We Have Moved to a New Site

As of January 3, 2006, "Views From Gallatin" will be available on a new website, www.LittleTownViews.com, which will provide broader coverage of land use and municipal finance issues in the Hudson Valley and surrounding regions.

Check it out!

The Real Problems With Reassessments - Part One

The growing outcry over rising property tax assessments now grabbing headlines in many Hudson Valley towns highlights the financial complexities and political controversies involved in achieving one of the most basic principles of municipal government: equitable taxation.

A recent spate of grassroots challenges-- including a self-styled “tax revolt” protesting appraisal methods in the Dutchess town of North East and a slew of lawsuits by property owners in the Town of Canaan in Columbia County-- are among many examples indicating that the current system for maintaining fair and updated tax rolls in New York towns is severely flawed.

In order to help understand the root of the problems, and identify possible solutions, our next few columns will try to clarify a few basic facts about assessment, examine alternative methods of revaluing property, and report on the main political obstructions to reforming current deficiencies.

A reassessment is not a tax increase. A common outrage heard from homeowners in the region is that recent reassessments have raised their taxes to a level where they can no longer afford to own their house. But raising the assessed value of a home does nothing to change the amount of taxes levied by local governments and school districts. Local government officials and school boards, not town assessors, are responsible for increasing property taxes, driven by the rising cost of providing key public services and by a growing population that demands more of those services.

What reassessments are meant to do is shift the tax burden to the owners of those properties that have gained relatively more market value than other parcels in the town, county or school district. Assessment professionals suggest that when a given town reassesses after 10 or 20 years-- and if public spending budgets remain flat-- only 20-25% of parcels will suffer a tax increase while the remaining property owners will see an actual decline in their tax payments or find no change at all.

In our region, it is usually large tracts of open land and expensive, recently improved houses that see the highest relative change in their assessed values and, therefore, take on more of the town’s overall tax burden.

Homeowners can expect to pay more taxes if their town reassesses and neighboring towns in the same school district or county do not.

Consider the case of North East, which, like most small towns in New York State straddles multiple school districts. When the town reassessed all its properties in 2003, taxes paid by North East residents located in the Pine Plains Central School District increased 62% on average in each of the next two years. Pine Plains CSD residents living in the adjacent Town of Pine Plains, which has not reassessed since 1987, saw their annual school taxes rise only 2%. The increase in the school district’s total tax levy increased 5% annually over the 2003 to 2005 period.

Another way of putting it: Pine Plains Town is about five times larger than the area of North East included in the Pine Plains CSD and has about 12 times as many housing units, according to data supplied by the school district; but property owners in Pine Plains Town collectively pay only 2.8 times as much school tax as their North East neighbors in the same district.

New York State lacks the authority to require consistent methods of assessment, monitor inequities or enforce corrective measures.

New York State encourages all towns to reassess regularly in order to achieve fairness among property owners, and the state does make indirect adjustments to a town’s outdated assessed property values to compensate for different reassessment schedules.

But as the Pine Plains example and many others indicate, towns may have a strong incentive to avoid regular reassessments, and the state has no power to compel them.

“We have no authority to enforce assessment administration,” noted Joseph Hesch, spokesman for the state’s Office of Real Property Services (ORPS).

In contrast, almost all other states requires town assessors to revalue all properties every few years using the same nationally accepted appraisal methods and standards. Many, like Massachusetts, have a state office with the power to audit local assessment rolls, challenge specific valuations and require acceptable revisions.

The Albany legislature in the mid-1990s did create a Temporary Commission on Real Property Tax, which proposed drastic reforms to bring New York more in line with other states and, in the process, save hundreds of millions of dollars in what it identified as redundant administrative costs. Among the commission’s key recommendations were uniform assessment standards, regular updating of tax rolls, closer alignment of town and school district boundaries, centralization of assessing units at the county level and authority for the state to review and correct inequitable valuations.

Why those recommendations were buried in Albany and what interest groups prefer to perpetuate the current fragmented, expensive and inequitable system will be the focus of next month’s column.

