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2010-05-17 Finding of Fact and Conclusion of Law, May 10 and May 11, 2010 MeetingIrmo , ,POO ' Oin Ma 110 and Ma 11, 2010, the Board of E held meetin in the Kodiak Island Borou Assembl Chambers to, hear appeals of assessed values, pursuIant to KIB Code 3.35.050 The attached document reflects, the Findin of Fact and Conclusions of Law Issued'b the Board of'E . ... ...... . ......... . . . . . land, Chair ATTEST: Nova. lavier, Mm , t r h Clerk DOCKET 2010 -001 Property Owner: Mel Stephens Property: 3422 Tona Lane Legal: Lot 16 Tona Subdivision Appeal: Property owner contends that the assessment is unequal, excessive, and improper. The appraiser stated that the subject was reassessed as part of a neighborhood wide re- assessment of ocean front properties located in subdivisions with public sewer and water. A review of ocean front properties was also conducted to assure that the assessment of the subject property was not unequal. A list of ocean front properties along Cliffside Road, Spruce Cape and Tona Lane showed that. The subject assessment is well bracketed by these assessments. As a result the assessed value of $174,287 is considered to be appropriate. Appellant raised issues that the assessed value is improper, excessive, and unequal. Included in his exhibits are several listings, only one of which is an ocean front listing. Further investigation into this listing found that the property was under contract and given the current market asking to sales price ratio of about 95% would indicate that this property listing /pending sale would well support the current assessed value. Discussing the comparable sales of ocean front lots that were used for the land schedule the assessor pointed out that the value of said lots is within a very narrow band, from about $180,000 to $225,000 for lots ranging from 12,000 square feet to 40,000 square feet dispelling the appellants analysis that his lot was similar in value to lots of differing sizes which would indicate an unequal assessment. The methods utilized to appraise the subject property are sound assessing practice and are market based. The appellant also states that Borough code 3.35.040.E4 (Actually 3.35.050.E4) stating that the appellant bears the burden of proof is unenforceable. This is contrary to State Statute 29.45.210 paragraph b which states "The appellant bears the burden of proof. The only grounds for adjustment of assessment are proof of unequal, excessive, improper, or under valuation based on facts that are stated in a valid written appeal or proven at the appeal hearing." In supporting the assessed value of $174,287 the board found that the assessment is not unequal, excessive, or improper and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. 2010 BOE Findings of Fact Page 1 of 15 DOCKET 2010 -002 Property Owner: Mel Stephens Property: 3460 Tona Lane Legal: Lot 15 Tona Subdivision Appeal: Property owner contends that the assessment is unequal, excessive, and improper. The appraiser stated that the subject was reassessed as part of a neighborhood wide re- assessment of ocean front properties located in subdivisions with public sewer and water. A review of ocean front property assessments was also conducted to assure that the assessment of the subject property was not unequal. A list of ocean front properties along Cliffside Road, Spruce Cape and Tona Lane showed that the subject assessment is well bracketed by these assessments. As a result the assessed value of $174,287 is considered to be appropriate. Appellant raised issues that the assessed value is improper, excessive, and unequal. Included in his exhibits are several listings, only one of which is an ocean front residential listing. Further investigation into this listing found that the property was under contract and given the current market asking to sales price ratio of about 95% would indicate that this property listing /pending sale would well support the current assessed value. Discussing the comparable sales of ocean front lots that were used for the land schedule the assessor pointed out that the value of said lots is within a very narrow band, from about $180,000 to $225,000 for lots ranging from 12,000 square feet to 40,000 square feet dispelling the appellants analysis that his lot was similar in value to lots of differing sizes which would indicate an unequal assessment. The methods utilized to appraise the subject property are sound assessing practice and are market based. The assessor stated that re- assessing a neighborhoods land value and not the improvement value at the same time is not atypical in re- assessments and does not produce a value that is fraudulent nor does it adopt a fundamentally wrong principle of valuation. The assessment is not unequal, excessive, or improper. Also, the appellant states that Borough code 3.35.040.E4 (actual code is 3.35.050.E4 stating that the appellant bears the burden of proof is unenforceable. This is contrary to State Statute 29.45.210 paragraph b which states "The appellant bears the burden of proof. The only grounds for adjustment of assessment are proof of unequal, excessive, improper, or under valuation based on facts that are stated in a valid written appeal or proven at the appeal hearing." Upheld by court case included in the packet CH Kelly Trust v. Anchorage Board of Equalization (1/26/96), 909 P 2d 1381. In supporting the assessed value of $485,568 the board found that the assessment is not unequal, excessive, or improper and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. 