HomeMy WebLinkAboutItem 04 McVay ROW ReversionAGENDA ITEM SUMMARY Meeting Date: 6/22/2020
Meeting Type: Regular Meeting
Department: Economic Dev/CMO
Staff Contact: Courtney Griesel
S P R I N G F I E L D ECONOMIC Staff Phone No: 541-726-3700
DEVELOPMENT AGENCY Estimated Time: 10 Minutes
ITEM TITLE: MCVAY RIGHT OF WAY REVERSION
ACTION
REQUESTED:
Authorize/Not Authorize the City Manager to negotiate and execute an agreement
with ODOT to remove the existing right-of-way (ROW) restrictions and
reversionary clauses with Oregon Department of Transportation specific to McVay
frontage property in an amount not-to-exceed $173,700.
ISSUE
STATEMENT:
In 2016, the City acquired property located along McVay Blvd in Glenwood (Map
18-03-03-40 Taxlot 1200). This acquisition was part of the Franklin Blvd
jurisdictional transfer. The transfer agreement includes terms which restrict the use
of all transferred property to existing or future ROW use only. Any parcels not
needed for ROW, per the ODOT reversionary clause, would revert to ODOT
ownership. Due to the shape, size and misalignment of the specific taxlot to the
future McVay ROW envelope (ATT1), the City desires to buy out the reversion on
taxlot 1200, lifting the use restriction and enabling more effective alignment
between current and future ROW and adjacent development sites. The cost of
removing this reversion is estimated at $173,700 (ATT2) and SEDA funds are
requested to complete the transaction.
ATTACHMENTS: Attachment 1 – Future Right of Way Envelope and Existing Tax Lot
Attachment 2 – Valuation Conclusion and Appraisal Review
DISCUSSION/
FINANCIAL
IMPACT:
McVay fronting taxlot 1200 consists of a 3.5acre narrow parcel of land adjacent to
the existing McVay Blvd ROW. In February 2016, as part of the Franklin Blvd
jurisdictional transfer, the property was transferred to the City, restricting all
property to be maintained for current and future right of way use only.
City staff have since refined future McVay ROW design to include a total 74’
roadway, including all lanes, bike/ped facilities, and landscaping. Attachment 1
includes the future full ROW envelope area, illustrating the majority balance which
could be made available to support adjacent access and development should the
reversion be removed. While the envelope is now estimated, slight changes to
alignment are anticipated which may shift the ROW east or west along different
sections of McVay. For this reason, staff is requesting SEDA support to fund fully
lifting the reversionary restriction, allowing for the most flexibility.
The cost of fully removing the reversionary restriction is estimated at $173,700,
which would be paid to ODOT. ODOT, Department of Justice, and Regional
Solutions Team representatives have been engaged throughout this work. Staff is
requesting Board authorization to use SEDA funds to enable the City Manager to
negotiate and execute removal of the reversionary clause specific to taxlot 1200.
Should the Board support this action, adequate SEDA reserve funds are available.
There are no warranties that accompanythis product. Users assume allresponsibility for any loss or damagearising from any error, omission, or positional inaccuracy of this product.
6/9/2020I
McVay Road Corridor, City of Springfield
City
Right of Way
With
ODOT
Reversion
Clause
WildishProperty
0
250
500
125
Feet
NUGGET WAY
City Right of WayRemaining Right of Way
McVay & NuggetTotal City-owned Right ofWay Area under ODOTreversion clause132,066 Sq.Ft. (3.0 acres)
City-owned ROW,Converting to Real Property102,431 Sq.Ft.(2.3 acres)
City-owned ROW,Remaining ROW29,635 Sq.Ft.(0.7 Acres)
Taxlots
Railroad
City Right of WayConverting to Real Property(Remove ODOT Reversion)MCVAY HIGHWAYProposed New Rightof Way
Attachment 1, Page 1 of 1
SCOPE OF THE REVIEW
The following commentary identifies the level of due diligence performed by the
reviewer in determining the completeness, adequacy, relevance, appropriateness, and
reasonableness of the work under review. This review is based on a field review of an
ODOT Appraisal Form 20 Surplus (Over $20,000) appraisal report that was completed
by fee appraisers, Daniel Harms, MAI and Katherine Banz, MAI. It is noted that the
appraisers utilized their own narrative format report but met all the minimum
requirements of an ODOT Appraisal Report Form 20 Surplus (Over $20,000). In this
review, the term ‘Report’ refers to the appraisal report under review. An inspection of
the subject property was completed by the appraisers on February 24, 2018, the effective
date of appraisal; the Date of Report is March 4, 2019.
