THE MYTH THAT AIRPORT IMPROVEMENTS DECREASE LAND VALUES It is widely believed and often argued that improvements made to a general aviation airport, especially those which will allow it to accommodate modern business aircraft, will cause a reduction in land values in the airport area. Naturally, residents whose homes are near the airport are concerned about this. This is also an issue of concern to the Commission. The Commission received testimony from Mr. Winthrop Perkins, a real estate appraiser in New Jersey for 12 years who has appraised airports and their e nvirons exclusively for seven years. His area of expertise is in the evaluation of airport real estate, airport businesses and real estate surrounding airports. He has testified as an expert witness in New York, Michigan, North Carolina and New Hampshire, and testified before the Commission in this capacity. Mr. Perkins testified that the separation of fact from myth about the valuation of land surrounding airports is one of the great challenges to the appraiser. Very few people are expert at it. Very little is published about it. So little, in fact, that the seminal article to determine the impact of airport activity on non-aviation land is drawn entirely from a study of a military airport. This is misleading because the military uses such frightening expressions. For example: in civil aviation there is an area referred to as the "runway protection zone." The military calls it the "accident probability zone." Mr. Perkins also testified that "in New Jersey when the market is essentially considered to be good in residential housing, there is little or no distinction made between airport-related properties and properties that are [located] far away from an airport, particularly a smaller private general aviation facility... When the market is a soft market, you then begin to see some difference, not ... in the price ..., but in how long it takes to sell ...[the property]."245 In this latter event, the only cost of airport proximity, is the time value of money (e.g., the interest the sale proceeds would have earned had it been received a few months earlier.) More work of this type has been done, and thus more is known, with respect to larger airports. A regression analysis of the area around Chicago O'Hare was done to determine how value, with regard to the proximity to the end of the runway, was affected. They found, in some cases, "... the value of property in the vicinity of the airport was higher, because the people who worked at the airport wanted to be close to their jobs, thus contradicting what the general assumption was.246 The land around airports oriented to business aviation, such as Teterboro, Morristown, Trenton Mercer, Allaire, South Jersey Regional, etc. tends not to be occupied in a residential fashion. Infrastructure improvements around the airport generate nonresidential zoning, i.e., commercial or industrial. If the airport is in control of that land, it becomes a very serious adjunct to its capacity to generate revenue and remain viable. Many airports would have a difficult time breaking even on aviation related revenues alone. Often the most significant asset of the airport is the long-term lease of structures in their airport industrial park that are not aviation related. These leases generate rental income unrelated to aviation activities, which constitute significant income to the airport. If the airport is not in control of this land surrounding the airport, there tends to be an enhancement in its value for whoever is the owner. In some instances, particularly at air carrier airports, significant premiums are paid for the surrounding commercial and industrially zoned land. Land that has aircraft access to the airport can become disproportionately valuable, as there is very little of this land available. A company that wants a hangar with airport access cannot go anywhere else to acquire it. The owner of this land has a monopoly and will secure monopolistic prices. In summary, as a general rule (subject to the inevitable exceptions): * Residential real estate located near a small aircraft general aviation airport without airport access does not become less valuable due to an airport improvement. In a good market there is no effect on it at all. In a poor market, the only effect will be that it takes longer to sell it, but the price it will command will remain unchanged. In some instances, such as sales to aircraft owners, this real estate may command a premium. * Residential real estate located on a small aircraft general aviation airport will usually command a premium. * Residential real estate located near a large aircraft general aviation airport or near an air carrier airport, but without airport access, does not become less valuable due to an airport improvement and, in some cases, may become more valuable due to improvements that enhance the acceptance of the airport by the business community. * Commercial or industrial real estate near, but without aircraft access, to the small or large general aviation airport will command a slight to a substantial premium for their location, and tends to be reliable rental generators in both good and poor times. * Commercial or industrial real estate near, but without aircraft access, to the air carrier airport will command a premium. * Commercial or industrial real estate with aircraft access to the large aircraft general aviation airport will usually command a substantial premium. * Commercial or industrial real estate with aircraft access to the air carrier airport will usually command a substantial premium.