2010 BOE Findings of Fact Page 2 of 15 DOCKET 2010 -003 Property Owner: Kenneth and Ellen Lester Property: 1528 E. Kouskov Street Legal: Lot 9A, Block 8 Leite Addition Appellant claims that the assessment is unequal and excessive. The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. Discussion included the fact that part of the subject property is not developable as it is now considered tidelands. Assessor noted that most of the sales utilized in the land module were ocean front properties that had lost part of the site to attrition to wave action and were similar. In supporting the assessed value of $302,376, the board found that the assessment was not unequal or excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -004 - WITHDRAWN DOCKET 2010 -005 Property Owner: Ronald and Mary Doubt Property: 1010 Stellar Way Legal: Lot 5A, Block 32 East Addition Appellant claims that the assessment is excessive. The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. In supporting the assessed value of $383,013 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -006 - WITHDRAWN 2010 BOE Findings of Fact Page 3 of 15 DOCKET 2010 -007 Property Owner: Kyle Crow Property: 410 W Rezanof Drive Legal: Lot 39A, Block 19 Kodiak Townsite Appellant claims that the assessment is excessive The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. The appellant claims that in his opinion the 2006 -7 remodel was deficient in that there was not vapor barrier under the sheetrock which it could possibly cause moisture problems. The assessor had staff re- inspect the home, including an interior inspection and no evidence of moisture damage was noted. In supporting the assessed value of $174,450 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -008 Property Owner: Dora Jurado Property: 2335 Beaver Lake Drive Legal: Lot 10B, Block 1, Lakeside Subdivision Appellant claims that the assessment is excessive The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all homes in the Lakeside Subdivision. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. The cost model utilized for the subject property was designed exclusively for zero lot line homes such as the subject. The assessed value is well within the range of recent zero lot line property sales. In supporting the assessed value of $143,242 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. 2010 BOE Findings of Fact Page 4 of 15 DOCKET 2010 -009 Property Owner: Kimberly Holmes Property: 1312 Mylark Lane #24 Legal: Lot 3, Block 1 C Alderwood Subdivision Appellant claims that the assessment is excessive The assessed value is based on a market derived cost approach that was produced especially for the Alderwood Planned Development Units. The land value for these units is an allocation based on other improved property sales. In the 1980's, the assessing department and Home Owners Association for the Alderwood Townhouses agreed that assigning an assessed value for the common area and having the association pay taxes and then re- billing the individual owners for their share could be avoided by allocating a land value to each unit. In supporting the assessed value of $91,608 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -010 Property Owner: Terry and Bobbie Ivanoff Property: 119 and 121 Murphy Way Legal: Lots 2 and 3, Block 1, Killarney Hills Subdivision Appellant claims that the assessment is excessive. The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. In supporting the assessed value of $175,081 for Lot 2 and $140,336 for Lot 3 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 - 011 -013 — WITHDRAWN 2010 BOE Findings of Fact Page 5 of 15 DOCKET 2010 -014 Property Owner: Samuel and Doreece Mutch Property: 2160 Spruce Haven Lane Legal: Portion of U. S. Survey 1822 Appellant claims that the assessment is excessive The appraiser stated that the subject was reassessed as part of a neighborhood wide re- assessment of ocean front properties located in subdivisions with public sewer and water. A review of assessments of other ocean front properties was conducted to assure that the assessment of the subject property was not unequal. The subject home is a very high quality construction and the location with both ocean frontage and lake frontage are strong indicators that the subject home should set the upper limit of value for custom homes in the Kodiak Area. The current assessment for the subject is higher, but not excessively so especially considering the superior attributes of the subject. The current assessment is based on appropriate appraisal techniques. In supporting the assessed value of $796,116, the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -015 Property Owner: Martin and Carol Wandersee Property: 1524 E Kouskov Street Legal: Lot 7, Block 8 Leite Addition Appellant claims the assessment is unequal, excessive and improper The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. In supporting the assessed value of $240,512 the board found that the assessment was not excessive nor unequal and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. 