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HomeMy WebLinkAboutM081790 JEFFERSON COUNTY BOARD OF EQUALIZATION A. C. DALGLEISH DAVID G. DOUGLAS ARCHIE BARBER, JR. JAMES A. DE LEO CHAIRMAN VICE-CHAIRMAN MEMBER ALTERNATE M IN UTE S AUGUST 17,1990 The Board of Equalization convened at 9:00 a.m. with Chairman A.C. Dalgleish, Vice-Chairman David G. Douglas, Member Archie Barber, Jr. and Clerk Dierdrei Keegan present. The Board dis- pensed with the reading of the Minutes of previous meetings and proceeded with the scheduled hearings. HEARINGS SEATTLE FIRST NATIONAL BANK Edward J. Miesen, MAl 1206 E. Pike Street, suite 695 Seattle, Washington 98122 Robert Shold was present on behalf of the Assessor's Office and Robert Barnes was present on behalf of the Department of Revenue (DOR). Dick Cormier of the Department of Revenue was present to observe the proceedings. Chairman Dalgleish swore in Mr. Ed Miesen, MAl who was present on behalf of Seattle First National Bank, and Mr. Barnes (DOR). Mr. Miesen noted that he did not have any objection to a representative from the Assessor's Office or the Department of Revenue being present at an on-site inspec- tion. BOE: 90-021-C (a) BOE: 90-021-C (b) PN: 989 704 206 PN: 989 704 203 Prooertv Description: The description of this property encom- passes both parcel number 989 704 206 which includes some land and the improvements and 989 704 203 which is land only. The land is 33,430 square feet zoned commercial and the building is the Seattle First National Bank, Port Townsend Branch. Board of Equalization Minutes: August 17, 1990 Page: 2 Pro~ertv Descrintion - continued: The bank, constructed in 1976, has a corner location in the central business district of Port Townsend with adjacent neighborhood businesses consisting of retail, grocery, office, churches, apartments, and other banks. The subject bank has two levels, a parking lot, and a three- customer-lane drive-up teller facility. The main level includes 6,127 square feet, the mezzanine is 5,078 square feet for a total square footage of 11,205 square feet. The improvements are considered of average quality and well maintained. The 33,430 square foot site has no slope and is rectangular with average accessibility. One parking space is required for every 200 square feet of gross building area which means that 56 spaces are required for the 11,205 square foot building. The site improvements consist of asphalt, sidewalks, curbs and landscaped areas. Assessed Valuation: Land Only: Improvements: Total Valuation: $ 264,000 697.000 961,000 Petitioner Request: Land Only: Improvements: Total Valuation: $ 264,000 236.000 500,000 Assessed Valuation Breakdown: Parcel Number 989 104 206 LAND: $132,000 IMPROVEMENTS: $697,000 TOTAL: $829,000 Parcel Number 989 104 203 LAND: $132,000 IMPROVEMENTS: NONE TOTAL: $132,000 Parcel Numbers combined: $961,000 * * * Board of Equalization Minutes: August 17, 1990 Page: 3 The following section of Minutes is a verbatim tran- scription of the proceedings for Seafirst National Bank: * * * Petitioner's Testimonv: Edward Miesen. MAl: To begin, I've reviewed the assessed value of a group of properties that Seafirst owns and have selected ones that I think are over- assessed. In light of recent market information, the Port Townsend Branch is one of those. This is the first time that I've appraised this Branch, and I know that it's, that it was brought before the Board of Equalization in previous years, I'm not sure how many times. A couple of years ago? Member Archie Barber. Jr.: In the last eight years. Edward Niesen. MAl: Okay, once. And ah, I, after reviewing this, I believe that one value is correct but that the improve- ment value is too high. The Assessor has a total value of $961,000 and I appraised it at $500,000. I'm going to start by talking about the banking industry, and construction of Branch buildings, and today's market and how it's changed, and that affects the values of this building greatly. This building was built for First American Bank about 1976 and during, there's been a major change in the 1980s in the size of branch banks, mainly caused by deregulation of the banking industry and changes in technology. This building was designed for 30 employees and now they have an average of 10 1/2 employees there. If you go in the building you'll see that half the teller line of, ah, ten teller posi- tions, is totally unused and that three or four teller positions inside are usually occupied. The upstairs portion of this building includes a storage room, some office area surrounding the light wells which goes down to the main floor. And then, another office, sort of storage room/copy room and a very large lunch room, and then a conference room. They really don't use this in the way it was designed and that affects the value. The banking industry, since 1982, has gone through a lot of changes, especially since this one was built in 1976. First of all, the technology of banking has reduced the space needs of a typical branch bank. By branch bank, I mean a full service bank that has a vault, deposit boxes, and one that would offer resid- ential loans and typical checking and savings. It used to be that they designed a building like this and housed a business loan department, commercial banking department, it would have a residential real estate loan department there, it would also do check proofing which is ah, accounting function within the branch, and they'd also have a very large area for storage