NEW ROCHELLE, NY — The City of New Rochelle will hold a Public Hearing on Tuesday March 12th at 7:30 p.m. at City Hall to allow residents to comment on the Echo Bay Draft Environmental Impact Statement (DEIS) released last month by Forest City/Ratner.
Every resident who cares about the New Rochelle school community needs to understand what is at stake for the public schools and either turn out at the public hearing and speak against the deal as currently structured and/or contact their City Council person and tell them to oppose the deal as structured.
- Noam Bramson = nbramson@newrochelleny.com
- Louis Trangucci = louistrangucci@aol.com
- Albert Tarantino = ataranti@newrochelleny.com
- Jared Rice = jared@jaredrice.org
- Ivar Hyden = ivar@ivarhyden.org
- Barry Fertel = bfertel@newrochelleny.com
- Shari Rackman = rackmandistrict6@aol.com
This is not about favoring or opposing development in New Rochelle, generally, or at the Echo Bay site, specifically. This is about getting a fair deal for the New Rochelle public school system.
There is an extremely limited window to act.
The DEIS was presented and discussed last month by the New Rochelle City Council. There appears to be three members of Council who have grave doubts about the deal as currently structured. One more and the Council can stand their ground and require Forest City to amend the DEIS and thus the terms of the deal.
The public hearing is this week.
The DEIS will be made into an FEIS or final version of the Environmental Impact Statement next month.
Once the City Council votes to make the DEIS into an FEIS, the City Council no longer has any say in the deal. It will be turned over to the New Rochelle IDA which has one of the worst track records in New York State.
What the school district needs is to get the deal changed right now so that the tax payments are based on the actual number of students living in the apartments at Echo Bay and no some random, fixed number determined by the developer.
With Governor Cuomo’s tax cap now in place there are now constraints on how much of a budget increase the school district can achieve during a budget referendum which is why the deal as structured today will mean fewer teachers and more crowded classrooms tomorrow with higher taxes for everyone for decades to come.
It can get a bit complicated for residents not acquainted with these sorts of public-private development deals to follow the acronyms and buzzwords. Just stay focused on the number “22” and why the developer is so determined to lock in this amount before they have turned a single shovel-full of dirt.
In the DEIS, Forest City/Ratner has projected there will be 22 school age children residing in their Echo Bay development project who will attend public school.
The issue is not whether there will or won’t be 22 public school children residing in the Echo Bay apartments but rather that the number would be fixed at 22. Once fixed at that number it would then become the basis for calculating the amount of taxes Forest City/Ratner would pay over the period of the tax abatement they seek to obtain from the New Rochelle Industrial Development Agency (NRIDA).
The DEIS indicates they expect to get a 20-year tax abatement so New Rochelle residents would be stuck with what amounts to a very bad deal for the school district for a very long time.
Under the tax abatement, Forest City/Ratner would not make traditional property tax payments based on the assessed value of the property. Instead, it would make a small, fixed payment in lieu of taxes or PILOT. This is a typical tax structure on real estate development deals intended to encourage developers to build projects by offering them an effective tax rate far below the regular tax rate.
Offering a PILOT is not the problem but the way the PILOT is being calculated.
The amount of the PILOT, an annual payment, would be, in part, a function of the projected number of school age children attending public schools multiplied by an amount set by the City of New Rochelle for the “per-pupil cost” to the district for each new student.
Forest City/Ratner is using a certain set of assumptions, cast in a light most favorable to them, to low-ball the number of projected students in their DEIS. That is to be expected. They are in a business to make a profit and one way to that is to lower their costs.
The City is, in turn, low-balling the per-pupil cost for each student. That is not to be expected. The City is selling out the school district.
The figure assigned by the City as the district’s per-pupil cost is $17,500. City officials have sought to portray that figure as an agreed-upon, negotiated figured. School officials have disputed that there is any agreed-upon figure and stated that the $17,500 was a take-it-or-leave-it proposition from the City of New Rochelle. It was not negotiated but jammed down their throat.
As anyone who has ever attended a school budget meeting knows, the district has always claimed their per-pupil cost to be the simple average of the total school budget divided by the total number of students, typically somewhere around $21,000.
