How much was the city’s latest open space acquisition really worth? Opinions vary.
Meigs Farm is so idyllic, and so abundantly moist, that former owner Gale Cool hoped it would one day house a spa.
Equally smitten by its bounty, the city purchased the land from Cool, spending $1.5 million in April to preserve it as open space. Questions were raised about the property’s value, but the sale moved ahead.
Then came word last month that a second, more-detailed appraisal valued the land at $700,000 – less than half what the city paid. So some are wondering: did the city, in its deal with Cool, get the spa treatment – or did it simply get hosed?
“When a seller wants to sell for a certain amount, and the buyer’s willing to buy. And they tell the appraiser to hurry up and write a letter appraisal. And he’s friendly to both parties…it doesn’t take a rocket scientist to figure out what happened,” said island developer Dick Allen, an outspoken critic of the deal.
The city Open Space Commission has formed a subcommittee, consisting of commissioners Dwight Sutton and Tim Bailey, to study the two appraisals in hopes of discovering the source of the disparity. Discussion of the matter will take place at the OSC’s next meeting at 5:30 p.m. Tuesday at City Hall.
The findings won’t impact the deal, which is already done. They may, however, help the OSC and the city avoid similar controversies in the future.
The city already has changed its procedure for appraisals of desired properties, city Administrator Mary Jo Briggs said. Whereas past appraisals for potential open space properties were administered by the OSC, they now will go through the city’s legal department, with appraisers to be chosen by the city attorney from a pool of firms.
As for Meigs, the city won’t decide what, if anything, it should do in response to the second appraisal until a separate evaluation of the property’s water rights – there is an artesian well on-site, whose value has yet to be determined – is finished next month.
The land, located off of State Route 305 near Koura Road, has a varied history and adjoins 67 acres of current parkland owned by the Bainbridge Island Metropolitan Park District.
A conservation easement limits development on the newly acquired portion to two homes on two separate 10-acre parcels, though the easement – pending permits – allows for other uses, including construction of a barn and other structures consistent with Cool’s once-planned spa.
The restrictions, and the ways in which water availability might impact any potential development there, were among the complicating factors, said Allen, who was critical of the deal from the start.
Sutton and Bailey haven’t yet finished their analysis of the two appraisals, but one thing is clear.
“It’s an enormous difference,” Sutton said. “I think the hazard here is that the public may fasten on the more recent appraisal and say, ‘that’s the real number’ – but there is no real number.”
Instead, Sutton said, there are two independently reached, differing opinions. Assuming the second appraisal is closer to the mark simply because it goes into greater detail is a mistake, he said.
“I don’t think that’s a valid assumption,” Sutton said. “We need to look at the instructions and constraints given to each of the appraisers.”
For the first appraiser, islander Anthony Gibbons, there was a short timetable with which to work. The deal came up in the spring, with word that Cool had abandoned his plan for the spa and wanted to put the property on the market. Though his claims couldn’t be independently verified, Cool indicated that he had interest from other buyers; he offered the land to the city for $1.5 million.
The OSC then went to Gibbons – with whom they’d worked successfully in the past – to see if the asking price was fair.
Gibbons’ three-page appraisal was, by its own admission, “very limited,” and was “prepared to meet (the OSC’s) time requirements for a potential purchase of the property.”
It concurred with the $1.5 million valuation – or $750,000 for each developable 10-acre lot – citing six comparable land sales as the main basis for its conclusion. Gibbons did not assess the value of the water rights.
In council discussions, concerns about the property’s value were raised by Councilman Kjell Stoknes, himself a retired appraiser, but the council ultimately approved the deal by a 5-2 vote.
At the request of the council, Briggs sought a second appraisal anyway, the results of which were returned to the city last month.
The new appraisal, completed by Seattle’s Columbia Valuation Group, echoed Gibbons’ assessment in several respects; it didn’t address the value of the water rights and pegged the land’s best and highest use as residential development.
But in the bottom line, it differed dramatically.
“Our opinion of value of $700,000 falls significantly short of the recent purchase and appraised value used in conjunction with the purchase,” said the 76-page document. “We were not provided with the other recent appraisal, so therefore cannot comment on the report or differences in methodology.”
Columbia Valuation Group appraiser Kevin McAuliffe did not return multiple phone calls from a reporter for comment on this story.
Based on the document, the Columbia appraisal process included interviews with area brokers and data from comparable land sales. All comparables were inspected and photographed by the appraisers, the document said.
“Comparable recent sales of single-family lots range from about $250,000 to about $450,000 per developable dwelling unit,” it said, or between $25,000 and $45,000 per acre.
The city purchased the Meigs property at $75,000 per acre.
The final value was based on the assumption that, legally, development on the two lots wouldn’t be hindered by critical areas. It did, however, say the following:
“We do not believe that, without extensive modification, that the areas of standing water are suitable to support any potential improvements allowed under current zoning. Also, it is likely that some of the dry areas on site at the date of inspection are wet during the rainy season.”
Stoknes said any modifications or permitting delays that would be required to make a property developable should be accounted for by appraisers.
‘No question’
Gibbons wouldn’t comment on the Columbia appraisal, other than to say there was simply a “difference of opinion.”
He did, however, stand by his assessment.
“There is no question in my mind that the city got that property at a fair price,” he said.
Gibbons said he has worked with the OSC on a number of past open space purchases, including “two or three” unpublicized deals in which he recommended against the purchase because the price was set too high.
Disparity sometimes arises, he said, when out-of-market appraisers are brought into unfamiliar situations.
“It’s just really hard for people to come over from Seattle and understand our market in the scope of one assignment,” he said.
Cool said he made a number of improvements to the property over the years to increase its value, many of which weren’t accounted for in the second appraisal. But the water rights, he said, more than anything else, were the central component of the deal.
Though not backed up by a written assessment, Cool says the high quality of the water has been verified by experts, and that it has a significant impact on the overall value of the land.
“We (Cool and his wife) thought, and we still think, that we’re giving a gift to the public of at least $1 million,” he said. “It’s my belief that (the water rights) could pay off the remaining open space debt in five years.”
Had he marketed the property to private buyers, Cool said he would have asked for $2.5 million, based on the value of the water.
He said he offered the OSC a discount, with the idea that he could take a tax deduction for any value above the sale price that might be found following the water study.
Allen is less certain about how the water rights would impact the property.
“I hear about this well and its wonders,” he said. “But no one knows anything about it. Where’s the concrete evidence? If the city got that, this would be a different discussion.”
Meanwhile, as the OSC and city look for answers about Meigs, questions continue about the future of open space purchases elsewhere on the island.
The OSC now is discussing the possibility of a new deal for a property on Manzanita Bay, after an earlier deal for the land was struck down by council. With money at the city stretched thin, and a continuing public desire for open space, Allen and others say they simply want to make sure the city is exercising due diligence when considering land deals.
Sutton reiterated that all appraisals, for any property, are by nature open to criticism.
“That’s the challenge for us,” he said. “We do recognize that we have a responsibility as a commission to be good stewards of public funds. We’ve done pretty well through this entire open space process.”
“This (Meigs deal) could indicate a potential weakness,” he added. “That’s one of the significant outcomes of this.”