The appraisal reviewer inspected the subject property and comparable sales on
December 14, 2018. A review of the appraisal report was conducted to ascertain if the
document conforms to the appropriate appraisal standards and guidelines outlined in
ODOT’s Guide to Real Estate Appraisal and Chapter 5 of ODOT’s Right of Way
Manual. The appraisal report was specifically reviewed for compliance with the
technical requirements of the aforementioned standards as well as for consistency and
mathematical correctness. The appraisal reviewer was qualified by education and
experience to conduct this appraisal review.
The reviewer read the report as identified herein. During the review process, all
submitted documents and correspondence were considered in addition to the appraisal
report. The accuracy of calculations was confirmed. The adequacy and relevancy of the
market data cited has been evaluated for propriety and accuracy of application. The
report analyses, opinions, and conclusions have been evaluated for consistency.
Independent verification of the fee appraisal data was not conducted, nor did the
reviewer seek out other relevant data in the market.
APPRAISAL REVIEW COMMENTARY
HYPOTHETICAL CONDITION AND EXTRAORDINARY ASSUMPTIONS
The appraisers have made the following hypothetical condition: The hypothetical
condition has been made that the subject property is salable (despite not being a legal lot of
record). Appraisal review noted that there was no prior authorization for invoking this
hypothetical condition.
Attachment 2, Page 1 of 8
The appraisers have made the following extraordinary assumption: The values concluded
herein are predicated on the extraordinary assumption that the locations of sewer line easements,
access points across the subject property segments, and the sizes of the subject property
segments, as reported by ODOT, are correct. If this is determined to be false, the value
conclusions herein will need to be revisited.
PROPERTY DESCRIPTION
The subject property is made up of one “tax lot”, identified by the Lane County
Assessor’s office on Map #18S03W0340, Tax Lot 1200; the subject property is not a legal
lot of record. The appraisers relied on documents provided to them by ODOT which
indicate that the subject property is 142,386 square feet, or 3.27 acres plus associated
slope easements which contain 14,194 square feet, or 0.326 acres. The property was
conveyed for the purpose of a future City of Springfield transportation improvement
project. The transfer document indicates that “If said property is no longer used for
public transportation related purposes, or if the transportation improvement project
does not commence within twenty (20) years of the execution of this Deed then the
property shall automatically revert to Grantor.” The transfer document goes on to state
that, in the event that the City of Springfield wishes to remove the Right of Reversion,
the current value of the Right of Reversion shall be determined by a fair market value
appraisal. The City of Springfield desires to remove the Right of Reversion; therefore,
the purpose of the appraisal is to determine the fair market value of the Right of
Reversion.
For purposes of this appraisal, the subject property was divided into segments. On the
ODOT Sketch Map, the subject property has been divided into 12 segments [A-K (which
includes two “C” segments due to the numbering system utilized when the subject
property was originally assembled in the late 1960’s)] which range in size from 1,968
square feet to 33,936 square feet. There are 10 adjacent properties which the appraiser
has identified on their map as segments I-X; apportioning the subject property to the
adjacent sites based on ownership (multiples of the adjacent sites are owned by the
same entity) results in a total of seven lots (“parent parcels”), ranging in size between
2,523 square feet to 41,144 square feet. As stated previously, the slope easements have a
combined area of 14,194 square feet. The slope easements are abutting six segments (C,
D, E, F, C, portion of G) of the subject property. The appraiser has noted, there are slope
easements on four (identified as II, IV, V, and VI on the appraiser’s map) of the
consolidated segments. In addition, it was discovered that there are three (identified as
V, VII and VII on the appraiser’s map) of the consolidated adjacent properties which are
encumbered by a sewer line easement (subject property segments F, C and G). It should
be noted that a portion of the subject property fronts Nugget Way which is already
Attachment 2, Page 2 of 8
owned by the City of Springfield; additionally, the appraiser has concluded that this
portion of the subject property is encumbered by the Nugget Way right-of-way and has
rendered this portion unusable and attributed no value to it. The subject property is
presently under the ownership of the City of Springfield subject to the reverter clause in
the conveyance documents; it was transferred to the City by ODOT in early 2016.
