Report on the value of Central
The most important considerations for the sale of our Central Property are 1. what we can sell it for, and 2. the financial impact on the District for failing to sell it. This email addresses the first question and to that end I am attaching the report that gives us the best idea of the Central property’s value.
The last serious appraisal of the Central site by Ramsland and Vigen was conducted in 2006. On page 11 it lists a “value-in-use” for Central of $30.3 million. This figure was used to justify not selling the Central to the Duluth Public Schools Academy. But that value is carefully explained as the value of a working school to ISD 709 which is what Central was in 2006. There is another figure on page 11 that was a more realistic sales price for the entire property $13.7million. You can find it listed on the chart on page 11 under “Alternate Use Value.”But even this turns out to be an unrealistic sales price for the property. It is the land value of Central that makes it sellable and the “land value” is listed as $8 million in the chart. As for the three buildings you can derive their value by subtracting the land value from the Alternate use value or $13.7 million minus $8 million. The three buildings were thus assigned a value of $5.7 million dollars ten years ago while they were still functioning as schools.
The report explains on page 2 “The alternate use analysis might be considered a worst case scenario. It is noted that there was no attempt to estimate the cost to raze any of the buildings for the purposes of reusing or to maximize an alternate land value…”
We have been given an estimate of the cost to raze Central by our facilities manager that ranges from $1 to $2 million dollars. Assuming that there are no buyers who want these three school buildings we will likely have to raze the building ourselves or subtract a minimum of $1 million for demolition from our asking price. In 2006 at the height of a national home building boom the land value would have been in the neighborhood of $7 million dollars.
The City recently rezoned parts of the sellable property at the site to be kept as nature trails which further reduces the land’s value.
And there is more to consider. A 2014 Report on potential development on the Central site paid for by DEDA and prepared by Cuningham Group Architecture, Inc. offers additional insights on the land. It notes on pages 14 that some sellable portions of the land should not be developed further reducing the land’s value. The report says, “The wooded acres along the perimeter of the site minimize erosion of the hillside by keeping the soil in place and capturing storm water runoff. This plan recommends maintaining this area as much as possible.” It continues on page 15, “In 2012, a large storm event caused massive flooding and damage in Duluth and highlighted the City’s unique storm water management issues.” Thus building on some portions of the Central site increase the flood threat below the hill and should be discouraged.
Mr. Vigen told me that the values placed on Central are “salvage” values. He mentioned that the building has also been stripped since its closing of cabinets and possibly other valuables that further diminish its value.
He has told me that he would be happy to explain the report to the Board Monday in a closed meeting should we hold it. I have explained that we may choose to do all our talking publicly so there is no guarantee that Mr. Vigen will address us although he plans to attend the meeting.
I’m going off to sing at St. Scholastica in half and hour. I’ll try to set up a link to this report later this weekend.