Whether $17,500 or $21,000 or some other figure, these figures are estimates based on a critical assumption, that the costs to the district of new students are only variable costs not fixed costs. In other words, that one extra child is just one extra desk in an existing classroom with an existing teacher and support staff in an existing building.
That’s largely true if you are talking about one child and there is excess capacity in the school system. Neither is the case here.
As currently being presented, Echo Bay is projected to be 285 units. Waiting in the wings is another project, “Albanese” which is projected to be another 700 units. There are other smaller projects in the pipeline as well.
To understand the real impact on these projects based on initial projections and actual results, New Rochelle residents need look no further than than the Avalon buildings in downtown New Rochelle.
Avalon 1 & 2 began in the late nineties with Avalon 1 coming online first and then Avalon 2 several years later.
At 100% valuation, the Avalon project would pay over $12 million in total taxes of which, about $8 million would go to the school district. Instead, in 2012, both Avalon buildings combined paid a PILOT of $110,000 as part of a 30-year tax abatement. Under the law existing at the time, none of that money goes to the school district. The law has since been changed so that the district does get its share of the PILOT but that would still only be two-thirds of $110,000.
On the cost side, Avalon 1 & 2 has added, so far, 146 students to the New Rochelle public schools. At $17,500 per student, the cost per-pupil is $2.56 million. The district gets zero revenue and pays out $2.56 million per year
Echo Bay may add another 50 or more. “Albanese” in downtown New Rochelle may add another 100 or more.
As many parents know all too well, the schools in New Rochelle are already at capacity, with class sizes in many classrooms in elementary schools now exceeding 30 students per classroom.
When there is no excess capacity and more students enroll, the district must build new schools or expand existing schools with all of the associated capital costs and staffing costs. The cost can easily run into the tens of millions of dollars, as was the case with the new wing at New Rochelle High School.
Because the New Rochelle schools are either at or over capacity today, the cost of adding new students is no longer an incremental increase on variable costs ($17,500-$21,000) but requires large increases in fixed costs that will run into the many millions of dollars.
The per-pupil cost off adding the students that push the district past the tipping point is, for all practical purposes, infinity. There is no good number for the district.
It is a discussion for another day but the City’s focus on giving away public property and tax abatements for residential housing developments like Avalon 1 & 2, Trump, Echo Bay and Albanese is a major factor in declining assessables and higher property taxes all of which has strained school budgets cause teacher cuts and increasing class size.
Thankfully, the New Rochelle Board of Education has finally begun to wake up the reality that heavily tax-abated, long-term development deals, often extending for decades, is a case of the municipal government writing rather large checks today that the school district then has to cash tomorrow.
Last August, the Board of Ed had the following exchange:
Schools Superintendent Richard Organisciak: “We did feel that 22 as a number of kids was kind of low…I don’t pretend to know the Rutgers scale in determining how many kids. I will defer if your telling me there is such a thing. I just don’t think it works. I think our experience is that it just doesn’t…”
Board Members: Avalon…Avalon…Avalon…
Naomi Brickell: Yeah, what was the reality with projections and actualities with Avalon?
Chrisanne Petrone: Way over.
Deidre: …way over….[taxes] should be based on the actual number of kids coming out because you can’t take a risk again.
You can watch the video or read a transcript of the entire discussion here.
To understand the game being played here by the developer, members of the school community, and all residents, need to know what Mr. Organisciak is talking about when he says “Rutgers Scale”.
The term Rutgers Scale refers to housing projections based on Residential Demographic Multipliers (RDM), a table of data produced for each state every 10 years by the Center for Urban Policy Research at Rutgers University.
The Echo Bay DEIS relies on the Residential Demographic Multipliers (RDMs) for New York (2006)
http://www.newrochelletalk.com/files/NEW%20YORK%20multipliers%20Rutgers%20Scale.pdf
The New Rochelle City administration, which supports the DEIS as written, has recently begun to claim that the Echo Bay projection is based on a “new formula”.
In fact, there is no “formula” at all and certainly not a “new formula”.