of Board of Equalization Minutes: August 17, 1990 Page: 4 Edward Miesen. MAr continued: checks as they came in, they would store copies of all those things. Microfiche has changed the need for storage room drastically, they can take a whole room and put it on one shelf now on microfiche. The electronic bank machines, on their teller machines, have been introduced since this one was built and mUltiplied, which has caused the number of visits to a branch to be reduced severely. So this Branch had 10 teller positions, some of them, all of them would have been open at one time on a busy day, and now people are doing their banking at their convenience in grocery stores, Seven Eleven, at other banks, and probably all of us have had experience of that. Another reason that the visits to branch banks have been reduced is that propentionaries and some pay checks are deposited elect- ronically into the customers' account instead of being mailed to the customer and then brought in by the customer. Another way of reducing the number of visits. Let's see if I've missed anything here. Oh, one big thing, those residential loan departments, the commercial banking and business banking, which used to be in this Branch, now are consolidated into a central office, so that if you wanted to make an application for a home loan in Port Town- send, we get an application from this Branch, fill it out, give it to the Branch Manager, and she would immediately send a facsimile copy of that to the home loan center in Seattle which would then approve the credit and go through all of the hoops that they need to go through and then send back an approval of this approval to the Branch Bank. The, most banks have done this. They consolidated their residen- tial loan departments: Washington Mutual, Security Pacific, First Interstate. And in just about every other large branch like this, you see that the trend is very much the same. Banks, since 1982, have had to compete with each other a lot more than they had in prior years. And, and that competition is accelerated even more now as the competition for checking and savings dep- osits is greater. How does this affect the value of the build- ing? Well, this building, as I said, was designed for three times the number of employees that are actually there now. It's not specific to this building, and it's not just a business decision of Seafirst. It's, ah, it's a business decision by the industry that they're consolidating functions using electronics and microfiche to do the work that needs to be done in this Branch. And, so, since 1982, the average size of new construction, and type of new construction. The average size has been reduced from what this one was, which is ah, I believe it's about 11,205 square foot building, down to an average size of maybe anywhere between 1,500 square feet to 3,500 square feet. The average Board of Equalization Minutes: August 17, 1990 Page: 5 Edward Miesen. MAl - continued: size, I, please turn to page four [APPRAISAL REPORT AND REVIEW OF ASSESSED VALUATION PORT TOWNSEND BRANCH SEATTLE FIRST NATIONAL BANK] in the Appraisal Report, do you all have a copy of that? No? Well, okay, I'll just refer to it then. I've listed seven, let's see, eight facilities there that were built by Seafirst, on page four, since 1982. And they range in size from 396 square feet in West Olympia, to a high of 3,400 square feet in Spokane in Wandermere. The average size is 2,100 square feet. Turning to the next page [page 5], there's another trend in branch banking that's emerging which will be multiplied in the future. And ah, that is the placement of branch banks in grocery stores, and in large, specific retail stores like Castco, and Shopco, and Home Club. Those branches are the kiosk type that have ah, maybe four or five employees, two teller positions, they serve the customers of that, of that store and have a synergistic effect with the customers of the grocery store along with their own customers. In other words, people can make one trip instead of a trip to the bank and a trip to the grocery store. Olympic Savings, in my report, I mentioned that Olympic Savings has just placed 18 of these branches in Safeway grocery stores in this State, mainly in the western part and they have a total of 26 branches. So 18 out of the 26 branches are 400 square feet in size. These little branches are replacing the big ones, and the reason they're doing this is to reduce their real estate costs. Banks are just simply not building 10,000 square foot, 11,000; 12,000 square foot branches. And, if they do, they're not going to be around too long because of the cost involved. Now, in the valuation of the subject property, which is downtown, with all that background, the average size, being 2,100 square feet and also knowing that there are smaller branches going in, safeways, which is the trend. Oh, I also wanted to mention one more thing: There's another branch that I didn't put into this report, which is here in Port Townsend. It's First Federal Bank, up on the hill there, and I don't have the exact measurements, but I think it's about 2,000 to 2,500 square feet. And that's built this last year. Does anybody else know? Assessor's Representative: Robert Shold: It's about 2,600. Edward Miesen. MAl: Yeah, about 2,600 square feet, okay. So, so that's a pretty good example of the trend that's happening and it supports the argument. The way I value this Branch Bank, is using all three approaches. The traditional way