Garfield County

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Garfield County

• Land Values and Solutions Study

BBC Research Consulting3773 Cherry Creek North
Drive, 850Denver, Colorado 80209800-748-3222
www.bbcresearch.com June 1, 2006 Report
Presentation
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Introduction

• Two Economic Studies Are Underway
• The Economic Impact Model
• The Land Values and Solutions Study

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Land Values Study Project Objectives

• Demonstrate what factors drive residential land
  values in Garfield County.
• Document how rural industrialization (gas,
  gravel, power lines, etc.) affects the value of
  residential property.
• Offer mitigation strategies for situations where
  value losses occur.

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Land Values Study Three Phases

• Phase I. Data Collection and Analysis
• Phase II. Statistical Analysis and Conclusions
• Phase III. Solutions and Mitigation Evaluation

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Phase I Process

• Assembled a data base of 7,600 sales transactions
• Unincorporated, residential sales 1987-04
• Cleaned and added data gravel roads, geographic
  features, water sewer, etc.
• Ultimately used 20 variables per property
• Assembled gas drilling and industrial data
• Location of power lines, gravel pits, highway,
  railroads
• Location dates of gas wells
• Integrated GIS with Community-Viz mapping
  software
• Analyzed data in light of interviews and
  anecdotal observations.

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Phase II Statistical Analysis

• Meet with committees revised conceptual approach
• Completed Statistical analysis
• Tested 20 property variables
• Land characteristics (e.g. size, presence of
  water)
• Location (e.g. RFRV vs. CRV, distance to town)
• Structural characteristics (e.g. size, age,
  number of bedrooms)
• Determined factors that explain value
• Provided a basis for understanding impact on
  property value and strategies for mitigation

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What is Hedonic Regression Analysis

• Hedonic regression analysis is a method of
  explaining demand or prices for a particular good
  (e.g. a housing unit) by attaching estimates of
  value to its component characteristics (e.g. size
  of structure, age, quality of construction)
• Why Use? Produces results with statistical
  authority

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Variables Tested for the Property Value Models
Included in Model

• Size (acreage)
• Presence of water features

• Presence of good vegetation (CRV only)

Land Characteristics

• Presence of outbuildings
• Heated space in outbuildings
• Central wastewater system (RFV only)

• Size of home
• New home (less than 10 years old)
• Presence of garage (CRV only)

Structural Characteristics

• Distance to nearest gravel pit (CRV only)
• Gas well completed within 90 days after sale
  (CRV only)
• Gas well completed less than 2 years prior to
  sale (CRV only)
• Gas well completed more than 2 years prior to
  sale (CRV only)

• Distance from Glen. Sprgs. (CRV only)
• Distance from Pitkin County (RFV only)
• North of Colorado River (CRV only)
• View of Mt. Sopris (RFV only)
• Distance to nearest paved road

Locational characteristics/ industrial proximity
Value appreciation over time

• Increase in value per acre by year
• Increase in value per square foot by year

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Variables Tested for the Property Value Models
Tested and Rejected

• South facing percentage
• All flat terrain

Land Characteristics

• Number of bedrooms
• Number of bathrooms
• Construction type (e.g., modular, condominium,
  etc.)
• Additional house age groupings (e.g., 10 to 20
  years old)
• Water system other than a private well

Structural Characteristics

• Distance to nearest town
• Adjoins Federal land
• Distance to I-70
• Distance to railroad
• Proximity of high voltage lines
• Proximity of land fill

Locational characteristics/ industrial proximity
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Challenges

• Wide variation in property characteristics and
  locational influences
• Value effects across three key dimensions
  property characteristics, size and time of sale
• Sample sizes diminish with multiple variables
• Difficult to measure some key factors
• All data sets have some inaccuracies

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Results

• We can explain influences on property values
  with a reasonable level of accuracy
• 76 of value variation in Roaring Fork Valley
  (2,726 observations) (95 confidence level)
• 81 of value variation in Colorado River Valley
  (4,727 observations) (95 confidence level)
• Provides a reliable basis for overlaying impacts
  of gas drilling and other industrial effects.

