Clare Jellick reports that the District 150 School Board has “agreed to pay $750,000 for the 22 acres of land” on which they want to build a replacement building for Harrison Primary School.
The land is appraised at $178,000, but the PHA has maintained that it should recoup some of the costs for razing buildings there. The cost of demolition was about $1.4 million.
My question is, why? Why should they recoup costs for razing buildings there? These buildings were going to be razed anyway. The process was started at least a year before the school district expressed interest in a land swap with PHA for the land.
In fact, their first application for federal approval to raze 200 units (30 buildings) on the south side of Harrison Homes was reported in the Journal Star on March 30, 2005. On August 23, 2005, they added another 11 buildings to be demolished on the north side. “The decision to raze the additional buildings brings the total number of units to be destroyed to 306”; it was all part of a “10-year plan to tear down and rebuild the entire housing complex,” the paper reported at the time.
The paper also said, “Most of the latest buildings approved for razing are located near Harrison School, in the block between West Krause Avenue and West Seibold Street.” The “latest buildings” were the 11 that were added, with a total of roughly 106 units (306 total minus the 200 units initially reported in March). How much would that cost to raze? “The cost of demolition is estimated at about $4,000 per unit, said Regina Simpkins, director of facilities management.”
At $4,000 per unit, the cost to raze 106 units near Harrison School would be $424,000. But according to later reports, demolition of all 306 units cost roughly $1.4 million total, which comes out to about $4,575 per unit. Even then, the cost to demolish the 106 units near Harrison School would only be $484,950. Add that to the $178,000 appraised value for the land and the cost comes to $662,950.
So, if my reading and calculating is correct (which it admittedly may not be, since I’m only going from published reports) the school district is still overpaying for the land even if they eat all the demolition expenses for the land they’re purchasing. And that doesn’t even take into consideration this little nugget from that August 2005 article: “The PHA plans to apply for demolition grants so they can reprogram their budgeted funds for other uses, [Simpkins] said.” How much of this demolition cost was already paid for with grant funds?
This is a big coup for the PHA. It basically takes over half a million dollars the School District collects from our property taxes and transfers it to the PHA, an agency that has lost considerable federal funding as of late for a variety of reasons, including low occupancy in PHA properties.
CJ,
I posted this on the Urinal’s website. It brings the value of land into perspective, perhaps,
C, Bubba, Mark, Eye in Sky, Barbee, and others,
REALITY CHECK, >>>>>>> REALITY CHECK, >>>>>>>
The City of Peoria routinely has sold property in the past in Southtown for between $1.50 and $2.25 per square foot or $65,340 and $98,010 per ACRE. We are currently selling approx. 6 ACRES for $4.00 per square foot or $174,240 PER ACRE.
What is sad is because the Journal reports an “appraised value” of $178,000 for 22 ACRES or $8,090 per ACRE or $0.185 per square foot (18 1/2 cents per square foot), everyone believes it. Instead of jumping on School District 150, the real story is how the appraisser appraised it at $178,000.
I am sure most of you will jump on the “war zone” theory but the value of land is the value of the land and inspite of what the preceeding brain trust believes, you can’t buy blocks of homes any where in Peoria, demolish them for $0.18 per square foot.
Land in Downtown Peoria often reaches $16.00 per sq foot ($696,000 per Acre) and Chicago land, in spite of C’s assertion to the contrary goes for considerably more than that. Raw farm land in the growth cells is going for over $200,000.
It’s sad the reporter didn’t really understand the economics of land, but rather spalashed an emotional headline on a silly set of numbers and sold papers and enflamed a whole bunch of people that suggest they used their heads and judgment to calculate the value of 22 acres.
By the way, I consistantly voted againt the sale of Southtown property for $1.50-$2.25 per sq foot ($65,340 – $98,010 per ACRE) because the land is worth more than that and when you sell land too cheaply, you encourage sprawl and land wastage. Land is very valuable and by discouting the underlying value of it, you end up with low density suburban landscapes instead of urban density. Southtown because of the City DISCOUNTED the underlying value of land ended up with a “Pocket Pioneer” Park across the street from Central Illinois’ Urban City, whether you who think the School District was foolish and wasteful want to acknowledge Peoria’s position.
Gary, how do you determine the value of land versus the way the appraiser determines the value of land? You say, “the value of land is the value of the land.” But what is that value? I.e., why do you disagree with the appraiser’s estimate? Because land in downtown fetches more? How do you know land value in downtown isn’t overestimated? How does one set a price that you would consider an accurate value of land? What metrics should be used?
good question CJ, would like to have a basic understanding of that myself.
The value of land is “based on what a willing buyer and a willing seller will pay for it on the open market”. Unlike land that has been built upon and because that capitalised investment can wildly affect the total value, the value of raw land is fairly stable. Elements that affect it’s underlying value include basic things such as access to utilities, ie. water, sewer, elect. and gas and or topography (slope or steepness). Secondary elements that affect the value of raw land is traffic and road infrastructure. Traffic counts that drive down residential value may actually increase the value of commercial sites, for example. Lastly, views, timber, natural features can affect raw land prices.
Because the variables that affect land values change slowly from parcel to parcel, land value also changes rather slowly with regards to parcel to parcel variations.
