School board questions Chap. Crossing developer about negative fiscal impact
October 1, 2010
Editor’s note: At the September 28 hearing on the most recent proposal for the development for the former Reader’s Digest site, now called Chappaqua Crossing, Gregg Bresner, vice president of the Board of Education of the Chappaqua Central School District, presented six questions to developer Summit Greenfield. The focus of the questions was on the financial impact of the proposed development on the taxpayers of the school district. He also submitted his questions, on behalf of the school district, to Town Supervisor Barbara Gerrard in writing. The complete text of his questions is reproduced here.
September 28, 2010
Ms. Barbara Gerrard, Supervisor
Town of New Castle
200 S. Greeley Avenue
Chappaqua, New York 10514
Dear Supervisor Gerrard and Members of the Board,
As the Chappaqua School Board of Education stated in our letter to the New Castle Town Board (the “Town Board”) dated September 7, 2010, we have requested additional time to submit an appropriate response to the recently released draft Final Environmental Impact Statement (FEIS) of the proposed development at the former Reader’s Digest Association property. We believe the removal of the age-restriction, our past and current disagreements with respect to analyses and statements contained within both the DEIS and FEIS, and the significant change in economic conditions since this project proposal began reasonably justify the need for us to update our analysis. We have retained the law firm of Keane & Beane as counsel. Keane & Beane has contracted with other experienced professionals to assist us in preparing our analyses and eventual submission.
In our previously filed responses to the Town Board during the DEIS period, the Chappaqua Central School District (the “CCSD”) raised serious concerns regarding the negative financial impacts of this proposed project to the school district that we believe have not been adequately addressed by either Summit Greenfield (the “Developer”) or the Town Board. Most specifically, there is no proposed mitigation to the financial impact on the school district taxpayers. In the very recent Huntington Bay, Long Island development precedent (The Avalon), that Town Board turned down the proposal based primarily on school district concerns.
In order to help us properly analyze the potential impact of Modified Project (Scenario I), we submit the following questions and concerns for the Developer and the Town Board:
1)
CCSD Taxpayers Bear the Incremental Student Enrollment RiskIn Summit Greenfield’s recent brochures distributed publicly to New Castle residents, the Developer has stated the following:
a. “this plan will have a net positive tax benefit after increased costs are considered”
b. “This project will add about 58 students to the school district – 5 students per grade
or 1 per section.”
Our question is how does the Developer plan to fund these guarantees and representations? Given the certainty of the guarantees and representation, we would expect these funds to be placed in cash in escrow for CCSD taxpayers. Interestingly, in the Huntington Bay case, that developer had proposed a cash payment to the school district to assist in mitigation of the impact of increased student enrollment.
2)
The Number of Additional Students Represented Appears Unreasonably LowThe School Board has a number of concerns regarding the methodology used in calculating the Developer’s representation that only “approximately 58 additional students” will be enrolled from the proposed project. The FEIS information contains submissions that clearly show that the existing condominium developments in New Castle do not constitute a sufficient sample upon which to base a comparable enrollment analysis.
As stated in the report submitted 7/12/10 by Hudson Property Advisors to the Developer, “. . . it was noted that reliance on CCSD comparables is preferable where possible, in conducting assessments of property in that school district. However, this was simply not possible due to an insufficient sample size of similar properties situated within the Town of New Castle.” It further states that “The comparable CCSD units were, on average, constructed 20 years ago, while the units at the project site would represent new construction, with modern design, construction and amenities which are not found at the comparable properties.”
This is further reinforced by the statements contained on page 11 of the residential market study submitted to the Developer on 11/10/09 by Economic Research Associates (the Developer’s real estate consultant) that “The townhomes will appeal to married couples of all ages. . . . Given the strength of the Chappaqua school district there will be families with children interested in the project. It further states on page 11, “To attract young families, Chappaqua Crossing should offer play areas and possibly onsite childcare services. Further, optional interior packages might allow younger buyers to select more modern or family–oriented designs for the kitchen and living spaces.”
We are concerned that the methodology utilized is limited to existing New Castle and adjacent comparables that the Developer’s own advisors have stated are not comparable in the FEIS.
This is another reason why the School Board deemed it necessary to hire experts to help us to analyze this issue in greater detail and hence the need for additional time to perform and submit this analysis.
3) The School Cost Analysis Is Not Correct
In the recent FEIS filing, the Developer utilized marginal cost methodologies to project education costs that are not consistent with the data provided to the Town Board by the CCSD. The Developer is assuming that education costs are based only on the tax levy portion of the budget, which represents approximately an 11% shortfall to the actual budget expense. New York State aid and other revenue streams do not proportionally increase with an increasing student enrollment. In fact, New York State aid is declining. Therefore, this methodology is flawed and incorrect.
In addition, the Developer has utilized a limited, marginal cost analysis for public school children based on the 73% of the tax levy devoted only to programs, which results in cost estimates per pupil of $16,451 that is approximately 35% lower than the $25,246 full average cost per pupil data provided by the CCSD to the Town Board and Developer.
