Real estate gets appraised, diamonds get appraised and businesses get appraised. Have you ever thought about appraising your community?
Nowadays, there is a lot of attention paid to economic development and community revitalization. The current trend is something called asset-based economic development, which refers to the process of identifying assets contained in a community that might be capitalized on. It is a useful exercise that I strongly recommend for any community.
There is another perspective on identifying community assets that might be worthy of consideration. It is one that basically looks at the community in terms of its estimate of value. One might respond to this suggestion by saying that there is already an estimate of the economic value of the community. It is known as assessed value. That is true, but that assessment is by the tax assessor for tax purposes. And, it is concerned with economic value. It does not include parcels such as public properties and nonprofit properties that are not taxed. Those properties certainly add value to a community. So, let us review the concept of value and how it can be used in community development and revitalization.
An appraisal is an estimate of value. There are many types of value. The residential appraiser, the gemstone appraiser and the businesses appraiser usually estimate market value. There are many other types of value, such as liquidation value, use value and going concern value. There is even sentimental value, although that is something very hard to estimate. Just for the record, here is the commonly used definition of “market value:”
The most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as a specified date and the passing of title from seller to buyer under conditions whereby: the buyer and seller are typically motivated; both parties are well informed or well advised, and acting in what they consider their best interests; a reasonable time is allowed for exposure in the open market; payment is made in terms of cash in United States dollars or in terms of financial arrangements comparable thereto; and, the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale
There are four characteristics of value, often referred to by the acronym DUST. These characteristics are demand, utility, scarcity and transferability. Let us review each in terms of the value of a community.
Demand is the need or desire for possession or ownership. It assumes that there is the financial wherewithal to purchase the item. What is the demand for your community? Who wants to live there? Who can afford to live there? The demand for your community has a lot to do with the jobs available there. Indeed, the primary determinant of where one lives is where one works, hence the effort at creating jobs in a community. Many communities do not realize their potential because they limit their marketing. Successful communities know how to market their value to the rest of the world, or at least to a wider market. One trend in this area is that of communities attempting to brand themselves. Branding goes deeper than mere tourism promotion and marketing. A recent USA Today article featured several cities that have new branding and marketing campaigns. City employees in Dayton, Ohio, now have business cards that say, “Dayton Patented. Originals Wanted.” It is part of a campaign to remind the world that Dayton once had more patents per capita than any city in the country and that the inventive spirit is still alive. Santa Rosa, Calif.’s, new tagline is “Place of Plenty,” which highlights the community’s “agricultural heritage and abundance of food and wine.”
Utility is the property’s usefulness, i.e. that it can be used for the purposes intended. For example, a fork has more utility than a hatpin if the intended use is eating rice. What is your community’s ability to satisfy the wants and needs of potential residents? Are there good schools, medical facilities, etc? Is there appropriate housing available for those who you might want to move there?
Scarcity simply means that there is a finite supply. There certainly is no shortage of communities, but there is a shortage of communities that have unique characteristics that contribute to a perceived high quality of life. What is unique about your community that would make it attractive to outsiders?
Transferability is the ease to which ownership rights are transferred from the owner to the other party. Is it easy to transfer property in your community? One thing that Mississippi discovered after Hurricane Katrina was that transfer of property rights in the disaster area was negatively affected in many cases by poor legal descriptions, loss of land records and a variety of title issues. But transferability refers to more than just transfer of real estate when analyzing a community. One must also consider how convenient and available community amenities are to its residents and visitors. For example, a beautiful park that has a fence around it because of a polluted stream does not have much transferability of benefits.
In conclusion, take some time to identify your community’s DUST.
Phil Hardwick is coordinator of capacity development at the John C. Stennis Institute of Government. Contact him at email@example.com.