger, offering greater flexibility in building site location.

– Residential use is important to prospective buyers, but additional diversity of

use also plays a role.

– These properties tend to have their own individual character and unique

combination of attributes with no immediate supply of comparable

substitutes that are not affected by the transmission lines.

• The properties are of a scale where the HVTL is a conspicuous attribute,

with some thinning of the buyer pool as a result.

• For the four transactions studied here, the HVTL do not appear to have

affected either the sale price or the marketing period.03/21/2012 41High Voltage Transmission Lines and


FindingsRural Recreational Tracts / Cabin Sites


FindingsRural Recreational Tracts / Cabin Sites

Conclusions

• Buyer criteria are different and generally less sensitive to transmission line effects.

• Effect depends on line location relative to property access routes and potential building sites; given size, topography and vegetation, effects are often nominal.

• In 12 of 14 transactions studied, the lines appeared to be of no consequence.

• In two cases there were concerns raised by brokers, but we were unable confirm specific effects with market data.


ConclusionsOverall

• Three issues are dominantUSE – the more heavily oriented the property is toward

residential use, the more vulnerable it is to market

effects from transmission lines.

SIZE – the smaller the property, the more vulnerable it is

to market effects from transmission lines.

SUBSTITUTES – the availability of otherwise comparable

substitutes increases the vulnerability of a property to

transmission line effects.03/21/2012 44High Voltage Transmission Lines and


Implications

This study SHOULD NOT

• Create a presumption of effect, or lack of effect, for any specific

property.

It SHOULD

• Alert us to situations where the likelihood of effects is either larger or

smaller.

Determination of impacts to a specific property, MUST

• Be based on an in-depth analysis of how that particular property

would be affected by imposition of a new transmission line corridor:– In its current use, with consideration of mitigation opportunities.

– In potential future uses, with consideration of mitigation opportunities.03/21/2012 45High Voltage Transmission Lines and


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