In the case of air-quality impacts, researchers have employed atmospheric-dispersion models such as AERMOD along with interpolation methods to assign exposure levels on a parcel-by-parcel basis. This allows researchers to define a set of parcels impacted by particulate matter (PM) or hazardous air pollutants (HAP). Developing an atmospheric-dispersion model is of course outside of the scope of an appraisal. However, as in the case of noise studies, these models may exist for larger facilities or be developed by consulting engineers in litigation. What is most common, however, is that researchers use distance to a point source of air pollution as a proxy for exposure.
In groundwater-contamination cases, however, using distance as a proxy for exposure can present problems, because groundwater does not present aesthetic impacts or disperse odors from a point source. Contaminant plumes are usually asymmetric, have direction and velocity, and follow the flow of groundwater in the area. Which homes above the plume are impacted depends, also, to a great degree on the use of private wells. This may vary from one neighborhood to the next or from one parcel to the next.
Because it is beyond the appraiser’s expertise (and budget) to determine the level of exposure to contaminated groundwater for different properties, the appraiser must rely upon secondary sources—such as media reports, environmental engineers, public geographic information systems (GIS) data, and regulatory agencies—for geographic delineations of the affected area.
- Plume maps. Plume maps from environmental-engineering firms retained by the client are often the first place to look. However, as already mentioned, not all properties above the plume may experience the same level of exposure. This depends on the extent of the local water supply and the use of private wells. A new subdivision connected to a public water source may have zero exposure to groundwater contamination flowing underneath. Some early studies of the impact of groundwater contamination used such cases and found, unsurprisingly, that there was no impact. Unfortunately, these same studies are often cited as evidence that groundwater does not have an impact on homes that have private water wells or whose public water supply may depend on that same contaminated aquifer.
- Neighborhood boundaries. Just as buyers may want to purchase a less desirable home if it allows them to write “Beverly Hills” on an envelope, buyers in theory may want to avoid a neighborhood simply because of some perceived environmental risk. Consider the notoriety of place names such as Love Canal, Three-Mile Island, and Avila Beach. However, it is critical to understand that market resistance due to remediated environmental conditions is by no means a rule. Nevertheless, using neighborhood boundaries or zip codes—which may have little to do with physical proximity—is one way to classify affected properties. It is likely that this practice implicitly emphasizes the role of stigma, rather than costs and use issues such as reduced lending, changes in highest and best use, or the installation and maintenance of in-home filtration systems. In rare cases, appraisers have attempted to delineate boundaries when no plume maps are available. This approach is completed by identifying so called “stigmatized” sales within the subject neighborhood and in relationship to the alleged point source of contamination; however, such a technique has been discredited and rejected by the courts.
- Investigation areas. Federal or state regulatory agencies, after the discovery of groundwater contamination, may establish an investigation area based on a combination of plume maps, testing results, and neighborhood boundaries. Investigation areas are often the best way to delineate the affected area, because the investigation area is often treated as a proxy for the affected area by regulatory agencies, lending institutions, and the media. For example, on-site sampling by environmental consultants or regulators on potentially affected properties is an obvious way that those property owners can become aware of any contamination. State regulatory agencies usually have an established process for delineating investigation areas and making these determinations public. The resulting maps are often displayed in print media, on television, on social media, and in online publications and blogs. Sometimes lending ceases or is reduced in a certain geographic area, and banks will often rely on such existing investigation areas. Disclosure laws may also require a property to disclose that they are within a certain region or group of affected properties. For these reasons, and because of the frequent availability of these maps, investigation areas are often the strongest source when delineating the affected area. If possible, classification using investigation areas may be enhanced by private-well data.
- Public water vs. well/bore water. The question of whether a property relies on public water or private well water is often the most difficult issue and the question that most differentiates groundwater contamination from other disamenities, which may be approximated by distance to the source. No matter how close to the source, a property with public water access will likely experience less exposure to contaminated groundwater than a property further away that relies on private well water. However, determining which homes are on public water and which rely on private wells is often not an easy task. In some cases, water access is specified in the multiple-listing service (MLS). However, this data may be incomplete. Depending on the area, the appraiser may be able to access private-well applications or even a precompiled dataset of private wells. In rare cases, there may be a publicly available map or GIS dataset of the public water system, which can be overlaid onto the subject area. There are further considerations. In areas with larger, more rural properties, it is often common to combine water usage including delivery of potable water or by providing a connection to municipal waterlines. Loss of water, then, may impact the highest-and-best-use of the property. The public water supply may also change during the study period, because in high-profile cases, homes may be connected to the public water system to mitigate exposure to any contaminants.
The delineation of the affected area in groundwater-contamination cases is critical not only for class certification but also for coding of data for inclusion in a hedonic model or for choosing properties for a sale-resale analysis. Incorrectly delineating the geographic extent of the affected area can doom an attempt at class certification and can also render inaccurate a correctly specified appraisal model. As always, however, the appraiser must make the best of the data available for the given study area.
Orell C. Anderson, MAI, is the president of Strategic Property Analytics, Inc. (SPA), located in Laguna Niguel, California. Alexander R. Wohl is a research analyst at SPA.