The subject property is a long, somewhat narrow (+/- 50’ wide at the north end and +/-
130’ wide at the south end) remnant parcel located along the McVay Highway/Franklin
Blvd. at/near the Nugget Way intersection which is south of the newly constructed
Franklin Blvd. Roundabouts. The subject property is located in the Glenwood
neighborhood, an unincorporated area within the Springfield Urban Growth Boundary.
The subject is less than one mile from downtown Springfield and less than three miles
from downtown Eugene. The appraisers noted that the subject has a Eugene mailing
address. Apparently, when Springfield took over jurisdiction of Glenwood, the zip
codes for the Eugene/Springfield boundaries were not changed. Therefore, the subject
still has a Eugene address, despite not being under the jurisdiction of the City of
Eugene.
ODOT research has revealed that the adjacent properties all have access to the adjacent
McVay Highway/Franklin Blvd. over and across the subject property, via Nugget Way,
or via an easement through an adjacent property. McVay Highway/Franklin Blvd. is a
two-lane, asphalt paved road that is maintained by the City of Springfield. The
appraisal has a detailed map showing the access points from each adjacent property to
McVay Highway (Franklin Blvd.). It appears that each of the adjacent properties have
adequate access if assembled with the subject property.
The subject property is located within the City of Springfield’s Glenwood Refinement
Plan Area/Glenwood Riverfront Area. The zoning of the subject site is MUE (Mixed Use
Employment); this zone is established where office employment, educational uses and
light manufacturing employment uses are intended as the primary uses with external
impacts less than or equal to office uses. Limited small scale retail and service uses are
also permitted if developed as an integral part of the primary employment
development to provide commercial services needed by employees in close proximity
to their workplace (employment-generating educational uses may be considered
primary uses). Warehousing is permitted as a secondary use. The appraisers have
concluded that the highest and best use of the subject property as though vacant is
assemblage with adjacent/abutting properties. In the present condition, there are
existing site improvements located on the subject property. According to the appraisers,
the existing site improvements may hold some assemblage value to the adjacent
property owners. However, the contributory value of the subject site improvements
Attachment 2, Page 3 of 8
cannot be realized until the date of reversion (2036). Noting the current condition of the
subject site improvements, and the length of time to the reversion date (17-18 years
throughout which the site improvements will be depreciating further), the site
improvements will have fully depreciated and reached the end of their economic lives.
Therefore, the subject site improvements do not contribute value to the subject
property. It is appraisal review’s opinion that were the property valued correctly, the site
improvements could contribute value to the adjacent properties in as much as the respective
property owners would, more than likely be willing to pay a slightly higher unit value for the site
improvements and land to ensure that another market participant does not purchase their
respective site improvements/frontage. The appraisers have opined that the highest and
best use of the subject property as improved is assemblage with the adjacent/abutting
properties.
PROPERTY VALUATION
ODOT appraisal requirements for properties similar to the subject property typically
require an independent site valuation and an assemblage to the most logical adjacent
property/properties (Assemblage Value). The appraiser has utilized the across the fence
(ATF) methodology to value the subject property which appears to be the most
appropriate valuation technique. In order to value the subject property utilizing the
ATF method, the appraiser has employed the sales comparison approach. In their
analysis, the appraisers have analyzed seven comparable land sales – three of which
were located within the immediate vicinity of the subject and four that were located in
nearby Springfield. The subject segments are valued on a price per square foot basis, as
is custom for similar property types in the local market. The comparables sold between
January 2015 and January 2018; range in size between 15,246 square feet and 1,118,621
square feet; and had unadjusted values between $1.03 and $6.12 per square foot.
Adjustments were made to the comparable sales for building demolition (Sale #4) and
market adjustments were applied at a rate of 0.75% per month where applicable. After
adjustments were made to the comparable properties, a value range from $1.14 to $6.45
per square foot was realized. Subsequently, property characteristic adjustments were
made on a qualitative basis by the appraisers. After concluding a per square foot value
for the subject property, the appraisers appropriately completed an analysis of the
segments which are presently encumbered by the sewer line easement. They attributed
50% of fee value for this encumbrance which appears to be consistent with the market.
The appraiser concluded the following based on a thorough analysis of the comparable
properties and the subject property.