A Promising Pledge for the Campaign Season

As election campaigns kick off this month for some 100 open town board seats in our region, most candidates agree that preserving farmland and providing affordable housing are among the issues foremost on voters’ minds, but few, if any, have offered specific proposals to finance these popular though costly initiatives.

There is, however, an effective, fair and timely policy that could raise tens of millions of dollars each year to support land conservation and expand home ownership in Columbia and northern Dutchess counties. The “real estate transfer tax,” a small levy on all property sales in a town that is reserved to fund housing and preservation efforts, has been a surefire campaign pledge and a successful catalyst for community improvement in many states and a handful of New York towns.

The transfer tax, once approved by town voters in a special referendum, can quickly fortify a town’s planning objectives by providing an annual source of funds to purchase development rights on farmland and finance programs that make home ownership more affordable. Though authorization from our state government is required to hold the referendum and enact the tax, senior legislators in Albany have said they would support requests from individual towns seeking to launch a transfer tax referendum.

As part of a political platform, the tax has popular advantages: 1) it shifts most of the financial burden to the housing developers and high-end property sellers who are reaping the greatest profits from the current real estate boom; 2) it can exempt the sale of lower-priced homes, say below $200,000, from the tax entirely; 3) it gives local voters the final say in drafting the details of the law; and 4) it can raise significant amounts of money that often attract even larger matching funds from other public and private sources.

A transfer tax of 2% ($2,000 on every $100,000 of sales value) would have raised about $10 million for towns in Columbia County last year alone, according to data supplied by the County Clerk’s Office. Leveraging the towns’ contribution with matching funds from state, federal and private sources could have raised the total amount of funds available to more than $25 million.

In the northern Dutchess town of North East, the tax would have raised some $350,000 last year, enough to attract substantial matching funds and demonstrate a strong political commitment to addressing voters’ demands.

As a starting point for widespread adoption of the tax, candidates should pledge to voters that, if elected, they will press their town board to request state permission for a transfer tax referendum.

“It is definitely among the options the Ghent Town Board should be pursuing,” said John Mesevage, Democratic candidate for a board seat in the Columbia County town of Ghent.

“It’s a very interesting idea to talk through on the board,” echoed Bonnie Hundt, who is running for an open seat on the Amenia Town Board in northern Dutchess County.

Many farming advocates fear that state legislators, buckling under pressure from the homebuilding and real estate industries, will reject towns’ requests to craft and implement their own transfer tax laws. Indeed, the Republican-controlled State Senate this summer killed a bill, passed by the Democratic majority in the Assembly and supported by Governor Pataki, that would grant blanket authorization to any municipality seeking to enact a transfer tax earmarked for land preservation.

But top Republican lawmakers, even those skeptical of the statewide authorization bill, seem willing to secure state approval for individual towns requesting “home rule” laws such as the transfer tax.

“If a town requests a home rule measure, it is rare that I would not be able to support it,” said State Senator Stephen M. Saland, a senior Republican legislator who represents Columbia County and much of Dutchess County. “That’s my job. I don’t sit in judgment as a higher authority telling municipalities what they should and should not do… Balancing issues like land preservation and affordable housing is best done more closely to home.”

“All it takes is a town board resolution, and we’d participate in writing the actual state legislation,” said Republican Assemblyman Patrick Manning, a key sponsor of the statewide enabling legislation bill that died in the Senate.

“I don’t have any reservations about supporting individual requests,” for a transfer tax referendum, added Manning. “It’s a quality of life issue that transcends everything else.”

Dear Mr. Durst

Mr. Douglas Durst
President and CEO
The Durst Organization
New York, NY 10036

Dear Mr. Durst,

Your Manhattan skyscrapers are honored for their commitment to conserving energy and preserving natural resources. You own the largest organic farm in the state, and you serve as an advisor to the Trust for Public Land, a leading non-profit advocate of protecting agriculture, open space and parkland. When you and your family donated 320 acres of land in the Town of North East to the Nature Conservancy, you commented that you were “pleased to be able to assist in protecting this beautiful place…which will be enjoyed now for many generations to come. ”

What my readers are asking is “Why?”