of assessing these buildings is to merely use Board of Equalization Minutes: August 17, 1990 Page: 6 Edward Miesen. MAl - continued: the Cost Approach. And that, they would take the value of the land and estimate the replacement cost, depreciate that, based on the number of years it's been in existence and leave it at that. Well, cost does not always equal value. And this case, the cost of the replacement of this, this, these improvements is far greater than what it's actually worth. Ah, so, therefore I developed the Income Approach and also developed the Sales Comparison Approach. I think that the Sales Comparison Approach should receive the primary weight, although, ah, all three approaches are somewhat difficult to develop because it's not a lot of activity down at the branch banks. In other words, there, they um, if there are any leases to review on branch banks, they are either out of this area or they are too old or they're, well, just leave it at that. Or, they're of a different quality construction that's impossible to compare. So, what I've done is I've valued the improvements based on typical branch bank size; 3,000 square feet; and I've also valued the rest of the building as office or retail space, recognizing that there's a differential there and the rest of the building has some value, but it doesn't have the same relative value as a branch bank does. Because, if you go in this building, and you walk around, you'll note that it's just a, ah, basically, the upstairs is not necessary. They had a lunchroom up there, but ah, you'll see that there's a vast area that's unused. Empty. There's one desk upstairs, which is used two days a week by a business banker, but they have the space there to put him in this office, and they could easily put that person downstairs. And I think the Branch Manager can point that out to you, in your visit. So anyway, I estimated the income on the Branch Bank at $10 a square foot, that's triple net. The estimated rate of the lunchroom, the storage room, the office area at $5 a square foot, triple net. Now as a full service area, that might be $9 a square foot and $14 a square foot. Um, which is higher than anything downtown, of this size. I don't think YOU'll probably find anything this size that would be available for rent, of this quality. so, it'd be difficult to compare. I used the Capitali- zation Rate of 10 and the Income Approach [Page 12 & 13] indi- cates a value of $470,000. And that's with the 5% vacancy credit which is pretty low considering the market. Now the Cost Approach [Page 8 & 9] was developed, and you can read it if you want, but basically that, the indication is $480,000; and that was used, primarily built with Marshall Swift. It also measures the amount of functional obsolescence in this building, using the reference. Board of Equalization Minutes: August 17, 1990 Page: 7 Edward Miesen. MAI - continued: There have been some recent sales, but our building is 11,205 square feet and a lot of the sales are much smaller around the, well, I have one here that's 1,620 square feet. Chairman A. C. Dalqleish: Excuse me, and you say that building is 11,205 square feet? Edward Miesen. MAI: Right. Chairman A. C. Dalgleish: Thank you. Edward Miesen. HAI: And ah, and you have one comp here in ah; I've gone out, outside of this area because I didn't find any sales here. And, what I've done to analyze these building sales [Valuation by Market Approach - Page 15 - 17J, I've got, ah nine, thirteen sales and I have a couple to add. Ah, what I've done is I've estimated the value of the land at the time of the sale and that's using the comparables and also the Assessor's information. And I've taken that away from the sales price and what's left is the value in improvements. So, the differences of location will be reflected in the land value and what's left over is the depreciated value of improvements. And that, I've used that value of the square foot to compare to this Branch, which is in Port Townsend and while it's not perfect, it's a way that allows you to compare across County lines, a lot more confidently. One of the most recent sales was in Port Orchard and um, Seafirst bought American Marine in about early '89, I believe. Along with that came several branches. Seafirst already had a branch right near this location, and closed the Branch and put it up for sale and it sold in May of '90, just ah, about two months ago, three months ago, for $195,000. And this was built in 1985, it's a, it's a good quality building. So, for $195,000; about 2,961 square feet, and when you take the land value away that indicates just under $31 a square foot for the improvements. And, and this was a fair market transaction. There was no, there were no deposits purchased with it, and no sale/lease back, which can also affect the price. Ah, there are three sales that we used from Snohomish County and they indicate a range from $23.40 to $32.61 for the building only. And then, Kitsap County, the most recent sale there is a building which, I would say is, well, it was built in 1929; remodelled in 1987 and I would say it's not as good quality as, as our subject. That was at, ah $19.74 a square foot, also in May of 1990. Board of Equalization Minutes: August 17, 1990 Page: 8 Edward Miesen. MAI - continued: I'll just mention that yesterday, ah, this one is less comparable, in East Bremerton there's a Pacific First Branch which is 3,900 square feet, which is a lot closer to a suitable size in this