Attachment 2, Page 4 of 8
The next step in the appraisers’ analysis was to value the slope easements associated
with Parent Parcels 1-5. They attributed 25% of fee value for this encumbrance which
appears to be consistent with the market. The appraiser concluded the following based
on a thorough analysis of the comparable properties and the subject property.
Based on the aforementioned information, the subject property Assemblage Value
(ATF) is $386,000 ($374,000 + $12,000 = $386,000). It should be noted that the appraisers
did not attribute any value to the existing improvements located on the subject property
which consist of asphalt parking lot, chain link fencing, public street, gravel drives,
asphalt/gravel parking lot and a business sign. The appraisers estimated depreciated
replacement cost for the site improvements at $71,031. As stated previously, it is appraisal
review’s opinion that were the property valued correctly, the site improvements could contribute
value to the adjacent properties in as much as the respective property owners would, more than
likely be willing to pay a slightly higher unit value for the site improvements and land to ensure
that another market participant does not purchase their respective site improvements/frontage.
The next step in the appraisers’ valuation was to apply an “enhancement factor” to the
Assemblage Value. It is appraisal review’s opinion that this is not a “typical”
methodology for ATF value (rather, appraisal review believes this should be factored into the
Sewer Encumbered
Size Easement Unit Total
(S.F.)Impact Value Value
Parent Parcel 1 $5.25 13,022 0%$0.00 $68,366
Parent Parcel 2 $0.00 2,523 0%$0.00 $0
Parent Parcel 3 $5.25 13,025 0%$0.00 $68,381
Parent Parcel 4 $3.50 12,027 50%$1.75 $21,047
Parent Parcel 5 $2.25 41,144 50%$1.13 $46,287
Parent Parcel 6 $3.50 26,709 0%$0.00 $93,482
Parent Parcel 7 $2.25 33,936 0%$0.00 $76,356
142,386 $373,919
Rounded $374,000
Slope Impacted
Size Easement Unit Total
(S.F.)Impact Value Value
Parent Parcel 1 $5.25 1,234 25%$1.31 $1,617
Parent Parcel 2 $0.00 461 25%$0.00 $0
Parent Parcel 3 $5.25 2,586 25%$1.31 $3,388
Parent Parcel 4 $3.50 3,608 25%$0.88 $3,175
Parent Parcel 5 $2.25 6,305 25%$0.56 $3,531
14,194 $11,711
Rounded $12,000
Attachment 2, Page 5 of 8
unit values previously estimated), it is not a gross error and could be a reasonable method
used to achieve the same ATF value as factoring this “enhancement factor” into the unit
value. The premise behind this makes sense because the adjacent properties are not
required to purchase the subject property segment, so this factor is util ized to entice the
adjacent owner to purchase. In addition, this factor takes into account any potentially
large discounts for the decreased marketability and utility of the segments and any sell-
out period and/or reluctant property owners due to the number of segments that
comprise the subject property. Appraisal review believes that calling it an enhancement
factor is misstated, as the appraisers’ conclusion of 0.50 is not an “enhancement” but a
reduction. Regardless, appraisal review concurs that this a reasonable method to arrive
at the fair market value of the assembled property, stated at $193,000 ($386,000 x 0.50 =
$193,000).
At this point in the appraisal, it is appraisal reviews opinion, the valuation methodology is
incorrect. Appraisal review made repeated attempts (email, phone, in-person meeting) to work
with the appraiser to better understand their methodology. However, the attempts were
unsuccessful and the appraisers and appraisal review came to an impasse.
The appraisers valued the property as an independent site taking into consideration the irregular
shape, encumbrance of Nugget Way and sewer easement encumbrance; but, failed to take into
account that the independent site value is subject to the Right of Reversion. At the end of 20
years if the property is not used for a transportation related use, the property reverts back to
ODOT. Further, selling and/or leasing the property is not an option because that is not
transportation related use. It is appraisal reviews opinion that these are the heaviest
encumbrances that the subject property bears and they aren’t factored into this value. These
encumbrances severely restrict the marketability of the subject property (if it can’t be sold there
is no market participant to buy the property). However, in order to formulate an economic use, it
would be necessary to either a) analyze and research other sales in the market that are severely
encumbered (access, shape, topography, easements, etc…) and estimate a discount rate (to be
applied to the assemblage value) or b) use the Easement Valuation Matrix and estimate a
percentage of fee based on the easements/encumbrances which burden the property because of the
specified use and restrictions (to be applied to the assemblage value).