Why does a man of your environmental vision, your tremendous wealth and your civic generosity want to develop a 951-unit residential subdivision that is likely to double the full-time population of Pine Plains, impose huge new property taxes on existing residents, and open the entire region to a competitive building frenzy that will turn our rural way of life into the next front line of suburban sprawl?

Perhaps you are doing it because you believe that the project, as described in public documents your company recently submitted to the Pine Plains Town Planning Board, will be welcomed as a great boon to the area. Your preliminary Environmental Impact Statement (EIS) now under review envisions the build out of the former Carvel estate as a high-end, golf-oriented retreat for weekenders or, alternatively, an upscale full-time residential community with a median house price of $800,000 and relatively few school age children.

But not one of the many real estate and planning experts I interviewed believes there is a market for either scheme your EIS describes. These experts, pointing to 30 years of development trends in the Hudson Valley, expect that the primary demand for your proposed one-to-five acre building lots and clustered condos would come from families fleeing New York City and its suburbs in order to find cheaper homes, a quieter community and better public schools.

Even if the proposed 951 homes sell for an average price of $500,000—well above any forecast I have found-- my research indicates that the property tax revenues they generate will fall short of the cost of educating the kids living in them by some $10 million per year. The bulk of that deficit will have to be borne by homeowners who currently live in the nine Dutchess and Columbia County towns that comprise the Pine Plains Central School District.

Your representatives have refused to discuss their financial analysis presented in the EIS, which, among other major flaws, severely underestimates the costs of providing public education to the future Carvel households. They claim that it is “premature” to comment on any part of the EIS with the press or the public at this stage of its review. They suggest instead that citizens address any questions to the planning board or wait until a period designated for official public comment begins, perhaps later this year.

My readers and I welcome the chance to discuss the financial details of your EIS at the earliest possible date. We want to understand how your vision-- 951 homes and a golf club that will draw, on your estimates, 328,000 visits per year-- fits with the vision that the majority of citizens here have in mind for the future of their towns. In the meantime, the question of your motives continues to perplex us.

One natural motive that comes to mind is the basic instinct for making a financial killing. Indeed, your decision to purchase the 2,200-acre Carvel property for a reported $7.5 million looks like a brilliant investment. If, after receiving approval for 951 home sites, you re-sold the entire estate and let other developers build it out, my guess is that you could walk away with a profit of $80-100 million.

Such a fortune would be hard to resist for most of us. But for a man whose Manhattan real estate holdings are already worth over $2 billion, according to published estimates, you might excuse those who wonder if monetary rewards alone are sufficient to drive your interest in such a contested project.

“Environmental values are important to me in everything I do,” you said last year, explaining why you chose to drive a fuel-efficient “hybrid” SUV.

Would those same values allow you to consider an alternative proposal for the Carvel land, one that would make a far smaller financial profit but would earn you an enduring legacy far more consistent with your ecological priorities and with our towns’ future fiscal health?

If sufficient funds were raised to pay you twice your current investment in the property, would you consider working with the community to develop it as a combined town park, experimental farm, and environmental education center, a living showcase for the civic principals you hold most dear?

We eagerly await your response to these and other questions about the Carvel development. Like you, we want to protect this beautiful place “for many generations to come.”

The Pace of Growth

With land use regulations under review in dozens of Hudson Valley towns, citizens and local officials find themselves grappling with one of the major shortcomings of traditional zoning codes: while the codes specify lot sizes and permitted uses for different areas of a town, they offer little guidance on planning the pace of growth.

Almost all new residential development increases property taxes for existing homeowners, as previous columns have illustrated. But a surge of new homes over a short period of time causes greater disruption to public services and costs taxpayers substantially more than gradually phasing in the same number of new homes over a longer time frame.

