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Case Study

Wetlands Valuation: Everglades and Big Cypress Assignment for the U.S. Department of Justice
Henry Wise

Background
In 1997 the Justice Department retained Pritchett, Ball & Wise, Inc. to undertake a market study to determine the variables that affect the value of the South Florida wetlands. The Corps of Engineers (Corps) and the National Park Service (NPS) were to acquire approximately 300,000-acres to expand the Everglades National Park and the Big Cypress National Preserve and to redo the plumbing of the L31-N Canal to recharge, rather than drain, the Everglades. The property was to be acquired from approximately 10,000 owners and Justice expected to have to condemn about 20 percent of the parcels. Real estate appraisers were to be hired to be testifying expert witnesses for Justice’s specific cases. The purpose of our study was to give the appraisers some guidance concerning the variables that mattered as they considered this relatively undifferentiated property.

Process
We began with a database made up of all of the sales comparables reported in appraisals prepared for the Corps, the NPS, the South Florida Water Management Agency and any other governmental or quasi-governmental agency that had commissioned appraisals of these wetlands over the past twenty years. We had about 2,500 sales. Many reported sales were duplicates of other reports on the same transaction written up by another appraiser. We recorded all of the data we could on each parcel from each appraiser’s comments. We reconciled conflicting information as best we could, reverified the transaction data with either the buyer or seller, geocoded the data and flew to inspect each parcel. We may be the only people, including the buyer and or the seller, who could actually testify to having seen the parcels. When we were finished, we had a data set for the Everglades of 362 sales and a data set for the Big Cypress of 360 sales. We had about 180 potential explanatory (independent) variables counting the interaction variables (like size of track and type of access). The dependent variable, for the most part, was “price per acre”.

We used three analytical tools to determine the variables that actually affected the value of these parcels. The most reliable is a stepwise multi-linear regression model at a 0.05 rejection region using SPSS. Once we knew the variables that were statistically significant, we used matched pairs to illustrate the differences “caused” by the independent variables.

Finally, we interviewed a “panel of experts” made up of brokers, buyers and sellers, regulatory officials, etc. concerning what we believed we were observing from our statistics. We found that there were at lease eight variables that an appraiser must consider when selecting comparables on the east side of the State (Everglades) and twelve that he or she must consider when appraising on the west side of the State (Big Cypress).

Additional Information
The Everglades report was released under FOA and may be downloaded here.

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