A new cost estimate for the WTC has been prepared by VDOT´s contractor (Parson-Brinkerhoff). The major revision is the cost of land acquisition. If this new "cost" data is far from realistic, there are some significant problems both for the current landowners and for the commonwealth´s taxpayers.
- A significant undervaluation of the cost of acquisition of land would make the Western Corridor appear artificially attractive. A cost/benefit analysis with an artificially lowered price would tend to make the project appear more attractive than it really is.
- A significant undervaluation of the cost of acquisition of land will cause the project to be underfunded; there will be difficulties and delays during the implementation of the acquisition. Landowners will reject acquisition bids that are unfair, and more of the acquisition will end up in litigation which could delay the start of construction. Schedule delays almost always mean higher costs for the taxpayers.
- A significant undervaluation of the cost of acquisition will play havoc with the commonwealth´s budget in general. If the state elects to proceed with construction prior to the settlement of acquisition matters, those landowners that prevail with litigation will have to be paid somehow. If the Western Corridor funding line is exhausted, compensation for the landowners will have to come from funds the state had planned for other uses. Essential services could be jeopardized.
- A significant undervaluation of the cost of acquisition will make things more difficult for the landowners, especially homeowners. If a "fair" offer to purchase is not made (and can´t be made because the program is not adequately funded) by the commonwealth, the owner will be forced into a process of negotiation and litigation of indeterminate duration. It is not always clear where the person lives during this process, what happens to existing mortgages and notes, and all the other turmoil that takes place in such a process.
DO THE NEW COST FIGURES REPRESENT A SIGNIFICANT UNDERVALUATION?
Well, everyone has to decide this one for themselves. Our role in this is to present the facts and let you decide:
In the latest draft revision the costs are determined as follows:
- $10,000/acre for unimproved (including farmland)
- $16,000/acre for residential developments (includes anything from 1 dwelling
per 3 plus acres to 4 plus dwelling per acre)
- $25,000/acre for commercial/retail/industrial
What is the value of unimproved land in the study area? From those property listing we have looked at, it seems that unimproved land that can be developed seems to run from $30,000 to $60,000 per acre. Unimproved land that can not be developed is not a consideration, after all the road is an improvement. Interested readers can search property listings at the linked search site. There is a "land" option in the property type field, and we would suggest setting the location filter at either Loudoun, Prince William, or Stafford counties. Also, remember to set the number of bedrooms and number of bathrooms filters to "any" because their computer can´t deal with a 3 bedroom vacant lot.
What is the value of residential developments in the study area? This question is a bit harder to address, undeveloped land prices are more uniform that the resale value of homes. One of the big factors is the difference between a "damaged" property (some part of a homeowners lot or land taken but the home more or less left intact) and a "taken" home (the entire property taken and the home destroyed). Generally the state is required not to leave an owner with an uneconomic remnant, although we have all seen homes with roads running right up to the front door. For many of the rural homes in the study area there is a bit less flexibility in that the well and the septic system must remain intact for the home to remain.
There has been a bit of political spin relative to the "power line" corridor in this regard. Some politicians have made statements to the effect that they have flown the power line corridor and only a very few homes will have to be taken. We would not dispute that you could draw an imaginary line through the power line corridor and impact a very few homes with this line; if the line were right under the power line we suspect very few homes would be on the line. What is ludicrous about such statements is that civil engineers, not politicians, will decide the ultimate placement of the highway within the study area. These engineers have to concern themselves with certain details that the politicians can conveniently ignore like drainage, terrain, and the requirements of the highway in general--the highway that follows the line of no damage is not an option.
What is the value of commercial development in the study area? This question we include for completeness, but only point out that answering the question poses similar difficulties as determination of the value of residential property.
We conclude that the new cost estimates have undervalued "unimproved" land in the study area by a factor of 3 to 6. We draw our conclusion on the study statement that unimproved land will be valued at $10,000 per acre, and the typical market costs of $ 30,000 to $60,000 per acre.