Asking themselves not only how much growth they want, but how soon they can handle it, municipalities in several states have adopted development “phasing” techniques to insure that population growth does not overwhelm their schools, overstretch their fire and police departments or bury their residents under huge tax increases.

Some towns have met the threat of too rapid growth by imposing a limit on the number of building permits they will approve in a given year. Others have opted to freeze subdivision approvals entirely until adequate public facilities—schools, roads, water systems, etc.-- can be financed and constructed to meet the demands of new residents.

Legal precedents support a town’s right to impose phased growth restrictions provided they are based on thorough analysis and are consistent with planning goals and zoning regulations. In a landmark 1972 case, New York State’s highest court ruled, “Where it is clear that the existing physical and financial resources of the community are inadequate to furnish the essential services and facilities which a substantial increase in population requires, there is a rational basis for ‘phased growth.’”

One successful model of phased growth is the central Massachusetts town of Amherst. A rural college community of 23,000 full-time residents, Amherst in the mid-1980s was comfortably absorbing between 100 and 150 new homes annually. But in 1986, with real estate markets booming nationwide, developers besieged Amherst planners for approval of more than 1,200 new housing lots.

“People were scared,” recalled Robert Mitchell, the former Director of Amherst’s Planning Department and now his state’s Special Assistant for Sustainable Development. “They worried about overcrowding in the schools and traffic demand… They wanted to maintain open farmland and a diverse range of housing types, the distinctive features of the town.”

With overwhelming public support, Amherst imposed an 18-month moratorium on new development and allocated $100,000 to Mitchell’s department to develop a blueprint for the town’s long-range future. The resulting regulations increased zoning densities, maintained the town’s commitment to affordable housing and initiated programs to preserve farmland. As part of its growth strategy, Amherst also capped the rate of new home building at 125 permits per year.

“More important than the number,” said Mr. Mitchell, was a point system for allocating the limited permits among developers that focused on “not just the quantity but the quality of growth.”

The Amherst system, like many others across the country, gives more points and more permits to developments that advance the town’s primary planning goals: concentrating population in and around village centers, preserving open space and making at least 10% of the housing stock affordable to working families.

Since its inception 18 years ago, Amherst’s growth plan has remained popular with townspeople and with developers, who have not filed a single court challenge to the phasing system.

“It changed the kinds of developments being proposed,” Mr. Mitchell said. “We sent a clear message to the development community of what kind of growth Amherst wanted and the incentives we were willing to offer. All proposed subdivisions now meet our growth standards as a matter of course.”

Phased growth planning can also be very valuable to smaller rural towns in the Hudson Valley, according to Nan Stolzenburg, founder of Community Planning & Environmental Associates, which consults to dozens of upstate towns including Pine Plains and Kinderhook.

“I almost always recommend” some method of regulating the pace of growth consistent with a town’s financial and physical capacity to absorb it, Ms. Stolzenburg said. “But my clients often reject it.”

New York municipalities remain generally reluctant to adopt phased development along the lines of the Amherst model. Some town officials are deterred by the up-front costs of the studies required to justify a phased growth plan—though they are insignificant compared to the potential tax savings the plan could achieve. The need to administer the plan once approved adds another layer of complexity.

But the biggest reason many New York towns resist enacting phased growth plans, Ms. Stolzenburg suggested, may have more to do with the politics of planning in general.

“There needs to be the political will on the part of town officials,” she said, to step into “the conflict between what a community wants and what large landowners with significant influence on decision-making believe they have a right to do. It all comes down to money and politics.”

Lessons From Our Neighbors

At Arlington High School, the classrooms were cropping up everywhere. On the stage of the auditorium, in the art studio, in what once had been home to a thriving music program. After lunch, the cafeteria doubled as a gymnasium because the gym was divided up to house four classrooms. Class sizes, once 20 to 25 students, topped 30. There was gridlock in the hallways. Tempers flared. Teachers were unhappy. Administrators were over-stretched. Everyone was on edge.

