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Mr. Dennis Welsch January 6,2004 Page 2 Before advising the City on how to respond to this demand for an additional $25,000 to $30,000 in compensation, I delved into these issues further in order to assess the strength of the landowner's arguments. Counsel for Mr. Garley arranged for a conference call with his appraiser, so I was able to question the appraiser directly on his position. I then spoke to both Eric Bjorkland and Jason Messner, the City's appraisers, about the arguments that were made. With respect to the parking space issue, the City's code requires two spaces for each rental unit, which means a minimum of 190 spaces for the 95 units. The City's appraisers stated in their report that, while several spaces were lost because of the new street, there were still over 190 spaces left after the taking, so the code requirements are met and there are no damages for that issue by itself. The landowner's appraiser states that the parking lot had 190 spaces before the taking, and only 181 to 183 afterwards, as evidenced by the professional striping job that was completed. Mr. Bjorkland questions the accuracy of that statement. The only way to figure this out for certain is for someone from the City to count the current spaces and verify that they were striped properly (proper width and so forth). Only then will we know if there is an issue here warranting additional consideration. The reduced rent issue is a little more complicated. In a partial taking such as this, severance damages are typically appropriate, and those damages are measured by the difference between the value of the property immediately before the taking and the value afterwards. The method by which that valuation is accomplished is not dictated by law; it is up to the appraisers. The City's appraisers utilized both the sales comparison approach and the income analysis approach to determine which worked better. Typically, in an investment property such as this, the income approach is most appropriate. Here, however, the difference between the before and after valuations using the income approach resulted in a damages of only $20,000. That is the total estimated impact to the income stream of this property as a result of building the new street. Or, to put it another way, the land taken accounted for only $20,000 of the future income ofthis parcel ofpropeliy. Simply valuing the land, as opposed to income, on the other hand, results in damages of $55,000. In other words, if we ignore the income being generated from the land and just look at the land itself as if it were vacant, the total parcel will drop in value by $55,000 simply because there is less land than before. What this shows is that the land is worth more vacant than as a factor in generating rental income for this apartment complex. That is because none of the apartments are actually on the land that is being taken. Because using this approach resulted in a larger figure, it was used as the measure of compensation by the City's appraisers. Mr. Garley's appraiser is not arguing about the $55,000 calculation. Rather, he insists that the rental income loss of $20,000 must be added to the $55,000 as a fonn of severance