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Tuesday, March 30, 2004

Spokane

At a glance: Forecasting value

Jim Camden
Staff writer

Appraisers hired by the city to estimate the value of the River Park Square garage were required to use a process known as investment value.

  • It is a different method from that used by a person buying a house or a business. It had never been used by the city in evaluating property and hasn't since.
  • Someone building a new house might estimate ”actual value,” the cost of purchasing the land and building the structure.
  • Someone buying an existing house usually wants to know the ”market value,” or the price of similar houses sold recently in similar locations.
  • Someone buying an existing business might want to know the expected income the business could generate. The price is based on its ”income value.”
  • Investment value looks at both the income a business is expected to generate and the cost of borrowing money. Rare in Spokane, it is a standard method for governments to use in ”publicprivate partnerships.”
  • A lower interest rate will produce a higher investment value; in the case of the garage, the financing being proposed was tax-free municipal bonds, which have lower rates than conventional loans or most other bonds. That also increased the investment value of the proposed garage.

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