It took three years before the Arlington Central School District in mid-Dutchess County managed to relieve the over-crowding by completing a major expansion of its high school, at a cost of $38 million. Two years later, faced with similar disruptions at jam-packed middle and elementary schools, the district board asked voters to approve a $44 million bond to build two new schools. The new buildings, which opened last fall, have solved the crowding in younger grades with room to spare. But back at the high school, classrooms are once again brimming to capacity, and the district is once again reviewing its options for expansion.

This portrait from Arlington is a familiar one to many school districts that have been forced to absorb rapidly rising enrollments caused by widespread housing development that swept through much of Dutchess County and the mid-Hudson Valley in the 1990s.

With the development wave quickly moving north, school boards in the smaller, rural districts serving Columbia and northern Dutchess towns are faced with similar and, probably, much more severe challenges. How well these elected boards manage to predict and regulate the impact of growth will determine whether their schools can maintain their current educational standards and at what cost to district taxpayers.

In the Pine Plains Central School District, which includes nine northern Dutchess and southern Columbia towns, developers are seeking approvals to build more than 1,300 new houses. Judging by comparable trends in Arlington and elsewhere, if 1,000 homes were built over a five-year period, they would add 1,350 new students to the district, nearly doubling the current enrollment of 1,400.

Beyond the stress and overcrowding in the classrooms, the financial cost of accommodating such a large influx of new students would, in five years time, increase the current annual school levy to existing tax payers by 75%, according to a preliminary analysis by this columnist.

Pine Plains school taxes for the coming year are budgeted at $13 million. Research indicates that the addition of another 1,000 homes would, in five years time, create an additional deficit of $11.5 million, or a gap of $11,500 between the cost of educating kids from each new house and the tax revenues that each house contributes to the school district. The higher costs would be shared by all taxpayers in the district, including the new residents, but the vast majority—more than 80%, according to U.S. Census data-- would fall on today’s property owners.

Taxpayers will also suffer from the rising cost of educating the current student body, a bill which experts expect will continue to increase at 8% annually. Faced with the dual burden of cost inflation and 1,350 new students, the average homeowner today would see his school taxes more than double in five years, the preliminary research indicates.

Asked to comment on these estimates, Superintendent of Schools Linda Kaumeyer replied, “The Pine Plains Central School District cannot endorse any (research) model that is not commissioned by the Pine Plains Board of Education.”

Ms. Kaumeyer added that the board is looking to launch demographic studies and other research that will help the district estimate the potential costs and disruptions posed by the new subdivisions.

Could the burden of 1,000 new homes prove less damaging to the schools and the taxpayers who support them? Possibly. The developers who aim to build 975 homes on the 2,000-acre Carvel estate in Pine Plains claim that the houses will be sold to upscale weekenders whose children will not be attending local schools. But several experienced realtors are skeptical, suggesting there is little demand for the Carvel plan from weekenders. Instead, they see plenty of appetite for mid-priced, full-time homes from suburban New York families looking for cheaper housing, quieter surroundings and solid public schools-- the same package that has drawn thousands of similar families to Arlington and other nearby districts over the past 15 years.

What else can local school boards do to prepare for the possibility, if not the probability, that the housing market may deliver a huge and expensive crop of new students in the coming years?

“One of the things we can do is become an informed partner in the subdivision review process,” said Susan von Reusner, a member of the Red Hook School Board, which has taken an active and formal role in advising town planning boards in the district how to quantify and cope with the costs of rapid growth.

Among other steps, Red Hook officials have explored zoning policies that would delay excessive development until the school district and the town can provide the facilities and public services needed to absorb the increased population. Similar approaches to “phasing in” development, which have worked successfully in Maryland, Massachusetts and other states, will be the topic of a future column.

A Question of Appearances

The recent wave of subdivision proposals flooding the dockets of town planning boards in our region has raised concern among many residents that town officials could find themselves torn between their public duties in reviewing the proposed developments and their private financial interests.