We conclude that the new cost estimates from residential property are at least similarly undervalued, and may be more so. If a condemnation damages a property by reducing the amount of land associated with a home, the state may be able to make the acquisition for the stated cost of $16,000 per acre. When the entire home is taken (and again until the civil engineers have done their thing nobody really can say in how many cases which action will result) the cost will be far greater, we would estimate a range of $40,000 per acre (a $200,000 home on 5 acres) to as much as $300,000 (a $300,000 home on one or two acres). In these cases the undervaluation factor is from 2.5 to 19.
How widespread is this problem? The original study listed data for each segment of the corridor, and percentages of land use within those corridors. The original study corridors were one mile wide, the current discussion on the roadway implies that a 440 foot wide strip will be acquired for the roadway itself. In many cases the strip will have to be wider to accommodate the 16 or so intersections currently planned, the actual as built numbers would probably be greater as there is always a tendency to build more intersections as a project progresses.
One note must be made here, the following analysis has assumed that the distribution of land by use is uniform within the segment. We know how many acres have what use within the one mile study area, we don´t (and nobody does) know which of those acres the 440 foot right of way will occupy. Thus for estimation we have assumed that those acres taken for the road will have the same percentage of use as the overall corridor does. Its not precise, but its the best estimate we can use until the actual route is determined.
In the analysis below, we have computed the acres in each segment that will have to be taken for the 440 foot right of way (and we are using option E as this is what the study seems to be concentrating on these days) and normalizing those for the percent of land use within the one mile study corridor. We note in the column "Study Cost" what the new study number is for the land acquisition cost. We then come up with a CARD cost of acquisition estimate by computing a high and a low cost using the undervaluation factors we derived above, and then taking the median of these estimates. We compute how much difference there is between our estimate and the one currently used by VDOT. Finally, we compare the card estimate with the one originally in the study; this original study number was the VDOT estimate before new math was applied. It interesting how closely our numbers match the original study estimate. Its also interesting what a large delta there is between our numbers and the current VDOT study estimate.
Another few notes:
U = Unimproved
R = Residential
C = Commercial
We are treating C as R because it has the same variability
| Segment | Length | U Acre | R Acre | C Acre | Study Cost | CARD Cost | Delta | Original Study Cost |
| 1 | 14.2 | 553 | 167 | 38 | 9.35 | 59.7 | 50.4 | 61.9 |
| 3 | 13.8 | 721 | 14.7 | 0 | 7.62 | 35.0 | 27.4 | 39.1 |
| 5 | 6.4 | 195 | 143 | 3.4 | 4.46 | 33.6 | 29.1 | 34.4 |
| 7 | 6.7 | 182 | 143 | 32 | 5.00 | 38.0 | 33.0 | 47.6 |
| 9 | 12.0 | 544 | 64 | 32 | 7.4 | 40.8 | 33.4 | 62.1 |
| Total | 53.1 | 2195 | 532 | 105 | 33.8 | 207 | 173 | 245.1 |
From this analysis, CARD has drawn the following conclusions:
- The new cost estimates grossly undervalue the cost of land acquisition for the Western Transportation Corridor. The only reason we can see for doing this is an attempt to make the project more attractive by moving the projected cost estimate to be under 1 billion dollars.
- We feel that this underestimation is by a factor of 6, which is very difficult to attribute to a mistake or oversight. We conclude it was deliberate.
- We are concerned because such a gross underestimate of the cost of the project will have negative results on the go ahead decision (false cost benefit analysis), the homeowners/property owners along the corridor (insufficient funds to pay a fair price), and the taxpayers of the entire state (funds will have to be diverted to from other projects to pay for the land after all the smoke clears).
- We feel this tactic of misrepresenting the cost of property acquisition represents a breach of trust between the government and the citizens. The right of property ownership is so basic to the American system that it is protected by the Bill of Rights of the Constitution; "...nor shall private property be taken for public use without just compensation..." Amendment 5.
- Finally, the application of this tactic is one more example of what is wrong with the Western Transportation Corridor. If the project was needed, it would stand on its own merit in an open, honest analysis. When supporters are forced to "doctor" the numbers then its a pretty good indicator that the project would not stand on its own merit, or the stated objectives of the proponents.
One final thought. We must remember the problem of this "mistake" is only compounded by the scale of the project. Altogether, we are looking at the condemnation or taking of 2832 or more acres, or more than 4 square miles of private property for this developer´s road.
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