market. And that one is going at $360,000, which is reduced five, from $562,000. So, by valuing it based on the Cost Approach, we get the high value, and that value's not fair market value. That's ah, that's a depreciated cost which is a convenient way of assessing prop- erty but it doesn't always hit the market. And that's the way the market, that ah, the depreciated cost is not equal to fair market value. So, in this range, of between $32 a square foot and $55 a square foot, we're in that range on this one with about $45 a square foot. And I think it's worth about $500,000. I also think that if this building were put up for sale, that the user that buys it may not be a Branch Bank. And in that case, the value would be even less. Because, there would be some conversion costs and, the ah, highest and best use as a Branch Bank, to be continued to be used as a Branch Bank; but you'd also have to recognize that the utility of the building has changed since it was built and the market sales and what other Assessor's think, the fair market value has come down to something less than it's cost. so, I'll answer any questions if you want. Chairman A. C. Dalaleish: In other words, you're placing (unintelligible) whatever it is, your valuation on the building, I assume is $236,000? That right? Edward Miesen. MAI: Right. Oh, one more thing, there's a, the lot size is 33,430 square feet and I question whether they needed all that land with that building. too? Chairman A. C. Dalaleish: Including the parking out there Edward Miesen. MAI: Yeah. Yeah. Chairman A. C. Dalgleish: That whole block? Edward Miesen. MAI: Well, we don't own the whole block. Chairman A. C. Dalgleish: Well, no, it's ah...pardon me, the land that the building sits on with the drive in and then the parking all behind it: What'd you say? Board of Equalization Minutes: August 17, 1990 Page: 9 Edward Miesen. MAl: Thirty three thousand, about 33,430. Now, I question whether they needed all that and so I called the Port Townsend Planning Department and asked Darlene Blumfield: How many stalls are required for that bank use? In other words, if they wanted to section off part of it and sell it, could they do that? She said they needed one space for every 200 square feet of gross building area, which amounts to 56 stalls required parking. There are 50 stalls there. So based on this conver- sation it was proven that there was an excess of, and that, that parking required (interrupted). Chairman A. C. Dalaleish: You say it requires 52 stalls? Edward Miesen. MAl: Fifty-six, yeah, that would be 11,205 square feet. Chairman A. C. Dalgleish: In other words, they're using all of it then? Edward Miesen. MAl: Well, I think probably there's some space there that's vacant, but the question is: Would the City allow them to build another building on it and rent it out? And based on her reply, she said to meet 56 stalls, and they have 50, so if they want to section off that land they would have to go through ah, a special process, a conditional use permit or something like that. For the, under the current legal restric- tions on this building, they need 56 spots. Vice-Chairman David Douglas: Actually, the current city requirement in the downtown parking area is becoming one of the most crucial issues. And development in downtown Port Ludlow, ah, Port Townsend, because there are several people that are asking for an opportunity to make major capital improvements and the biggest deterrent to all of them is the availability of parking spaces. And for that reason I think that you have to consider the value of the land that you have to a certain extent. Because of that crisis. As I understand it, one store offered to rent or lease three of their parking stalls and they declined because they wouldn't have met that variance because they were already below the requirements: and if they leased any, why they'd have to get a variance. Edward Miesen. MAl: Right. Vice-Chairman David Doualas: So, it's a very critical parking situation. Edward Miesen. MAl: I think Port Townsend's wise to do that, otherwise you might end up with a traffic jam on main street that people, or whatever, what's the street called? Board of Equalization Minutes: August 17, 1990 Page: 10 DeDUtv Assessor Robert Shold: Water street. Vice-Chairman David DOuglas: Water. Edward Miesen. MAl: Of people looking for parking. Vice-Chairman David Doualas: There are times when people that live in the area don't come to Port Townsend, specifically the weekends when there's a lot of tourist traffic, and parking problems. Edward Miesen. MAl: So my conclusion, that, just wanted to get that last point, is that there's no excess land. If there were I would have taken it out and then added it to the value. You've probably dealt with that before. Chairman A. C. Dalaleish: Any further questions at this time? Mr. Barber? Member Archie Barber. Jr.: I think I'll have to digest the exhibit. Chairma~ A. C. Dalgleish: I wanted to know if you wanted to ask Mr. Miesen anything at this time. Mr. Barnes? Assessor's Testimonv: Robert Barnes. Department of Revenue: Thank you. In 1988 in September of 1988, 1 was requested by the Jefferson county Assessor's Office to conduct an advisory app- raisal on this Seattle First National Bank building in downtown Port Townsend. I inspected the bank and did an investigation of bank sales and rents and concluded that the land value for the sUbject property, there are two planned parcels. I was requested to do one