The Value of an Acre

The value of an acre is often considered in relation to its profit potential as a commodity, but rarely considered in relation to its public revenue potential as a shared investment in the future.

INTRODUCTION

There are few, if any, municipal jurisdictions equipped to accurately appraise the revenue potential of acres within their zones at the present time. They know what they are producing but they cannot accurately predict potential options. They may not even know their total average annual expense per acre. This means they cannot accurately compare or plan to adjust the revenue produced in relation to the increasing cost of their operations, maintenance, improvement, and debt service.

If the total annual revenue received from a property owner were converted to the revenue received per buildable acre owned, it could be compared to a jurisdiction’s total annual cost of operations, maintenance, improvement, and debt service per buildable acre. If it were, we would have a much better picture of a city’s economic health at the cellular level of its anatomy - and the development strategy needed to maintain or improve this performance in the future.

Public revenue in this context is the total revenue per gross building area square foot that can be expected from the activity planned, present, or permitted. It would be unrealistic to expect that every property and every zone in a city would be producing surplus revenue per buildable acre when compared to a city’s total annual expense per acre, but the combined average must produce the total public revenue per acre required to avoid future reductions in service.

Most cities rely on past history and future projections built on a history of expense that either ignores, or is unaware of, the true cost of annual infrastructure maintenance, to say the least. Annexation makes new revenue look like the answer until age again begins to increase its total service and maintenance expense per acre. The annexation trap is easily concealed by the years it takes to emerge as a problem, but the absence of analytical data makes it a potential Ponzi scheme based on expedient solutions from short-term office holders and hope that this revenue will be adequate; but hope has never been a strategy.

THE THREE-DIMENSIONAL ISSUE

The problem is three-dimensional. It has been called “urban design” or “city design” and is generally placed in the realm of fine art since the options have had a subjective foundation defended with opinion and experience. I have written many essays explaining that the options can be defined with mathematical algorithms. They are used to correlate related design specification values entered in the specification module of a building category forecast model. The master equation in the model produces a forecast of the shelter capacity, intensity, intrusion, and dominance implications implied by the values entered. Optional implications can be tested by changing the values entered with a few keystrokes.

Shelter capacity is occupied by activities that have revenue implications. At the present time this is more of a guessing game than the product of rational evaluation and comprehensive planning. We are faced with isolated data silos and missing relational databases that are needed to correlate shelter capacity and intensity options with the revenue potential of permitted activity.

ECONOMIC PERFORMANCE

Economic performance is partially a function of the building capacity available or permitted per buildable acre to shelter taxable activity in a city. Some of these acres shelter activity that produces less than a city’s average annual cost per acre. Some produce far more, but there is no three-dimensional display that correlates shelter capacity, activity, intensity, and context with the revenue needed to sustain a desirable quality of life within geographic limits.

Before I go any further, “shelter capacity” is gross building area in sq. ft. divided by the buildable acres allocated to serve the building. Physical “intensity” is shelter capacity times the total impervious cover percentage present or planned divided by 10,000. If this is confusing, please refer to some of my earlier essays that discuss building design categories, the components of their shelter capacity forecast models, and their predictions in detail.

The challenge to produce an inter-active, three-dimensional display of shelter capacity, activity, intensity and economic performance is not a simple one. The prediction of options can only begin with a new mathematical ability to predict the gross building area alternatives associated with optional design specification values assigned to a given building design category forecast model and land area. Math is the foundation for correlated urban design and economic development evaluation since gross building area options can be occupied by any activity, and the relationship of building area to occupant activity sets the stage for revenue potential.

The standardized value topics in a forecast model can also be used to measure, record, and evaluate the shelter capacity of existing parcels on a systematic basis, and correlate these measurements with their calculated intensity and context implications.

Our inability to correlate building design categories and design specification values for every acre within a city has handicapped our ability to correlate shelter capacity, activity, and intensity to achieve and adjust the economic performance needed to support a desired quality of life for growing populations within geographic limits. In my opinion, sprawl and excessive intensity have resulted from this inability to correlate design decisions with the math that is an unrecognized foundation for the leadership decisions involved.

POSTSCRIPT

An acre has a higher value when slated for consumption as a commodity than when designated for preservation as a source of life. This is logic that begs for appraisal on a planet that will enforce its Law of Limits without compromise.

Walter M. Hosack: March, 2024