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Working on a Development Project?
How much is that shade tree in the window?
By: LA Johnny
9/30/15
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If you want to develop property in southern California you need to know the dollar value of your trees. This is true whether you are building senior housing in Oxnard or remodeling your garage in Thousand Oaks. Trees grow slow in the arid west making them precious and valuable. Your mature oak tree might be worth several thousand dollars and if you want to cut it down you will have to pay.

Above, in Hong Kong a developer spent $3 million dollars to save this Banyan Tree (Ficus retusa). Is it the most valuable tree in the world?

F. Scott Fitzgerald himself could not write an interesting blog post about tree appraisal. So let’s just cut to the chase shall we? If you are getting a tree appraisal report what do you need to know to review it? There are several points in the appraisal process where your arborist should exercise sound judgment and render an expert opinion based on evidence. Errors in judgement can cost you thousands of dollars.

If you have built anything in California recently you were probably asked to get a “tree report” and if your plans required removing any “protected trees” you had to have them appraised probably using the “Trunk Formula Method”. The trunk formula attempts to measure the value trees add to a piece of real estate.

For small lots with a few native coast live oaks the value of the trees can be tens of thousands of dollars. For larger commercial sites the value of the trees can easily run into the hundreds of thousands and much more if mature native oaks are involved. Whether it is a bigger garage or a housing development the value of the trees on the land is a big consideration in the overall development budget especially if they are protected by a local government.

Above: I recently appraised a large coast live oak like this one for $10,000

The trunk formula has been around since at least 1905 when a University of Massachusetts professor created it to place a value on “shade and ornamental trees”. It is one way of looking at tree value. The trunk formula method is considered a “cost approach” to value rather than an income approach like you would use for timber.

The Trunk Formula Method has been revised over the years. It was adopted by the National Arborist Association in 1957 and since then it has become the industry standard appearing in the Guide for Plant Appraisal which is in its 9th edition.

Most local governments want an appraisal done by an arborist certified by the International Society of Arboriculture (ISA) and some ordinances specify that the Trunk Formula Method be used as opposed to the other cost approaches described in the guide such as Replacement Cost, Cost of Repair, and Cost of Cure.

These types of appraisals are usually based on cancel checks or signed contracts. They are the appraisal methods that the Internal Revenue Service wants to see if you are claiming a loss on your taxes. The IRS doesn’t care about the birds and bees just the dollars and cents.

Unlike these more objective methods of appraisal, the trunk formula attempts to measure all variables that are believed to make up the totality of a given tree’s value.

The trunk formula is a combination of objective and subjective variables. The size of the tree is the starting point, specifically the cross section of the trunk measured at 4.5 feet above ground. When you actually measure a tree at 4.5 feet you will see that even size is not as cut and dried as it sounds. Other variable are more subjective. For example the formula allows the appraiser to consider things like air purification, noise attenuation, aesthetic contribution and wildlife attraction.

If you are receiving or reviewing a tree report it is helpful to realize that the variables can be sorted into three categories:

  • Variables the arborist measures in the field
  • Variables the arborist looks up in an official publication
  • Variables scored by the arborist based on evidence in the report

Example: coast live oak (Quercus agrifolia) with a 24” DBH

To show how these three categories work let’s take an example of a tree with a two foot diameter trunk. This is often abbreviated DBH for diameter at breast height. This is because most arborist are like me, lazy. We don’t like to bend over if we don’t have to so we measure trees at breast height or 4.5 feet above ground. Been going on a long time.

Above: I use a flexible tape to measure the circumference of this coast live oak 4.5 feet above grade (DBH).

In our simple example the tree has a two foot diameter trunk. That means it has an area of 452 square inches. If it was a relatively fast growing tree like an oak or alder then I could look up its cost per square foot which is $62. I look up that cost in the regional supplement for Southern California. That gives us a starting point, called a Basic Tree Cost of $28,000. If this had been a slower growing tree like a camphor it would be worth $84 per square inches giving it a Basic Tree Cost of $38,000.

The appraiser adjusts that initial Basic Tree Cost by multiplying it by the Species Rating which is a percentage looked up in the regional supplement. A committee of regional experts sorted the various species into five groups. Oak trees are in the 1st group and have a Species Rating of 90% so I begin by multiplying the Basic Tree Cost by 90% reducing the tree’s value to $25,200.

If we had chosen an alder tree for our example it would not be so valuable because the regional committee of experts place alders in group 3 with a species rating of 50%. After adjustments for the species a two foot diameter alder would be worth $14,000.

So far the appraisal has been based on objective variables that are fairly easy to measure or look up in a table. The next adjustment is based on the “Condition” rating of the tree. It is called condition because it is a measure of both health and structural integrity. The arborist scores this variable on a 25 point scale.

Most trees in landscapes are NOT in excellent condition. Trees are meant for the forest where their branches grow all the way to the ground or they are surrounded by their friends and no one steps on their tender absorbing roots.

When scoring Condition, arborist award up to 5 points each for roots, trunk, branches, twigs and foliage. Of the thousands of trees I have appraised most score in the 60 percent range. That adjustment would reduce the value of our example oak tree to $8,400.

These Condition scores should be included in your report perhaps as an appendix.

The last variable affecting the value of our tree is based on the arborist assigning a score to three components that make up the “Location”. Location is the average of the “Site”, “Contribution” and “Placement” percentage ratings.

Unless you have a very large property the site rating should be the same for all the trees being appraised. After all the trees are on the same site. There are criteria given for rating sites but much is left to the discretion of the appraiser.

Photo: I rated this site in the bottom third.

In my reports I usually devote a short passage to describing the site. Experience creates a certain level of comfort with shorting sites into thirds meaning is this site one of the best third, the worst third or somewhere in the middle?

Photo: I rated this site in the top third.

For our example let’s assume our site is in the middle third and give it a percentage of 60%. That gets averaged with the “Contribution” and “Placement” scores for each individual tree. These scores should be shown in the report because they are key components of the trunk formula. If you have fifty trees on a Site they should not all have the same contribution and placement scores. If they do you should ask your appraiser why.

For our example oak tree let’s say I rate its contribution 80% and its placement 85%. Those ratings combined with the 60% site rating give us a Location rating of 75%. Adjusting the oaks value for Location reduces its appraised value to $6,300.

Above: this pepper tree makes a nice contribution but the placement is not so good.

A new 10th edition of the Guide for Plant Appraisal is being reviewed right now. I will discuss the changes in a future blog post.

John Burke, Ventura, CA September 2015

The most expensive tree in the world? GardenDrum May 27, 2013, Copyright 2014 GardenDrum AU. 8/28/2015. http://gardendrum.com/2013/05/27/the-most-expensive-tree-in-the-world/

Council of Tree and Landscape Appraisers, Guide for Plant Appraisal, 9th edition (2000). International Society of Arboriculture, Champaign, IL. 2000.

Species Classification and Group Assignment, A Regional Supplement. Western Chapter of the International Society of Arboriculture. 2004.

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