As I stated for years, perhaps 10-15 years the City was receiving $1.50 – $2.25 per sf from private concerns that wanted to develope in Southtown. The uses ranged from churches to Industrial, retail to various offices. They all were willing to pay the $1.50- $2.25 and a majority of the Council were willing to sell. Similarily, there have been purchases of property from private to private to establish the underlying value of land, both downtown as well as on the edge of Peoria.
Before I have to disagree with the appraiser, I would first want to understand the basis of the appraisal and in fact if the Urinal got the numbers correct. Appraisers will generally ask what is the purpose of the apparaisal, ie., settliment of estate, to seek a selling price,or to seek a purchase price, or perhaps to provide equity for a loan. Depending on the purpose of the appraisal and the “bent” of the appraiser, the appraised value can wildly fluctuate. Then, I disagree with the appraiser because 18 and one have pennies for a square foot is one quarter of the cost of the cheapest carpet.
The land has access to all utilities, its flat, the buildings that were demolished were all “on grade” type building so there shouldn’t be surprise underground basement fill issues. A residential lot of 7500 sf (50′ X 150′) would have a value of $1,387.50 which is absurdly low.
CJ et al, think about this. Over in East Peoria where Kohls sits just south of I-74 where the old Holiday Inn / Mark Twain and Applebys used to reside. Whomever built the Kohls had to first pay the price for both the hotel and the restaurant and then tear them down, clean the site etc. All those costs up to the site preparation and construction of the Kohls store in fact determined the value of that land. The purchaser did not buy a hotel and restaurant, but rather the land to build their intended use. They purchased and developed based on the free market and the fair market value of property. There were no subsidies, TIF’s, Tax Abatement, etc from City government, just market forces that balanced ultimate profit based on a location against costa. I use that location as it is visable. The Walgreens in the corner of Prospect and War Memorial or the new strip center also at the same intersection required the purchase of property, clearing, relocation, etc and then capitalization by constructing a building with a new use. The cost of the land was/is the cost to get the land to the condition it can produce the intended results.
When the underlying or “intrinsic” value of land is discounted, the result is not using land to it’s full potential and rewards spreading out instead of high efficency usage of available land.
I remind you of my recommendation to have you call and discuss Land Value and Site Value Taxation with John Kelly as a very positive inducement alternative to the current property tax system that devalues land and hyper values the improvement. By doing so, sprawl is encouraged thru public tax policy instead of rewarding the highest and best uses for land.
Has that helped?????????????
Gary,
I think you are dead on. While CJ is a reasonable sort, there are simply some (see most of the comments before and after your comment at the PJ Star) who will dismiss your logic because it doesn’t fit within their worldview of the school district as fiscally irresponsible. They actually may be just that in lots of cases, but maybe not here.
I’ve looked into land value taxation before, and it seems appealing. Wikipedia has a great entry on it (probably less biased than John Kelly). Tell me: Can such a system be institued on a municipal level, or would the state need to change. Home rule only goes so far.
Thanks Gary,
this is an area that is nowhere near my fields of study and it helps to have a basic understanding of these items to lead to better questions and more research.
paul
Years ago when I took and appraisal class, I learned there are different approaches to appraised value, the most relevant being market value, established by comparable sales. There probably are not many “comps” for this sale. Embedded ito comparable sales calculations is the “arms length” principle, meaning there are no “influences” involved in the comparable that tweak the truth, like a father selling to a son, or a purchaser without any purse strings like a government entity. Speaking of purse strings, I read where district 150 just approved $40,000 to pay someone to develop a new website. Really? Does it cost that much?
CJ: If you have a copy of the appraisal that might be an interesting read. Remember that the City once had an appraisal that showed that land around John Gwyn Park was at the same value as land along the Riverfront ala the Recplex landswap. The piece of land that the Peoria Park District had, that was supposed to be in perpetuity open space per the PPD Master Plan was then swapped for this other parcel. The appraiser used ‘comparables’ of property from the center bluff area of Peoria, along with comparables from Lindberg Drive out by RLI — so that would indicate that an appraiser can come up with any number depending on the comparables used and what the client wants the value of the parcel to be valued at? Oh, the cost per sq. ft was at $5.00 per sq. ft. Just ask Gary — he will probably remember that. Then there is the appraisals for 801 NE Perry Avenue — too long to retell — the short version to appraisals 1.5-2 years apart and let’s just say that the values were polar and the appraisals were by the same appraiser — hum……
Progressive,
Cleanest way to allow for the adoption of Land Value Taxation would be thru State Statute. ANd thru state statute it could be viewed as a “permissive alternative” based on local review and decision. There are some real convoluted processes that include a “City Wide Special Assessment Project” based on land values to pay for Property tax revenues, but the state approach is preferred.
Yes Karrie, the price for the land swapped in Southtown to facilitate the construction of the RexPlex was $5.00 per square foot. BTW, 2 acres of the six acres that the City is selling for $4.00 per s.f. is some of that $5.00 exchanged land.
And while I generally agree that the 150 board/administration are not generally fiscally responsible, I don’t beleive that is the case in the negociations with the PHA. To the contrary, how in the world can the PHA justify spending $1.4 Million Dollars to demolish and then sell for just over half. I guess I will just accept this as a way of laundrying Federal money to Peoria instead of Bagdag, Iraq without Haliburton taking their cut