parcel. That was the parcel that has the bank building on it, and 1 estimated the land at $132,000 since we're talking about the entire, or both parcels, ah, that would, the other ( interrupted) . Chairman A. C. Dalgleish: How much, one thirty two? Robert Barnes, Denartment of Revenue: That's correct, and that's the same size as the second parcel, so that is a total land value of $264,000. Edward Miesen. MAl: So we don't disagree? Robert Barnes. DeDartment of Revenue: No. That's correct. We don't disagree. I worked a Marshall and Swift replacement cost estimate for the subject property, classing the building as a Class D building of good quality in very good condition. I estimated the effective age of the building at ten years, using Board of Equalization Minutes: August 17, 1990 Page: 11 Robert Barnes. Department of Revenue - continued: 6,127 square feet which is the mean floor area of the bank, as a bank. six thousand, one hundred, twenty seven square feet. And the second level, where, the mezzanine area of 5,078 square feet, I applied a different cost. A cost from the Marshall Swift Manual, which they indicate is applicable for mezzanines. In reviewing my appraisal I discovered two points, which I wish to correct at this time. I included an adjustment of $1.40 for a heating and cooling and ventilation adjustment and in review of that I entered my formula wrong and instead of adding $1.40 I should have subtracted $1.40 from that. And also, I failed to make an elevator deduction from the Marshall and Swift cost. The cost included in, the cost in the Marshall and Swift Manual includes the cost of an elevator in a Class C building and because the building doesn't have an elevator, that cost needs to be taken out. And the cost estimate of that was $1.70 which would adjust the square foot cost for the bank area to $81.69 per square foot. Chairman A. C. Dalaleish: Eighty-one sixty? Robert Barnes. Department of Revenue: Eighty-one sixty nine. I adjusted that cost for the size of the bank and the perimeter of the bank according to Marshall Swift formula to arrive at an adjusted, or refined square foot cost of $82.54. I applied current cost mUltipliers and a local multiplier to that figure for a final cost estimate of $88.37 per square foot for the main floor of the bank building. I added through, or added to this figure a cost estimate for the canopy and for the asphalt which totalled $15,935 and arrived at a total replacement cost for the main floor of $557,348. I followed the same procedure for the mezzanine. And I noticed in my original appraisal, I failed to adjust for current cost and the local multiplier on the mezzanine. After taking that into consideration, the adjusted square foot cost is $32.52 per square foot. The area of 5,078 square feet indicates a replacement cost of the mezzanine of $165,161. One sixty one. I then depreciated the improvements, again using the Marshall and Swift Manual as a guide. The indication from the Marshall and Swift Manual is that a bank that has an estimated life of 50 years when new, which the class of bank that we're talking about has a 50 year estimated economic life. Taking that into consideration, its' effective age in my original appraisal I estimated at ten, but I have revised that to its actual age of 14 years, indicates a deprecia- tion amount of ten percent (10%). And that's because over the life of a building, a building does not depreciate or lose value in a straight line, but will lose value rapidly at the beginning and then it will level off; and over the years with standard Board of Equalization Minutes: August 17, 1990 Page: 12 Robert Barnes. Deoartment of Revenue - continued: upkeep and repair the value loss will remain at a fairly constant level or a slightly declining level. The total depreciated building cost that I arrived at, on my revised cost approach is $650,000. When the $264,000 total land value is added to that, the total indicated value using the Marshall and Swift Replacement Guide Manual is estimated to be $914,000. Edward Miesen. MAl: Could I ask you a question? Robert Barnes. Department of Revenue: Yes. Edward Miesen. MAl: Is this the same form you used? 'Cause you must have re-worked it. I have a total of eight twenty-nine [$829,000 as the Total Capitalized Value of Property]. Robert Barnes. Deoartment of Revenue: That's correct, I adjusted the cost for the um, I made an error and added in the heating and ventilating cost instead of subtracting that. Edward Miesen. MAl: Okay. Robert Barnes. Deoartment of Revenue: And I also failed to deduct the elevator deduction. Edward Niesen. MAl: Okay. Robert Barnes. Det)artment of Revenue: This is a copy of my revised (interrupted). Chairman A. C. Dalaleish: So your total replacement cost is $914,000. Robert Barnes. Deoartment of Revenue: The total value isn't the Marshall and Swift. The actual depreciated replacement cost of the building is $697,000 rounded off. Or, no, I'm sorry, that's the wrong sheet, $650,000 rounded off. For the Income Approach to value, when I did my investigation I looked for bank leases and I located, or at that time I was aware of two leases in Grays Harbor area for banking facilities. And since then, I have located several others in the Grays Harbor area. At the time that I did the appraisal I had the information from a Rainier Bank Branch in Montesano, which was 4,000 square feet in size, 4,009 square feet, Class C building, good quality, which leased on a triple net basis, $12 