Pattye Benson

Community Matters

Given Our Economic Times, How Can T/E Afford A Real Estate Purchase?

Here we are nine days and counting until school starts, in the midst of contentious teacher contract negotiations and parents in the District hoping that school starts on time. Residents have repeatedly been told that T/E School District cannot afford the demands of the teachers … escalating health care and pension costs. With decreasing revenues and rising costs, in June we witnessed, as tough decisions were required to balance the District budget.

During the discussion on the Fact Finder’s report at the August 20 special School Board meeting, school board members weighed in on why they could not vote in favor of the report. Karen Cruickshank, Board president, commented in part,

“… The public knows how hard the Board has worked to balance the budget over the past 3 years. We have explored ways to increase revenues. We’ll be charging students an activity fee for the first time this year. We have raised taxes 2 years in a row to the Act 1 limit with allowable exceptions to referendum. We have cut $10 million from our budget, or one tenth. We have held administrators, aides and paras at zero raises over the last 3 years. The members of TENIG agreed to a 4.5% cut last year. The custodial staff has agreed to waive both the 4.5% increase for next year and has given back an additional 10% of current salary. The numbers still don’t balance. It is the responsibility of the Board to balance the budget. The Board has no control over large increases in state mandated pension obligations put in place by the legislature in 2001. The District has also suffered significant financial losses through commercial and residential real estate reassessments and tax appeals. These reassessments and appeals have resulted in the likely loss of $1.5 million this year. These factors together have wreaked havoc on what was once a stable T/E budget…”

For the most part, I think that residents are starting to recognize the economic problems facing the District and the importance of School Board members to make responsible and sound fiduciary decisions. It is because of this, that frankly I was astounded to see a specific item listed under the ‘Consent Agreement’ on the agenda for the School Board meeting, Monday, August 27. According to the agenda, a ‘Consent Agenda’ requires Board action but “… it is unnecessary to hold discussion on these items. With the consent of all members, they are therefore grouped and approval is given in one motion.”

There are probably 15 or 20 consent agenda items listed on Monday’s agenda, ranging from approving minutes, and acceptance of gifts to ‘purchase property’. All of these consent items are lumped together and then rather than going through them item by item, approved by the School Board in one motion. The purchase property item caught my attention but I had to read to page 45 of the agenda’s supplement materials to find the following:

Consent VII, E, 3:Purchase of Property

“That the Board of School Directors authorizes the Superintendent to execute, and the Board Secretary to attest, and deliver to the record owner of property designated as Tax Parcel No. 43-10L-2 [which is property adjoining the District’s property], the Agreement of Sale in the form attached to the resolution…….”

The agreement of sale that follows further identifies the property as 892 Old Lancaster Avenue, the seller as the Estate of Arthur Fennimore, and the price as $265K. The date of sale is left blank. On Saturday morning, I stopped by the property to take a photo and spoke with the grandson of Mr. Fennimore. He and his brothers were cleaning out the house in advance of the purchase by TESD. Mr. Fennimore was 97 when he passed away and was the original owner of the house. According to the grandson, closing between the Estate and TESD is expected by the end of the week.

I have attended most, if not all, of the 2012 School Board meetings and have absolutely no recall on the discussion to purchase additional real estate property, … especially given the agonizing budget decisions, the possibility of demotion and the contract negotiations with the teachers. Therefore, I don’t think that I missed the discussion about purchasing additional real estate.

This past Friday there was a Facilities Committee meeting and although I did not attend, according to the agenda there was no discussion about the upcoming purchase of the Fennimore property. To be clear, in the past, there have been on/off discussions about the maintenance building and the need to expand the storage facility. In fact, there are existing architectural plans — but as far as I knew, the project was ‘on hold’ for obvious economic reasons.

The Fennimore house is the last remaining property between the current maintenance building and T/E Middle School on Old Lancaster Rd. – the District previously purchased all other properties. So … I guess from an overall planning standpoint, the acquisition of this property makes sense. However, given the District’s current economic climate and the unsettled teachers’ contract, it would seem that the topic to ‘purchase’ would still require some discussion, not just buried with 20 other consent items. Unfortunately, the word that immediately comes to mind … transparency, or rather ‘lack thereof’.

Based on my conversation with Mr. Fennimore’s grandson, the estate has a deal with the school district and that closing and settlement will occur later this week. Given that there appears that there will be no discussion about the School Board’s decision to purchase the property, here are my questions …

How did they arrive at the price for the property? The sale price is listed as $265K. My friend Ray Clarke did the research and determined that the assessed value is $129,500. According to Ray, if we “… multiply $129,500 by the current Chester County Common Level Ratio of 1.70, you get $220,150.” Subtract $220,150 from $265K, and you have to ask, why is the School District paying a $45K premium for this property. Regardless of future development plans, for the time being, the District will need to tear down the house, which means an additional expense. Another question — is the maintenance-storage facility project still on the back burner or does the Fennimore house purchase have the timetable moved up on the construction project?