State law provides some guidance on particular arrangements that constitute “financial conflicts of interest” and offers specific measures that public officials should take to disclose and manage these conflicts. But the law has little to say when it comes to a multitude of “potential” or “perceived” conflicts likely to crop up in the daily workings of small town government, deferring instead to more vague, qualitative standards of ethics.

"Public officials are obligated to avoid circumstances which compromise their ability to make impartial judgments solely in the public interest,” the New York State Attorney General’s Office has written in promoting suitable standards of conduct for local government officials. “Even the appearance of impropriety should be avoided in order to maintain public confidence in government."

It is public opinion, rather than legal sanctions, that seems to be the final arbiter of many suspected conflicts of interest. Few town officials have ever been sued or indicted for committing an “apparent” impropriety. But many whose financial dealings have stirred public suspicion have later paid the penalty at the ballot box.

One case in point, which has raised significant outcry, is now under scrutiny in the northern Dutchess County town of Pine Plains. The town supervisor, Gregg Pulver, has agreed to sell his home and adjoining land owned by his parents to the developer of Village Green, a large proposed subdivision abutting his property. If the subdivision is approved by the Town Planning Board it would transform the town’s main hamlet with 280 residential units and 150,000 square feet of commercial space.

The sales price for the Pulvers’ house and 16 acres fronting on Route 83 is $900,000, according to a portion of the contract that Mr. Pulver disclosed after requests by local newspapers. Though he has not released the entire contract, Mr. Pulver said that, under its provisions, he would finance $435,000 of the sales price at a 6% annual interest rate for up to 30 months. He and his family would also be able to continue living in the house for no payment other than property taxes for that 30-month period.

The supervisor emphasized that the sale, which has yet to close, is not contingent on Village Green receiving any approvals from the Planning Board.

The contract, which with interest and rent-free allowances is worth close to $1 million, values the Pulvers’ house and land at roughly twice the amount paid for comparable properties in the area, according to local realtors. The developers apparently find significant extra value in the property because it would give Village Green the access it needs to County Route 83 in order to channel traffic into the heart of the subdivision.

There are no laws, according to several attorneys interviewed, that prevent the supervisor from selling his property. As long as Mr. Pulver discloses the existence of the sale, which he has, and recuses himself from any Town Board proceedings involving Village Green, which he has promised to, there is little that residents can do under the law to challenge the sale or even to force disclosure of further details of his contract. But the ethical issues are more complex.

The Pine Plains Code of Ethics, in boilerplate language adopted by many small New York towns in 1975, states that a town employee “shall endeavor to pursue a course of conduct which will not raise suspicion among the public that he is likely to be engaged in acts that are in violation of his trust.”

Many town residents have complained that by selling this particular property, which now becomes a crucial cornerstone of the Village Green plan, Mr. Pulver is reaping a financial windfall at the expense of the town and is demonstrating his support for the rapid growth, increased traffic and higher property taxes that Village Green and other proposed developments would bring to Pine Plains.

“I don’t believe that people who have a civic responsibility and are in a position of trust should be negotiating for their personal gain with developers,” said Connie Young, a full-time Pine Plains resident since 1995 and a former secretary to the Town Planning Board. “If he wants to sell his property—fine. But he should first resign as town supervisor. He should go for the money or the job.”

Mr. Pulver disputed the view that the sale is unethical or in any way biases his view of the Village Green project.

“It’s a family business decision,” he said, explaining that the developer first approached Mr. Pulver’s parents to sell the acreage they own surrounding his home.

The developers “felt they needed the access to the rest of the property from that location. My parents wanted to sell,” Mr. Pulver said. “I was left with the option of living next to something I may not want to live next to.

“Something will happen to that (Village Green) property someday and it could devalue my property by half,” he added.

Now in his second term as supervisor, Mr. Pulver comes up for re-election again this November. Noting his career of public service and years of volunteer work in the town, he said, “My record stands on its own, and I’m willing to let the voters decide when the time comes.”