a square foot. I ob- tained this from the Branch Manager of that bank in 1988. Chairman A. C. Dalaleish: Twelve dollars a square foot? Board of Equal.ization Minutes: August 17, 1990 Page: 13 Robert Barnes. Department of Revenue: Twelve dollars a square foot on a net, triple net basis. And in 1987 I obtained information from the Branch Manager of a Rainier Bank in Aber- deen, and Rainier Bank is now Security Pacific Bank. From a Class C, good quality bank, that was 15,481 square feet, in 1987 it, net rent that was paid was $13.16 per square foot. The Grays Harbor County Assessor's Office has since re-checked that infor- mation in 1989 and at that time they were paying $17.83 per square foot on a triple net basis. Chairman A. C. Dalqleish: Seventeen what? Robert Barnes. DeDartment of Revenue: Seventeen dollars and eighty-three cents. In the Grays Harbor area there are also three other Security Pacific Banks which are paying net lease, triple net leases, lease payments for their area: One is in Elma. It's a 6,110 square foot Class D, average quality bank which rents for $9.00 a square foot. Now this information's obtained by the Grays Harbor County Assessor's Office from the Branch Manager in 1990. There's a Security Pacific Branch in McCleary, which is a Class D building of fair quality, 2,608 square feet, the annual rent that is paid on that is $8.00 per square foot. Grays Harbor Assessor's Office obtained that information from the Branch Manager in 1989. There's a Security Pacific Bank in Oakville which is a Class C, average quality bank, this bank was built in 1909 but remodeled in 1982. It's a significantly smaller bank than the subject that we're talking about. It has 1,062 square feet but the annual rent on a triple net basis for that bank is $20.53 per square foot. That was obtained in 1988 from the Grays Harbor county Assessor's Office. And the Oakville Branch also sold for $208,865 in July of 1988. But because of size, it's not comparable with our sUbject property. Now on this basis, and talking to ah, talking with several Bank Managers and personnel, I determined that $12 per square foot on a net basis for the bank lease would be market rent for the subject property. Then taking into consideration the mezzanine, I determined that if that bank were to be on the open market for lease at that time, in 1989, that it probably wouldn't lease at the same rate as a branch bank. At that time I determined that $5 per square Board of Equalization Minutes: August 17, 1990 Page: 14 Robert Barnes. Department of Revenue - continued: foot on a full service basis with 25 percent expenses for maintenance and operations, upkeep of that area, would be sufficient. And that indicated a total of fair market rent on an annual basis for the subject property of $98,914. I estimated vacancy and credit loss allowance for the subject property at 10 percent, which at that time, was pretty typical in the ah, that may be a little high, and right now that's a 10 percent vacancy and credit loss allowance, would be a fair amount. Edward Miesen. MAl: But that only applies to the mezzanine area. Because twenty-five thirty-nine is 10 percent of: Do you guys have this page? it. Chairman A. C. Dalaleish: No, we're going to have to review Edward Miesen. MAl: I think you should get copies of this because I'd like to talk about it. Robert Barnes. Denartment of Revenue: I think the one that he's referring to is in, is, is from the appraisal. Edward Miesen. MAl: Yeah. Robert Barnes. Denartment of Revenue: See this? Edward Niesen. MAl: I called you [about], and thirty-nine is 10 percent area. I called you about this. This is what then you said, well that twenty-five of the mezzanine area, not the total * * * * * A break was taken to enable the Clerk to make copies of the papers being reviewed before transcription continued. * * * * * Edward Miesen. MAl: Well, we were at this ah, point on the vacancy, and I want to point out that although he said that there's a 10 percent amount for vacancy, he's only applied that to the mezzanine area. Robert Barnes. Department of Revenue: That's correct, and that was, at that time I felt that because the Bank was owner occupied, that now this was at the time of appraisal, the bank was owner occupied that they wouldn't experience vacancy because Board of Equalization Minutes: August 17, 1990 Page: 15 Robert Barnes. Department of Revenue - continued: if the property were to be put on the market, then there, there is the potential for a vacancy credit loss. So I have the, some adjust- ments to that figure. And this, well, I don't know, I'll have to do an analysis of that type of building, that is Class D. And Mr. Mock told me that they reserved some of the excess land that they purchased for that site for a future expansion of the Branch. There's a possibility that they may be expanding the size of that branch. And also, Interwest Savings and Loan, last year, increased their size from roughly 3,000 square feet of banking area to just under 5,000 square feet of banking area. So the contention that 3,000 square feet of banking area is all that he needs is a little miSleading. Vice-Chairman Douglas: Do we have any information on the evaluation of the savings and Loan there, greater, ah Great Northwest Savings and Loan? That's, that's a brick building. Edward Miesen. MAl: I don't have it with me. Vice-Chairman Douqlas: probably take a look at that terms of valuation. No, I don't mean with you. We could and see what's going