The RDM is a table that projects total numbers of persons by age, total number of School Age Children (SAC) and total number of Pubic School Age Children (PSAC) for a particular housing development.
Any 6th grader can use it to determine a “projection”.
The RDM has multiple variables that drastically affect projections such as whether the housing units are rentals or owned property, the price of the rent charges or the purchase price, the number of bedrooms and the actual type of buildings; single-family attached/detached, 2-4 unit ownership/rental and 5+ unit ownership/rental.
Within that, rents and purchase prices are assigned various categories; rents / all, less than $500, $500 to $1,000, more than $1,000 while ownership ranges are; all, less than $106,000, $106,000 to $164,500, more than $164,500. Then the projections are broken down to grade categories; K-2, 3-6, 7-9, 10-12.
The RDM explains how these values are derived:
There is a further differentiation of the demographic profiles by housing value or rent. The census definitions for “value” and “rent” are shown on the Definitions page; with regard to the latter, the current study indicates the “gross rent” (rent with utilities) rather than the “contract rent.”
Values and gross rents reported in the 2000 census are updated to 2005 using a residential price inflation index available from the Federal Housing Finance Board. A separate price index is applied for the nation, for each of the 50 states, and for the District of Columbia.
The demographic profiles by 2005 housing values and gross rents are organized following a four-tiered classification: all value or rent housing, and then housing arrayed by terciles (thirds) of value or rent (units at the 1st–33rd percentile of value or rent; units at the 33rd through 66th percentile of value or rent; and units at the 67th–100th percentile of value or rent.)
Dr. David Listokin and Dr. Robert Burchell, both of the Center for Urban Policy Research at Rutgers University, gave a presentation in Arlington, VA in October 2006 on their then-recently published Residential Demographic Multipliers based on the 2000 census.
LINK: Listokin Presentation on Demographic Multipliers – October, 2006
According to Listokin and Burchell, the average PSAC for affordable housing is higher than overall average PSAC, it is .52 and ranges between .22 and 1.42. If Echo Bay will include some percentage of affordable housing, the projected number of students will increase further.
The Echo Bay DEIS is based on a building layout of 71 studio apartments, 137 one-bedroom apartments and 77 two-bedroom apartments for a total of 285 units.
Is it common to build studio apartments on water-front property? No.
RDM does not count studio apartments as adding children to the local school districts. Developers are well-aware of this and often claim, initially, that their developments will have a high number of studio apartments to reduced the projected number of school age children attending public schools in their DEIS.
As many school districts have come to understand too late, the total number of apartments and breakdown is not set in stone and could change drastically right up until the moment construction begins.
Further, at any time up until the developer files with New York State, the project could be converted from rental to ownership (condo). That filing occurs well after the DEIS is approved by City Council.
In fact, this very thing happened with Trump Tower in New Rochelle which changed from rental to condo at the last minute.
Of course, rents or prices are a function of market forces and can change at any time
At the end of the day, RDM’s can fluctuate based on a mind-boggling number of variables used to project the number of public school children from a residential housing development.
RDM PSAC Projections for the Echo Bay Project, based on the current DEIS floor plan:
RDM PSAC Projections for the Echo Bay Project, converting all studios to 1 BR and 2 BR:
RDM PSAC Projections for the Echo Bay Project, converting all rental units to condos:
RDM PSAC Projections for the Echo Bay Project, converting all studios to 1 BR and 2 BR and converting all rental units to condos:
RDM PSAC Projections for the Echo Bay Project, converting all studios to 3 BR and converting all rental units to condos:
By changing just one variable (rental units v. condos) the projected 22 students could increase to 33, a 50% increase.
If the studio apartments are eliminated, those 71 units could become 20 1 BRs and 15 2 BRs and the projected 22 students could increase to 39, a 78% increase. Converting the studios to 3 BR causes the projected 22 students to increase to 48, a 118% increase.
The Avalon DEIS, created in the late 1990’s, forecast 58 students in the public schools based on an RDM derived from the 1990 Census.
Applying the 2006 RDM to Avalon “projects” 187 students from both buildings combined, a total of 1,000 units.
In fact, as of September 2012, there were 146 Avalon students in the New Rochelle School District.
