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We agree with Mr. Eldred that the highest and best use of
the townsite was its current mixed use and that the income
approach was generally inappropriate for the subject property.14
However, we believe that a couple of factors would result in a
lower market value than that determined by Mr. Eldred. First,
Mr. Eldred utilized a sales comparison approach to value the
millsite as industrial property. The mill itself, however, was
still owned by petitioner. Thus, while a hypothetical buyer
could purchase the land, it would be severely constrained in its
use of the land. Since the land was subject to a 20-year lease
in favor of petitioner, we believe that a capitalized income
approach would be more appropriate. Next, Mr. Eldred did not
factor in any cost with respect to the water system. Although a
hypothetical buyer of one of the houses would not incur costs to
improve or correct the entire system, we believe that a buyer
would consider the problems with the water system and factor it
into the price it is willing to pay for the house. Finally, Mr.
Eldred did not factor in any selling expenses with respect to the
properties, even though he indicated at trial that such costs
would probably be approximately 10 percent of the selling price.
14Mr. Slack subsequently appraised the Port Gamble townsite
as of Jan. 1, 1991, and although that appraised value is not
controlling for purposes of the present case, we note that in the
subsequent appraisal, he, too, concluded that the highest and
best use was a historical townsite and that the income approach
was inappropriate.
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