2010 BOE Findings of Fact Page 6 of 15 DOCKET 2010 -016 Property Owner: Martin and Carol Wandersee Property: 1524 E Kouskov Street Legal: Lot 7, Block 8 Leite Addition Appellant claims the assessment is unequal, excessive and improper. The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. In supporting the assessed value of $240,512 the board found that the assessment was not excessive nor unequal and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -017 Property Owner: Duane and Nancy Freeman Property: 1720 Simeonoff Street Legal: Lot 13, Block 53 East Addition Appellant claims the assessment is excessive. The appellant stated that after receiving the original assessment for 2010 he requested a re- inspection as the home had a foundation problem. The home was re- inspected by assessing staff and a crack in the foundation was noted and after discussion with building officials the assessment was lowered. The appellant indicated that he felt the assessment as amended was satisfactory. No further action was required. 2010 BOE Findings of Fact Page 7 of 15 DOCKET 2010 -018 Property Owner: Duane and Nancy Freeman Property: 212 West Hillcrest Street Legal: Lot 3 Alder - Natalia Subdivision Appellant claims the assessment is improper The appellant indicated that he did not have a problem with the assessed value but was alarmed at the rapid increase in assessments. The board explained to the assessor is directed by State Statutes to assess at 100% of full and true value. The rapid rise was due to the fact the property had not been properly re- assessed in the recent past. The appellant was satisfied with the answer and no further action was required. DOCKET 2010 -019 Property Owner: Barbara Rabold Property: 4176 Cliffside Road Legal: Lot 9, Block 1, Miller Point Subdivision, Second Addition Appellant claims the assessment is excessive. The appraiser stated that the subject was reassessed as part of a neighborhood wide re- assessment of ocean front properties located in subdivisions with public sewer and water. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. Upon request by the appellant for an informal review of the assessment the property was re- inspected on April 30, 2010. At that time the owner's agent pointed out that the decks facing the ocean had been removed due to rot and that there had been a roof leak and some flooding of the basement area. Damage to the basement included removal of carpet and some drywall water damage. It appeared that the roof needs replacement as there had been some leaking during a heavy rainstorm with high winds. It was also noted during that inspection that the assessment records do not show a basement area and there is also a finished area over the garage which is not on the rolls. The assessed value was reduced from the proposed $505,461 to $471,393 to reflect the need for repairs. The owner felt that this value is still excessive but offers no valid arguments that would reflect a lower value. The owner feels that the economic woes that have befallen some market in this country are also true in this market. This is a supposition that is not supported by current market trends. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010 and consistent with the neighborhood. In supporting the assessed value of $471,393 2010 BOE Findings of Fact Page 8 of 15 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -020 Property Owner: Barbara Rabold Property: 4176 Cliffside Road Legal: Lot 9, Block 1, Miller Point Subdivision, Second Addition Appellant claims the assessment is excessive. The appraiser stated that the subject was reassessed as part of a neighborhood wide re- assessment of ocean front properties located in subdivisions with public sewer and water. The assessment was based on approved appraisal methods for vacant land which produced an 85- 92% assessment to sales price ration when used to appraise the recent sales in the area. A list of ocean front properties along Cliffside Road, Spruce Cape and Tona Lane showed that. The subject assessment is well bracketed by these assessments and is current for 2010. In supporting the assessed value of $176,540 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -021 Property Owner: Kathryn Hough Property: 1811 Larch Street Legal: Lot 13A, Block 3 Russell Estates Subdivision Second Addition Appellant claims that the assessed value is excessive and improper. The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The Assessed Value is based upon a market derived cost approach. The improvements are valued on their replacement cost new less depreciation. Land is valued based upon a review of land sales and land values derived from an allocation analysis of improved property sales. This information is used to create a spreadsheet that allows the assessing staff to appraise the lots based on size, location and desirability. The replacement cost new of the improvements is based upon local costs for new construction as supplied by building contractors and as derived from sales of new homes. The depreciation schedule is based upon an analysis of home sales in which the price paid per square foot of improvements is compared to replacement cost new to determine depreciation rates for various aged properties. To calibrate and check the values given by the market derived cost approach the sales properties utilized in the land and 2010 BOE Findings of Fact Page 9 of 15 improvement schedules are appraised by those