Some may suggest that a $265K real estate purchase in the T/E School District is a ‘bargain’ and a ‘smart’ move for the District in these depressed economic times. But the bottom line for me, is $265K really such a bargain for a property assessed at $130K? And what about the public – do we deserve an explanation about the purchase? What is the plan for the acquisition? And if there is a plan, how much will that plan cost?

I have the questions, but it doesn’t look like there will be much in the way of answers.

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  1. I attended the Faciliites meeting on Friday and there was NO discussion on the purchase of this property. But under TESD’s Capital Sources & Uses 7yr Plan ..its the needed piece for the Maintenance & Storage Buildings project (Phase 1 & 2) estimated cost for 2012-2013 is 1.1 million and 1.6 million for 2013-2014. TESD bought 4 other houses for around 1.3 million and spent a lot of time /effort getting a permit for a multi million dollar parking lot which never happened on Old Lanc. RD.

    1. If I recall correctly — as part of the budget process, the School Board transferred money into the capital account but assured the public that there was no capital projects planned for 20ut-13, explaining that it was an accounting function. With the purchase of the final lot needed for the project, I am now wondering if this project is actually moving forward. Thanks for confirming that this purchase was not discussed at Friday’s Facilities meeting … when and where exactly was the purchase discussed?

  2. Wouldn’t land acquisition fall under the Sunshine Law ?
    TESD ‘s Capital Plan has $400,000 set aside for this ..maybe they felt $265,000 was a”bargain”.

    1. Well if land acquisition is covered by Sunshine, wouldn’t that mean that the school board would have to discuss it in public at school board meetings. Based on the consent agenda, it does not appear any discussion is necessary. So was it ever discussed and doesn’t the public get an opportunity to weigh in? I know that the purchase of the property has been discussed for some time in Facilities, but just thought that given economics, this purchase might have required some scrutiny, beyond the idea of it being a bargain.

      1. Fallling under the sunshine law means the board does not have to discuss it in public. It is afforded the protection of executive session.
        As I said elsewhere — the district learned an ugly lesson when the real estate lawyer representing the district made a good faith offer to buy the nursery property and it was discussed at a meeting. The nursery owner turned it into a nightmare for the board and the community — demonizing the district for trying to steal his family land. The District required an Act 34 hearing because of the scope of the renovation, and this potential land acquisition turned the hearing into a debate on eminent domain, which was NEVER formally contemplated. So regardless of price (there are obviously negotiations when you are the only buyer who needs the property) this is the right way to do it. We keep talking about $30M and what is it for? This.


        1. Given the fact that the District, like everywhere else, is suffering economically, I thought it was important to bring the real estate purchase to people’s attention. I understand that the maintenance/storage shed discussion has been going on for years. I just want to know that with this purchase, does it move the project to the forefront now that they will have the missing link. What exactly is the vision for this real estate; do they plan to raze the house and then wait until the economy improves? As for the price tag of the property, I think it is irrelevant and whether TESD is paying over or under the value is also irrelevant to me. It’s more about how it is buried in a long list of items on a consent agenda. That was my point and the reason that I thought it important.

  3. I recall many Facility Committee references to this property and to the expectation that it would eventually be purchased. Indeed, it could well make strategic sense to complete the district’s ownership along the north side of Old Lancaster adjacent to TEMS, the sports fields and the current maintenance facility. Presumably this might (might) allow the lower cost construction of an efficient maintenance and storage facility.

    However, the point is that all this is left to conjecture since – unless a Board member requests differently – “…. it is … unnecessary to hold discussion on these items.”

    Really? In the midst of budget deficits, we shouldn’t hear why it makes sense to spend capital of a quarter of a million dollars and more? I’d like to be assured that the price for a property that needs to be condemned is supported by appraisals, that spending the capital now will bring payback in the future, even though we might incur more costs (how much?) in the short term.

    Does the Board think that we are asleep out here?

    Which Board member is going to ask for discussion?

  4. The Sunshine Act allows the Board to meet in executive session to “consider the purchase or lease of real estate.” Public discussion, before an agreement has been signed, could lead to an inflated price for a buyer with supposed “deep pockets”. I’d be amazed if the Board did not have one or more appraisals. That said, it was a mistake to put it on the consent agenda.

  5. I concur with Keith. It was dumb to put it on the consent agenda, but this is exactly why the capital reserve fund exists. I’m confident that CHV is quite familiar with the long term plan to finish acquiring that side of the street.

