![]() Developers also look at such deteriorated property for re-development potential and severely discount current improvements.ĭealing with extraordinary depreciation is not a new problem for appraisers. The reinvestment required and the greater uncertainty introduced by extraordinary depreciation increases portfolio risk such that qualified purchasers dismiss the property in favour of candidates in better condition. Recent research shows that many real estate investment managers would be reluctant to even consider purchase of a property that had been allowed to deteriorate to an extraordinary degree. “In Europe, universities have become near slums as administrators have skimped on facilities.” – The Global Race to Reinvent the State. Time and again, maintenance and repairs are deferred to yet another budget cycle, and the backlog of deferred maintenance builds. “A problem that is easy to ignore until something breaks… “.Deferred maintenance: “a ticking time bomb” in the public sector –.Classes are cancelled for hundreds of students because of excessive heat. Water leaks in a chemistry lab, ruining both the experiment and the equipment. The problem with public sector buildings is widespread, as the inset comments below demonstrate:Īn anecdotal description of extraordinary deferred maintenanceĪ ceiling collapses in a fine arts studio, forcing its closure just two weeks before exam time. – From BCBC’s white paper on Infrastructure Policy & Financing – October 2014. If the value of an investment is evident, citizens may be willing to pay more, but the value proposition must be clearly articulated to secure public support. In the wake of the 2008-09 financial crisis and great recession, fiscal prudence has become a dominant focus for most governments across Canada.Īdding to the complexity of financing projects is the fact that voters seem increasingly reluctant to pay higher taxes or fees. Population growth, an aging population, increased urbanization and congestion, escalating demands for healthcare and other services, slow economic growth, and environmental issues are all straining government resources. A major impediment is constrained public budgets, which have been the traditional source of most infrastructure finance. Many observers argue that governments in advanced countries often are not well placed to meet growing and increasingly complex infrastructure needs. Some of the reasons for this are summarized as follows by the Business Council of British Columbia (BCBC): Once proud symbols in local communities, many public sector buildings throughout the Western World are in a state of disrepair. Reprinted with permission of International Association of Assessing Officers from Fair & Equitable, March 2015, Volume 13, Number 3. Methodology to recognize extraordinary deferred maintenance in asset valuation 1īy Bruce Turner, MBA, AACI, P.App, president of Heuristic Consulting Associates (HCA) in Courtenay, BC and Robert Metcalf, a professional appraiser and senior consultant with HCA
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