schedules. The current result is that the schedules or modules are currently and consistently returning a value between 90 and 92 percent of the sales price. Ms. Hough requested an informal review as she felt her home had many items of depreciation that greatly affect its value. Assessing staff met with Ms. Hough on April 11, 2010. An exterior review of the entire house was done and partial interior inspection of the apartment. Staff noted that the home appeared to be in overall average condition. House was measured for square footage per Ms. Hough's request. Square footage was corrected in the assessing computer system. The appellant has gone to great lengths to illustrate the property as sub - average for the area and age group of the home. This is inconsistent with the original property inspection and follow -up inspection. The property was purchased in 2008 but the owner did not wish to reveal the sales price or provide a copy of the 2008 appraisal. The home owner lists sixteen facts that she feels affects the assessed value. All of these items have been considered in the assessment, or have no relevance to the market value of the property. The assessor noted one sale of a similar property at 1721 Larch Street, which sold for $299,000 in November 2009 which supported the current assessed value3 for the subject. . In supporting the assessed value of $278,493 the board found that the assessment was not excessive and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -022 Property Owner: Gerald Markham Property: 1248 Mill Bay Road Legal: Lot 19, Block 2, Allman Addition Appellant claims that the assessed value is excessive and improper. The Assessed Value is based upon a market review of vacant business -zoned land sales along Mill Bay Road. This information was used to create a schedule that allows the assessing staff to appraise the lots based on size, location and desirability. To calibrate and check the values given by this schedule the sale properties utilized in the land schedules are appraised by the schedule to assure that the values returned are not excessive and are within a reasonable range of the actual sale prices. In supporting the assess value of $26,418 the board found that the assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. No information is provided by the appellant that alters the reasoning or conclusions of the assessing department. 2010 BOE Findings of Fact Page 10 of 15 DOCKET 2010 -023 Property Owner: Gerald Markham Property: 1250 Mill Bay Road Legal: Lot 20, Block 2, Allman Addition Appellant claims that the assessed value is excessive and improper The Assessed Value is based upon a market review of vacant business -zoned land sales along Mill Bay Road. This information was used to create a schedule that allows the assessing staff to appraise the lots based on size, location and desirability. To calibrate and check the values given by this schedule the sale properties utilized in the land schedules are appraised by the schedule to assure that the values returned are not excessive and are within a reasonable range of the actual sale prices. In supporting the assess value of $26,614 the board found that the assessed value is based on approved assessment techniques which produce values consistent with current market conditions, is proper and not excessive. The value is current for 2010. No information is provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -024 Property Owner: Gerald Markham Property: 211 Mill Bay Road Legal: Lot 3, Block 8 Kodiak Townsite Appellant claims that the assessed value is excessive and improper The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. In supporting the assessed value of $226,644 the board found that the assessment was neither excessive nor unequal and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. 2010 BOE Findings of Fact Page 11 of 15 DOCKET 2010 -025 Property Owner: Gerald Markham Property: 206 Kashevaroff Avenue Legal: Lot 3A, Block 8 Kodiak Townsite Appellant claims that the assessed value is excessive and improper The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. In supporting the assessed value of $74,600 the board found that the assessment was neither excessive nor unequal and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. DOCKET 2010 -026 Property Owner: Gerald Markham Property: 215 Mill Bay Road Legal: Lot 4, Block 8 Kodiak Townsite Appellant claims that the assessed value is excessive and improper. The assessor stated that the subject property was reassessed as part of an area wide re- assessment that included all one and two - family residential homes within the city limits. The assessed value is based on a market derived cost approach for valuing improvements and land. The assessed value is based on approved assessment techniques which produce values consistent with current market conditions. The value is current for 2010. In supporting the assessed value of $144,604 the board found that the assessment was neither excessive nor unequal and no information was provided by the appellant that alters the reasoning or conclusions of the assessing department. 