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Industrial Impacts

• We tested effects of highways, railroads, gravel
  pits, power landfills lines and gas drilling
• Also tested positive site attributes vegetation,
  views, proximity to USFS lands, rivers
• Proximity to highways, power lines, landfills and
  railroads were not proven to have an impact on
  values
• Proximity to gravel pits and gas drilling has an
  apparent (but not statistically significant)
  impact on property values

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Gas Drilling Data Issues

• Gas well permits 5,010
• Operational wells 2,674
• Parcels with operational wells 354
• Valid single parcel sales of parcels with
  operational wells 140
• Final sample Well impacts(less than 160
  acres) 32

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Revised Colorado River Valley Property Value
Model
Total Value 303,079
Baseline Property (Average Property With Gas
Well)
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Generalized Gas Drilling Impact on Property Value
in Colorado River Valley
Value Loss/Gain
Exploration Phase
100,000
Drilling Phase
Completion Phase
53,000
50,000
Typical Residential Change in Value
25,000
303,0791
Drill Site Properties Change in Value
(32,000)
(50,000)
(49,000)
(100,000)
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Months
1 Typical property with a well 40 acres, small
home, 24 miles from Glenwood.
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Generalized Gas Drilling Impact on Property Value
in Colorado River Valley
Value Loss/Gain
Exploration Phase
100,000
Drilling Phase
Completion Phase
53,000
50,000
Typical Residential Change in Value
25,000
303,0791
Drill Site Properties Change in Value
(32,000)
(50,000)
(49,000)
Perception of Risk
Institutional Uncertainty
Quality of Life Impacts
(100,000)
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36
25
Months
1 Typical property with a well 40 acres, small
home, 24 miles from Glenwood.
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Generalized Gas Drilling Impact on Property Value
in Colorado River Valley
Value Loss/Gain
Exploration Phase
100,000
Drilling Phase
Completion Phase
53,000
50,000
Typical Residential Change in Value
25,000
303,0791
Drill Site Properties Change in Value
(50,000)
Impact of Gas Employment Demand
(100,000)
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25
Months
1 Typical property with a well 40 acres, small
home, 24 miles from Glenwood.
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Impacts of Gas Drilling Conclusions

• Properties that experience drilling see a
  reduction in market value, but seemingly
  temporary
• On average, net residential loss of value of
  about 16 during drilling and about 8 three
  years after drilling ceases
• Anecdotal data suggest
• There is no average well site
• Some drilling instances have more severe impacts
• Problem compounds with contiguous site operations
  or multiple drilling
• Micro site issues are hard to capture
• Recent wells tend to be closer to residential uses

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Impacts of Gas Drilling Conclusions (cont.)

• Gas activity also has countervailing positive
  impacts
• Gas employment drives housing demand
• Property lease payments
• Site improvements
• Tax revenues
• Mineral owners have legitimate property rights,
  which cant be ignored
• Drilling is not locally regulated so operational
  restrictions are limited

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Mitigation Possibilities
Institutional Quality of Life Perception of
Risk

• Education material/seminar
• Ombudsman
• Recommend cooperative lenders/brokers
• Fund property purchase or buy down
• Define and enforce best practices
• IGA with COGCC
• Education
• Remedial funds
• Insurance
• Certification of completeness
• Environmental monitoring reporting

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Land Values and Solutions StudyInstitutional
Changes

• Ombudsman/Advocate
• Document county land value changes over time
• Represent Owners
• Clearing House of Information for Appraisers,
  Realtors and Buyers
• Environment Response Agent
• Intergovernmental Agreement with COGCC
• Lending or Property Purchase

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Quality of Life Mitigation Measures

• Phase I Exploration
• Landowner notification
• Negotiated surface damage provisions
• Ground water testing
• Phase II Drilling and Field Organization
• Reasoned environmental protections
• Reasoned well-siting practices
• Noise and nuisance abatement

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Quality of Life Mitigation Measures

• Phase III Production and Stimulation
• Responsible stimulation techniques
• Proper waste disposal
• Air and water quality monitoring
• Phase IV Abandonment and Reclamation
• Certification of proper abandonment
• Reclamation with native topsoil and vegetation

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Garfield County

• Land Values and Solutions Study