on there in Chairman A. C. Dalgleish: Well Gentlemen, we can play shuttlecock with this thing back and forth. Do you have anything to add to that? Edward Miesen. MAl: I just want to say that I don't see ( interrupted) . Chairman A. C. Dalgleish: We're going to have to do some; without any ballpark guessing on this thing. Edward Miesen. MAl: Yeah, and you can call me if you have any questions. I may want to go down and look at it, just once more, and look around upstairs. But, ah, when you re-worked the appraisal today, I want to make this clear that you recommend a change from $961,000 to $791,000. Robert Barnes. DeDartment of Revenue: ninety one thousand. Yes I do. Correcting the best thing on that. Seven hundred and the report would be Chairman A. C. Dalqleish: We have made note of that. Board of Equalization Minutes: August 17, 1990 Page: 16 Robert Barnes. Deoartment of Revenue: say that in my opinion there is a potential be converted to other uses at minimal cost. best use of that building is not limited to I would just like to for that building to So the highest and a branch bank. Chairman A. C. Dalaleish: Mr. Barber, do you have any questions? Member Archie Barber. Jr.: Mr. Barnes, what you just said, that the facilities are adaptable to other businesses, would that be as broad as multiple businesses in there or a business? Robert Barnes. Deoartment of Revenue: It would probably be limited to a business without substantial remodelling and cost to the building. It would have to be to a building, to a business, to a county organization, or maybe, possibly the City to extend their offices. Edward Miesen. MAl: So do you think that, I know you want to wrap this up, but do you think that it would be worth more as something other than a bank? Robert Barnes. Department of Revenue: I think the building has a value because it's there. I don't think that the current use of that building should be construed to restrict the building potential, I guess. Edward Miesen. MAl: 'Cause, when I said that I think the highest value would be as a branch bank, and to appraise it as an office or retail building, you come up with a lower value than that, appraised at here. So. Robert Barnes. Deoartment of Revenue: Then I submitted the sale of a Credit Union Building that was converted to an office, which indicates a substantially higher value than either of your approaches and also speaking of your appraisal, I would like to ask you, I guess, to confirm your statement at the closing of your appraisal that based upon the previous analysis and placing emphasis on the cost and income approaches that they indicated for market value of the sUbject property is etc. Do you still feel that primary emphasis should be placed on the cost and the income approaches to value for the property? Or are you stating that the sales that you submitted should be (interrupted). Edward Miesen. MAl: I think, well, I'm considering adding them together, and I believe the value is 500,000. Ah, one thing I want to mention too, this is from Bart Phillips, do you know Bart Phillips? Real estate agent in town? Clerk Keeaan: Economic Development Council. Board of Equalization Minutes: August 17, 1990 Page: 17 Edward Miesen. MAl: Oh, Economic Development Cancel. Clerk Keeaan: Council. Edward Miesen. MAl: He says that typical rates for first floor Water Street locations are 75 cents a square foot and $9.00 per square foot per year. The second floor is 40 cents per square foot, or $4.80 a square foot per year. Now I've used $5.00 for the upper, which is pretty much in line with that and ah, my rate for the bank is $10.00 which is higher. That's why I'm making that statement, I think this value's highest and best use. Robert Barnes. Department of Revepue: Also, I wanted to thank the Commission for reminding me of this. On your income approach you, there's roughly 2,900 square feet of area that you attribute no value to at all. No leasable value, and I think that, if that building were to be put on the market to be leased, that that area would command a rent. If you're going to lease a building you either lease it on a gross leasable area or you lease it on a net rent or net, net usable area. And, if you rent it on a gross leasable area and you pay a substantially lower amount than you would if you were doing it on a net usable area. Vice-Chairman David Douglas: In other words, you're saying that a different type of use they'd use all the area, whereas his evaluation was that there was a certain portion of the raised mezzanine that was not usable at all. Edward Miesen. MAl: And the areas, I have the ah, arch- itects calculation of the building and it lists the areas that are office, teller lines, and so forth. You're applying rent to the stairwell, now no one's going to pay rent for the stairwell. There's two stairwells in there. Also, there's (interrupted). Robert Barnes. Department of Revenue: I beg to differ with that. I, the office at our building which is, leased that building, gross leasable area, and pay a rent for everything including the stairwell, and there's three sets of stairways. Edward Miesen. MAl: Well, the rent can always be adjusted to reflect something that is equivalent to usable area. Robert Barnes. Decartment of Revenue: Well, correct, that was what I was saying about gross leasable area and net usable area. I mean there's a difference, but the differences are reflected in the rents they can pay. You take a net usable area and you pay substantially