As a follow up to the aforementioned Independent Site Value, the appraiser proposed a
“Valuation of the Reversionary Estate”. This methodology utilized the Assemblage Value
previously estimated; trended it forward for the remaining term left in the original 20 years,
added a 2.5% annual increase based on the CPI (this does not represent market value as property
values over time do not increase in this manner) and deducted a line item of 5% at the end of the
remaining term for expenses based on a hypothetical future sale (there is no future sale of the
property, its ownership just reverts back to ODOT if it’s not used for the specified uses outlined
Attachment 2, Page 6 of 8
in the deed transfer document). Then, the appraiser put those figures into a Discounted Cash
Flow (DCF) model, estimated a discount rate (8.5%) from which to purportedly conclude the
present value of the reversion; their opinion being that this is an indication of the fair market
value of the subject’s reversionary estate. It is appraisal review’s opinion that this does not
provide an accurate reflection of the fair market value of the Right of Reversion.
Appraisal review was very thoughtful in their review of the subject property appraisal with the
understanding that different appraisers have different methods of appraising properties; however,
those methods have to be reasonable and supportable. That is not the case with this appraisal. For
that reason, appraisal review does not believe that fair market value of the Right of Reversion was
achieved. Further, it is appraisal review’s recommendation that another appraisal for this file
should be procured.
It is appraisal reviews opinion that the proper way to analyze the fair market value of the Right
of Reversion is to calculate the difference in the value of the property with the encumbrance(s)
[Independent Site Value – “As Is” Value discounted commensurate to the encumbrances on the
property such as “If said property is no longer used for public transportation related purposes, or
if the transportation improvement project does not commence within twenty (20) years of
execution of this Agreement, then all right, title and interest shall automatically revert to state”
(ODOT) and (given the aforementioned condition) that the subject property can’t be leased or
sold. In addition, the site characteristics (not a legal lot of record, narrow shape, etc…) and
encumbrances (sewer line easement)] and without the encumbrance(s) [Assemblage Value
(ATF method) minus any site characteristic, provided that wasn’t a factor in the unit value of
the site].
On August 20, 2019, Appraisal review was tasked with providing an opinion of value as though
the property were valued in the correct manner. It is noted that the opinion of value provided by
appraisal review is subject to the conditions that the appraisal report (reviewed herein) contains
the best possible data and that appraisal review did not obtain, confirm or research the market for
other relevant data for use in the valuation of the subject property. To properly value the subject
property, the Independent Site Value must be opined. The Independent Site Value is by
definition the stand alone value as an independent commodity. The Independent site value is, in
layman’s terms, the value of the property as if it were put on the market today with all
encumbrances and/or easements. As a starting point for valuing the Right of Reversion,
appraisal review has utilized the appraiser’s previously calculated opinion of ATF value of
$193,000. To assist appraisers, there is a published Easement Valuation Matrix which can be
used as a general guide to assess the effect an easement may have on a total bundle of rights. For
purposes of valuing the subject property, the Matrix was utilized; as the only other method of
comparison would be to go to the market and research and analyze other sales in the market that
Attachment 2, Page 7 of 8
are severely encumbered (access, shape, topography, easements, etc…) and estimate a discount
rate which appraisal review was not asked to do. The Easement Valuation Matrix follows:
It is appraisal review’s opinion that the encumbrances and easements on the subject property and
as described in the appraisal as well as herein, have an impact of 90% (Comments: Severe impact
on surface use, Conveyance of future use Potential Types of Easements: Overhead electric,
flowage easements, railroad right-of-way, irrigation canal, exclusive access easements) of the fee
value. Therefore, the calculation for the Independent Site Value of the subject property is as
follows:
Independent Site Value: $193,000 x 90% ($173,700) - $173,700 = $19,300
As stated previously, the value of the Right of Reversion is the difference between the ATF Value
and the Independent Site Value which equates to $173,700 ($193,000 - $19,300 = $173,700).
Therefore, based on the following information, it is appraisal review’s opinion that the Right of
Reversion Value of the subject property, based on the conditions set forth herein, is $173,700.
Date of Updated Review and Opinion of Value: August 20, 2019
Attachment 2, Page 8 of 8