Wednesday, May 22, 2013

Klyde Warren Park and Value Added

Hi there.  This was fun.  I decided to play around a bit with a few studies related to land value premium/increase associated with proximity to new parks.  Of course, some of these studies added qualitative assessments based on great park/good park/bad park, which actually detracted value from nearby properties.

Recently, I did some qualitative analysis of the area around Klyde Warren Park in the past, suggesting that the road network around it was so poor that it couldn't possibly support the kind of street life (via ground floor businesses), of say Bryant Park and surrounding vicinity.  That wasn't a qualitative assessment of KWP, but rather its surroundings.  However, given that it is a deck park over a freeway, you can never quite escape that reality.  In the link above, you can see the disintegrative nature of the highway as soon as the park's boundaries are reached.  Bryant is much more radial in that it is directly connected to its surroundings in all directions.

So I wanted to do a bit of a mashup between these various studies.  One, the value added to nearby property based on proximity to the park, but not measured as the crow flies.  Instead, measured by walking distance associated with the actual streets around it.  Hopefully, that registers in some way.  However, since this is entirely quantitative, it doesn't make value judgment for example, "hey, KWP cut off Harwood which then dropped vehicular traffic 80% potentially hurting business, accessibility, and value."  Or, "OMG the streets of LoMac are so cartoonishly suburban and dangerous, people refuse to walk the .25 miles from the Crescent to AAC."

Using a variety of studies suggesting various values based on distance to a park, in this case I'm going with "great park" achieving maximum possible value premium, I came up with the following distances and premiums:

To create a measureable incremental hierarchy, I broke it down into tiers.  25% to the first 300', 15% for the next 300'.  10% from 600' to 1000' and then 5% for anything between 1000' and 1600' walking distance to the park.

I used that data to then create the following map, blacking out the parcels which are tax exempt.

After doing that, I created a spreadsheet of every property touching the 'green gradient,' assigning a 'value add' increment according to distance from the park.  For the most part, if the parcel was touching an part of the higher increment, I went with the higher.

Then I used the spreadsheet to calculate a few things: most importantly, Net Property Value Increase and Net New Property Taxes generated for the city.

I found there is currently $1.505 billion in assessed value within KWP's "reach."  This number, factoring in for the KWP "green gradient" increases to $1.659 billion, an increase of $154 million in private value due to the park, which, if memory serves, and the park cost about $60 million, works out to an ROI of 2.5:1 (which isn't a particularly great number).  Some economists I've worked with in the past, like to encourage a minimum of 4:1 return on public investment.

However, this doesn't factor new development from this point forward (ie Museum Tower is only assessed at a little over a million right now).

This is where it gets a bit tricky.  Many of the towers that generate the most taxable value in the area were here long before the park became a reality (ie had funding).  So the question is, if a new tower arises on a site in the area (say the drive thru Chase Bank site), how much of that new added value can the park be credited for?  All of it?  Maybe, but I suspect it will really only be responsible for the increment that makes that hypothetical development profitable.  Not all, but likely more like the 15%-25% increment.

In other words, there is some murk in the numbers.  I can only go by what is on record on DCAD.  And by doing so, I found KWP is potentially adding $1,229,032.23 in yearly tax revenue for the city of Dallas (that is, if the assessments reflect the "green gradient").  Considering the park is looking for an additional $750,000 in yearly maintenance funding, perhaps we just found it without having to levy an additional PID fee.  The question is, can you pry it away from the Dallas general fund considering how over-burdened the city is with parks and infrastructure?