higher amount per square foot, than if you're leasing the entire building. Board of Equalization Minutes: August 17, 1990 Page: 18 Vice-ChairmR~ David DOU9las: You take the, I can't remember the name of it, something or other [Flagship Landing] Landing down there where they have used the second floor, but a large portion of this is not there, I mean its just like the bank, you look down from the upper floor and I'm sure that the rents on that thing are based on the net rate usable area and for each floor. Robert Barnes. Denartment of Revenue: Right, and just because an area isn't being utilized, doesn't mean it doesn't provide some value to that business. A lobby area, you know maybe it has plants, etcetera in it, and they create an aesthetic value to customers coming in. And they may like to come into that particular building because it's a nice setting. So there is some value in these areas here. Chairman A. C. Dalqleish: I think we've discussed this, unless you've got another question? * * * End of verbatim transcription. * * * Denartment of Revenue Exhibits: Exhibit #la: Exhibit #1b: Exhibit #2: Exhibit #3: Exhibit #4: Exhibit #5: Income Analysis as originally presented. Income Analysis as corrected during hearing. Bank Lease comparables. Calculator Cost Form. Database Information from Shelton, WA re: Sale of Simpson Credit Union A Corrected Version of Income Analysis from Robert Barnes as stated in the hearing. Exhibit #6: Board of Equalization Information: Exhibit #7: sign In Sheet. Copy of 1987 File Information from Seattle First National Bank Appeals: BOE 87-048-C and BOE 87- 049-R. Board of Equali~ation Minutes: August 17, 1990 Page: 19 Seattle First National Bank Exhibit: Exhibit #8: Miesen and Associates Analysis "Appraisal Report And Review of Assessed Valuation Port Townsend Branch Seattle First National Bank". Board Action: After reviewing the exhibits presented by Mr. Miesen and Mr. Barnes, the Board took the petition under advise- ment. An on-site inspection was scheduled. BERG, Thomas 281 Old Schoolhouse Sequim, Washington BOE: 90-007-LO PN: 902 042 025 Road 98382 CONTINUED FROM MINUTES OF JULY 19. 1990. (Qages 8 and 9) The Board and Clerk were present as were Robert Kingsley on behalf of the Assessor's Office, and Mr. Thomas Berg. The Board made note that they conducted an on-site inspection of the sUbject property on August 10, 1990. Legal DescriDtion: This unimproved site is 54 T29 R2W, Tax 27, 1.36 acres in Jefferson County, Neighborhood Code 5411, and Land Use Code 9100. Petitioner Testimony: Mr. Berg noted that the last time Mr. Kingsley had completed a residential appraisal he'd found that the sale price was $6,500 on his listing. Mr. Berg maintains that this is not the sale price, but that it was a dispropor- tioning of the money by the title insurance company. He explained that he paid $20,000 for the whole 4.86 acres of land, 1.36 of which is in Jefferson County. The previous sale of the same property was around $23,000 a few years ago. He thinks that the money should have been proportionate with the acreage. Mr. Berg stated that the 1.36 fraction of property in Jefferson County should be valued at about $5,500 [$20,000 divided by 4.86 = $4,115 x 1.36 = $5,597 rounded up to the nearest dollar]. Mr. Berg also explained that when $6,500 of the sale was allocated to Jefferson County, Clallam County didn't like the $13,500 left so the County immediately reassessed the property to $14,240 for 3.5 acres for a total of $4,068.57 an acre. Mr. Berg feels the Jefferson County portion of the property should be valued at $3,000 [$3,000 divided by 1.36 = $2,205.88 an acre]. Board of Equalization Minutes: August 17, 1990 Page: 20 Assessor's Testimony: Mr. Kingsley explained that he called Clallam County and that they made a note on their worksheet to take into consideration the overall valuation and to contact Jefferson County to come to an agreement regarding the revalua- tion in 1991. The Assessor provided the following exhibits: Exhibit #1: Exhibit #2: Exhibit #3: Exhibit #4: Exhibit #5: Residential Appraisal Report on subject property. Computer Field Sheet for subject property. Statutory Warranty Deed for subject property. Real Estate Excise Tax Form for subject property. Irregular Tract map for sUbject property. Board OUestions: Vice-Chairman Douglas confirmed that the home on the property is on the Clallam County side. Chairman Dalgleish asked why the petitioner purchased this property? Mr. Berg explained that he bought the property for wood and that although the previous owners considered building a log cabin, he felt the land was too hilly to build on. He noted that the previous owner claimed to have a septic there. Vice-Chairman Douglas asked if there were any sales in the immediate area? Robert Kingsley explained that there may be sales in the area, but he has not researched this as he felt the subject property unique in being in the middle of a switchback. He noted that he thought adjustments would have to be made for topography and use reasons. He did not present comparables. Board Action: The Board took the petition under advisement and decided to make a determination after further consideration. BOard of Equalization Minutes: August 17, 1990 Page: 21 OTHER BUSINESS OF THE BOARD There being no further business before the Board, the Board adjourned until September 5, 1990. APPROVED BY: DATE APPROVED: XTO/!;E/l }7. /990 . ~-I~I A.C.D SH, CHAIRMAN ATTESTED ~A'Q tm!~~ ARCHIE L. ER, JR., ER