Highest and best use

Highest and best use of prime London riverfront?

Mayor Rossing has used the term “highest and best use” in the context of several projects in recent weeks with the latest iteration applied to the proposed relocation of the old depot to the Q Block.  As in: “Would relocating the depot to the Q Block be the highest and best use of that property?”

“Highest and best use” is a term from real estate valuation and appraisal; it is a useful tool for considering land value and a developer’s possible return on investment.

Used casually, however, I’d suggest the term is aimed at defeating or at least questioning the desirability of a project.  “Highest” and “best” are absolute terms, after all, so any doubt about a project tends to create the impression that it is too low and not good enough.  Used in public policy, as when Northfield tries to determine the highest and best use of a piece of property, the immediate analogy would suggest the city is playing the same role as a private developer and maximizing the profit on that specific piece of land.  I’d argue, however, that city government usually needs to look beyond the parcel in question to determine value and that public use of property may not be the highest dollar value, but could be the highest community value.

But, let’s think about this in policy terms relative to current events in Northfield: Depot and public safety facilities.  Here’s a short definition of highest and best use:

The highest and best use generally is the use that is reasonably probable, physically possible, supported by the market, and returns the highest value to the land. The final estimate of highest and best use should be defensible, the logic internally consistent, and the conclusions well supported and documented by facts as well as opinions.

Physically possible:  I’d say this is more like “buildable at an acceptable cost.”  Physically imperfect sites can be made usable by extensive grading, soil correction, flood mitigation, etc. all of which cost money.  Take the Council’s public safety site selection process as an example.

The physical limitations of the current Safety Center site (small, floodplain, difficult highway access) make its reuse problematic at best.   Some have claimed reusing the current building for police would be the most cost effective.  Others have countered that the flood mitigation, renovation of the building, and other site related costs make it too expensive.

For those who wonder why the Council can’t seem to decide on another site for either a combined or separate facility, the physical limitations are the biggest issue.  Of the sites considered, size, topography, infrastructure location (where the pipes and wires are placed on the site), and highway access are issues in each of them.  The Council determined that central location was required; public policy has thus constrained the choice of site and raised the cost.

Supported by the market and returns the highest value: This does not fit neatly into a public sector analysis for a couple of reasons.  One thing governments do is provide public goods.  We levy taxes and use that revenue to provide services for which there is not or should not be a private market.  I’d throw public safety and transit (to a lesser extent) into the public goods basket.  If we have policy goals of providing fire and police protection for all Northfielders (24/7 without a charge per incident) and incentivizing transit use for a variety of reasons (reducing vehicle miles traveled, providing low cost transportation for those without cars, saving fuel, reducing pollution, etc.), using land for facilities for these purposes is unlikely to be either supported by the market or return the highest value.  For the Depot, there is the additional value of historic preservation to figure into the calculations.

Government should consider what market-driven use a public use of the land might displace.  If, for example, we decided to use The Crossings site for public safety (it’s on the list), this land is at a highly visible intersection on Highway 3, but proximate to Division Street and the heart of downtown along with a substantial amount of Cannon River frontage.  It’s well worth considering whether there is a private, revenue and tax producing use which might a higher and better use of this site.

The same question should be asked of the proposed Depot location on the Q-Block.  The Crossings project was supposed to redevelop the old Kump lumber yard site, but economics short-circuited it.  The Q-Block has been talked about as a redevelopment opportunity for decades, but nothing has jump started that process.  Would placing the Depot (which would be privately owned on publicly owned land) on the Q-Block be a useful catalyst for redevelopment or a deterrent?  What else might the City do with its Q Block property?

Defensible, consistent, supported, and documented:  For government, this is key.  We’re spending your money which we take via taxes without asking you whether you like it or not.    The latest Public Safety activity is to form groups to develop “shared facts” about the sites under consideration and about the reuse of the current building (Yes, we should have done this at least a year ago, but it took our newly elected Council members to articulate the need and Administrator Tim Madigan to construct the process).  The outcome, I hope, will be concise information about proposed sites and the current building which will make the Council’s decision making easier and inform the public about how that choice was made.

The Save the Northfield Depot group has done a lot of homework for the Council (see their report in the Council packet from March 15) in terms of documentation.  The Council now needs to use that plus our own research about costs, process, and alternative uses of the site to make a defensible, etc. decision.

And finally, government also has a role in determining the highest and best use of almost all property through our tax policy, zoning regulations, development fees and exactions which add to the cost of any development and create incentives and obstacles to what might be developed.  We should be keeping this fact of governing in mind as we make our decisions to ensure that the consequences are intended.