RDM PSAC Projections for the Avalon Project, retroactively applying June 2006 data to late 1990’s project:
The RDM from 1996 projected 58 students. The 2006 RDM “projects” 187 students. In one case the RDM significantly under-estimated the number of students, applying the RDM in reverse over-estimates the number of Public School Children by 28%.
Listokin and Burchell reported in their presentation on a case study of 10 “Transit-Oriented Developments” (TOD) similar to Avalon and found that the actual PSAC averaged about 50 students or a PSAC of 0.02 per unit, well below the PSAC of 0.14 per unit for standard residential development.
Echo Bay is being presented as a TOD but is a long walk away from the train station. Is .02 or .14 the right per unit PSAC for Echo Bay? Who can really say for sure?
Under pressure already, the City will soon seek to portray the “new formula” RDM as more accurate than the “old formula” because the “new formula” would have projected 187 public school children in the two Avalon buildings and there is “only” 146 students.
Setting aside the rather obvious point that you cannot retroactively apply 2006 data to 1996 data to create new/old formula projections, 187 projected is not “accurate” when the actual number is 146.
All of the projections prove one thing rather convincingly; the RDM projections are just that — projections. They are not accurate and certainly not so accurate that the district should be willing to wager the future of the school district on those projections.
As school board member and board Vice President Deidre Polow said last summer we “can’t take a risk again”.
And why should we? Let Forest City take the risk. They are the ones who will keep all of the profits.
If the City administration were to believed with their “new formula” nonsense, they would be asserting, basically, that Forest City is willing to pay 28% more for school children than projected by applying the 2006 RDM retroactively to a 15 year old project.
Would Forest City really pay more than they have to on a deal?
Not only is the 2006 RDM based on the 2000 Census — 13 years ago — when there has since been a 2010 Census but the U.S. economy and the housing market, in particular, has undergone a radical transformation since 2006.
2006 is more than two years before the collapse of Lehman Brothers and the bursting of the housing bubble. The country has been through the Great Recession.
To put it simply, Forest City is applying an RDM with dozens of variables, with thousands of permutations, that is outdated and no longer reflects the current state of the economy or the reality of the “new normal” for parents, especially new parents with young children.
Families that would have moved out of an apartment or condominium and into a single-family home as their children approached school ago are no longer willing or able to do that. That is only going to increase the actual numbers beyond the projections.
Changing just a few variables can double the projections and recent history has shown that these projections can significantly understate the actual numbers. What happens if Echo Bay has not 22 students but 44 or 66 or more?
At $17,500, every 10 students above 22 will cost the district $175,000, every year for 20 years or $3.5 million over the life of the abatement.
Avalon has about 250% of the originally projected number of students. Applying that to Echo Bay would mean 77 students or 55 over the projected number or a cost of $19,250,000 over the life of the abatement. The finance wizards can provide the exact Net Present Value of $19.25 mm but it’s somewhere about $6.6 million in today’s dollars.
The solution is simple.
Forest City/Ratner should agree to pay an annual PILOT based on the actual number of students from their development enrolled in the New Rochelle public schools.
The City of New Rochelle should revise the per-pupil cost to include Echo Bay’s “fair share” of the cost of building and staffing a new elementary school and adding on to the middle schools and high school if and when that becomes necessary.
The action is equally simple.
Members of the New Rochelle Community and all residents who are concerned with the quality of education offered in our public schools should contact members of the New Rochelle City Council and tell them to vote “No” on the DEIS as structured and demand that Forest City/Ratner come back with a modified plan that better reflects the reality of how their project will be impact the public schools — less teachers, large class size, higher taxes for existing property owners.
- Noam Bramson = nbramson@newrochelleny.com
- Louis Trangucci = louistrangucci@aol.com
- Albert Tarantino = ataranti@newrochelleny.com
- Jared Rice = jared@jaredrice.org
- Ivar Hyden = ivar@ivarhyden.org
- Barry Fertel = bfertel@newrochelleny.com
- Shari Rackman = rackmandistrict6@aol.com
EDITOR’S NOTE: This article is based in large part on the analysis of the Echo Bay and Avalon projects by Anthony Galletta.