2010 BOE Findings of Fact Page 12 of 15 DOCKET 2010 -027 Property Owner: Alaska Commercial Company Northwest Company Property: 111 West Rezanof Drive Legal: Block 4 — All, New Kodiak Subdivision Appellant claims that the assessed value is excessive. The appeal was tendered by Thomson Property Tax Services, assigned agent for the owner. The appellants produced a recent appraisal completed by MacSwain and Associates, an Anchorage appraisal company. The appraisal indicated a value of $1,300,000 for the subject property. The appraiser provided the board the following information concerning that appraisal and the current assessment. Upon receipt of the appraisal from MacSwain and Associates, LLC, the assessor reviewed the appraisal. There were many items in that appraisal that were questionable and the assessor requested further commentary from the owner's agent. The Agent called the last week of the appeal period and agreed that the appraisal had flaws and offered an estimated value of $1,800,000 with not supporting documentation. The assessor recalculated the value of the subject property utilizing rents, land values and capitalization rates that were more relevant to the Kodiak market. The results were a considerably higher value $2,114,000. However, the premise of the fee appraisal is an interim use of the building, which is strongly contested by the assessor. A current cost analysis of the building was also completed utilizing the Marshall Swift Cost Index. This value was added to the estimated current land value and indicates a value of $2,480,700. In supporting the current assessment the board found that the appellant offers no reasonable data to change the current assessed value. The assessment is based on sound appraisal techniques and lacking evidence to the contrary should be allowed to stand. Supporting information. Highest and Best Us — Page 23 The appraisal determines that the Highest and Best Use of the property is for interim -use commercial (5 -10 years) and then removal of the building and redevelopment. This is based on a report prepared by the owner of the building noting it to be in fair to poor condition. In my opinion the report reveals that the current owners have not been prudent in their management of the building and many items listed are not a threat to the structural integrity of the building, but if left unrepaired could be. I disagree with the whole premise that the building is an interim use. 2010 BOE Findings of Fact Page 13 of 15 Site or Land Value — Page 26 The subject has a 40,000 square foot building that is built lot line to lot line as parking is provided by municipal parking lots that are part of the planned urban renewal in the area after the 1964 Tsunami. The best indicator of land value would be for a commercial zoned lot that could accommodate this size building with necessary parking and delivery access. This would require a site 3 -4 times the size of the building. The most recent sale of such a property that has similar location qualities is the sale of the vacant lot adjacent to the Walmart Store. This was purchased by Walmart for possible expansion of the store in 2005. This four acre site sold for $1,803,095 according to the seller. In my opinion this would indicate a similar value for the Alaska Commercial site, perhaps less as the site may not need to be as big. I estimate the Land Value at $1.3 million. Sales Comparison — Page 29 The appraisal places no weight on this approach and does not even draw a value conclusion despite listing some downtown sales. Also, the sale of the Spenard Building to Cal Worthington and the Macks Building to Army Navy, along with the listed sales, in my opinion would produce a credible value indication for the AC Store. Rent —Page 33 The report lists four rentals, not necessarily the most similar for the subject. However, rental #3 is most similar in size and rents for $.65 -$.70 /square foot according to the appraisal. In my opinion weighting to this comparable, which is inferior in location, would indicate a rent of at least $60 /square foot for the AC Store. This would indicate a gross annual income of $299,664. Income Analysis — Expenses — Page 35 The appraisal forecast a vacancy and collection loss of 10 %. As this is a single- tenant building I feel this is too high and 5% is more in line with the actual market. The appraisal also notes that the replacement allowance for above the range indicated by Korpacz Real Estate Investor Survey. I feel that this is exaggerated and a replacement allowance of $.50 /square foot of building is appropriate. Total replacement is $20,580. Also I feel that the management fees for a single- tenant building with tenant responsible for building maintenance and repair is overstated at 6% and 3 -5% is more in line with what would be expected in this market. 2010 BOE Findings of Fact Page 14 of 15 VALUATION: Assuming that the Highest and Best Use is interim as noted in the report but utilizing more reasonable rents, vacancy, capitalization rates and land values: Gross Annual Income $299,664 Less Management (5 %) -$14,983 Less Replacement Allowance -$20,580 Net Operating Income $264,101 The discounted cash flow utilizing 14% instead of 25 %r indicates the value of the present value of the income stream at $814,000. Following the logic of the appraisal the total value is Value of cash flow $ 814,000 Value of Land $1,300,000 Total Value $2,114,000 A Marshall and Swift cost approach was also completed. 2010 Cost analysis $1,180,700 Land Total DOCKET 2010 -028 WITHDRAWN $1,300,000 $2,480,700 2010 BOE Findings of Fact Page 15 of 15