The number provided by CCSD is also the number that the CCSD is required to provide to the New York State Education Department for calculation purposes. The Developer is in our view, utilizing an incorrect range of $16,451 - $22,536 for its marginal cost calculations. We believe that the full average cost methodology, defined as the total budget costs of operating the school district divided by the number of enrolled pupils, is the appropriate standard for municipal circumstances. This is also consistent with the advice provided to Town Board in the DEIS by its financial advisors, HR&A Advisors, in its memo to the Town Board dated May 26, 2010, where on page 8 it states “. . . the Developer’s average cost estimate underestimates the costs to the Town of New Castle and is not in alignment with standard professional practice”. On page 11, it then states, “The Developer should present a revised projection of municipal costs utilizing a full average cost methodology.” Utilizing a full average cost methodology, the same report shows on page 12 that the project has a materially negative net fiscal impact to the Town.
On page 9 of the same report, HR&A states “school cost drivers and the projection of costs of development to school systems require a different level of analysis…school costs are driven by student generation, and both number of students and cost of providing education services typically vary significantly by the number of bedrooms, price point and other characteristics of households. ...If a statistically-valid review of the student generation rate has not been performed by an independent expert, we would recommend that such analysis be conducted.” This is another reason why we request the courtesy of additional time to complete this analysis. In concurrence with HR&A, we request that the Developer re-run its projections utilizing the average cost per pupil data provided by the CCSD.
4)
In the DEIS submission of May 2009, the Developer stated that “92 public students would be generated from the single family dwellings in the CCSD vacated by households with no children moving to units in Chappaqua Crossing”. In the FEIS, the Developer has eliminated that concept entirely. Just to be clear, as the result of the Developer removing the age-restriction, we ask, is the Developer now projecting that not one single incremental student will be generated in the CCSD as the result of empty-nester or other residents vacating their single family homes and moving into Chappaqua Crossing? This seems highly inconsistent with other expert analyses provided in the DEIS and FEIS.
On page 8 of a report submitted to the Developer by Hudson Property Advisors, LLC (financial advisor to the Developer) on July 12, 2010, it states “the project is anticipated to satisfy a demand for age-oriented development that has been pent up for many years in this sub- market.” On page 10 of this same report, Hudson Property Advisors states that Economic Research Associates, a real estate consultant to the Developer, “believes that there is likely pent-up demand for multifamily housing within the Town of New Castle and that the Reader’s Digest site is extremely well positioned to support a successful residential development comprised of age-restricted components.”
In the BOCES analysis submitted to the Town Board dated September 2009, BOCES references the section of the Developer’s DEIS submission that in an analysis of comparable market-rate projects, between 30% - 80% percent of units were sold to buyers from the town in which the project was located. We believe it reasonable to request that the Developer and Town Board revise their projections to incorporate a 55% assumption, the mid-point of the 30% - 80% range, in projecting the number of units acquired by those vacating homes in New Castle. It is not simply limited to empty-nesters. There are no doubt residents who may be interested in “tax downsizing” their current New Castle residences for the much lower property taxes contemplated at Chappaqua Crossing. For the record, there is an average of 1.8 students per household for residences with school-age children in the CCSD. We request that you please incorporate that change in assumption into the FEIS.
5)
Capacity Is Not the IssueAs the School Board has stated in the past submissions, we do not believe physical capacity is an appropriate indicator or determinant of net fiscal impact. The costs of educating a student are largely variable and not determined by the amount of physical school space you have. The Developer and the Town Board have continued to reference and rely on potential future enrollment declines and potential excess physical capacity in their analyses and statements, despite our repeated objections. The School Board believes that any budget financial savings resulting from enrollment declines should flow directly to the taxpayers in the form of reduced taxation and should not flow to the Developer. Declining enrollment is an asset of the CCSD taxpayers that should not be freely transferred without considerable financial consideration.
We respectfully request that the Developer and Town Board provide a modified projection in the FEIS analyzing the cost to the CCSD taxpayers of not receiving the financial benefits of the reduced budget expense attributable to that enrollment decline. For example, over the past two budget years, the CCSD has been able to materially reduce budget spending versus the sequential program rollover largely due to enrollment declines. Programs have been kept in- tact and the financial savings have flowed directly to CCSD taxpayers. Therefore, we think it only reasonable and appropriate to factor this assumption into any net fiscal impact calculation and to provide mitigation.
6)
Tax Revenue Contribution from Development Appears Overly AggressiveIn the FEIS and the public marketing brochures distributed publicly to New Castle residents, the Developer is estimating total revenues to the Town of $5.2 million. This is a 2015 projection. In doing that projection, it does not appear that the Developer has assumed significant sequential growth in taxes without the financial impacts of potential grievances or tax certiorari claims for the period until 2015. If so, we believe that does not reasonably capture the historical experience of the CCSD. Nearly all of the condominium and commercial developments in New Castle have used the tax certiorari process to grieve multiple years of school tax bills based on the commercial standard of valuation. Retroactive settlements have resulted in tax refunds that have reduced cumulative taxes paid by a development during that period in excess of 20%. We believe any projection should factor the risk of future commercial-based certiorari claims.
We look forward to the responses to our questions and requests from the Developer and Town Board and will work expeditiously to complete our submission.
Sincerely,
Chappaqua Board of Education
Janet Benton, President
Gregg Bresner, Vice President
Randall Katchis, Alyson Kiesel, Jeffrey Mester
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