    Whether they move forward with the other capital plan is yet to be determined — the house purchase is on the agenda, so anyone at the meeting is free to ask questions about it. But you will never hear a public discussion about the purchase of real estate. 10+ years ago the district made a formal and public offer to purchase the nursery property adjacent to the high school in anticipation of the CHS renovations, and look what happened there! The owner turned it into a public cause against eminent domain (never intended) and there was hue and cry for the protection of this “little bit of heaven in Berwyn” (which I don’t think has been mowed since). It was generally understood that the owner just wanted a bigger offer. So if any lesson was learned, it was to keep real estate off the agenda.

  6. Unless the rules have changed …the public can request a board discussion on any consent agenda item.
    This project won’t happen overnight. . they’ll “lawyer up” will go to the township for zoning , planning, final step the BOS. I have several years worth of sketch plans & presentations. ..all with differnent costs. Maybe TESD can come up with a good reason WHY they need a seperate storage building and tell us how much money they’ll save. Plus how much they actually spent by shuffling the maintenance dept all over Berwyn. My 2 favorite quotes “its our property we can do what we want” and “we want to decompress the area” SURE

  7. Not that Zillow is the most accurate real estate estimator, but it estimates the property at $269k. My impression is this purchase has been long planned, the funds dedicated and it is now available. If you don’t acquire it now it seems reasonable to assume a much greater potential for TESD to not be able to acquire it or at increased $ or to cause a greater delay in planned construction.
    I think it makes sense to buy it and avoid regretting not having it later. It seems very reasonable from both a long term financial and facilities standpoint. Another point, it seems disingenuous to point out the assessment value to try to prove a point about district waste, would you sell your property at its assessed value? Not likely.

  8. Here are the current value estimates from the following admittedly nonscientific pricing services:
    Zillow 269K
    Trulia 284K 336K

    Recent comparable sales at 971 conestoga (375K) and 209 waterloo (381k) suggest that at $269K the TESD is getting a good deal here.

    I agree that there should have been more tranparency and public information about this transaction. But its hard to conclude the district is overpaying here. Quite the contrary. Appears to be a fair price or maybe even a bargain.

    Pointing to the assessed value to price a property is not a valuable exercise, in my humble opinion.

    1. An assessment presumes an arm’s length transaction….and since the demand for this property would likely be close to zero in light of the district ownership surrounding it, only an investor hoping to reap a profit when the district really needs it would be a buyer. That being said, highest and best use of the property would result in a higher price….so the price is what it is. Where was all this interest when the other properties (including the one directly across from the cafeteria window, which was owned by someone who constantly attended meetings complaining about the noise and traffic and got a very good price considering all the “noise and traffic”)

      1. TR that property is on Conestoga RD ..another empty lot with NO purpose. TESD paid top dollar ($400,000) for the house on Old Lanc RD next to TEMS. At the time they needed it fast so they could build a “proposed” parking lot before the sidewalks were put in. Now they’ll have the final piece . just the building order will change. The investor’s offer on the Fennimore property was for $190,000.

  9. They are not buying the house, they are buying the land. That makes a big difference. I have to agree that during this time frame the optics of this are not good AND the fact that it was buried doesn’t help either.

    1. The fact that they are buying the land does not really matter – you still have to pay market value based on the improvement. The seller isn’t just going to throw it in for free.

  10. Anyone that wants to trust Zillow might try buying the 4 bedroom, 1.5 bathroom empty lot next door.

    Interesting that we should not rely on the assessed value (times the CLR, of course) as one benchmark to price property. All the reassessments that are costing the district so much money are based on what, then?

    The issue here is not so much about the price (although that is germane) as the process.

    1. …. and not the negotiation/preliminary agreement process, legitimately an executive session matter, but the approval and communication process.

  11. now is a great time to buy. If money is put aside that can not be used for anything other then capital, I am all for it. Why wait until values go back up and why wait to build something when labor goes back up. It is an amazing time to buy when you don’t have to sell and an even more amazing time to build because bids are coming in tremendously low.

  12. Thanks for bringing this up Pattye. The Sunshine provisions protect the board from HAVING to discuss it — but that doesn’t mean they shouldn’t discuss it once the deal is cut. They have discussed it in the past and those who attend the facility meetings knew this house was on their watch list — but it’s citizen blogs that help educate the rest of us. It’s good to have the public engaged.

  13. Aside from this, another issue in the agenda for tonight that I find alarming is the listing of admin, supervisors, managers and confidential secretaries salaries. Technically, the conf. secretaries aren’t salary, they are hourly and are paid overtime. While some of the pay scales are in line, I don’t believe all are. Some of each group is grossly overpaid. I gasped when I saw Secretaries being paid 65 and 75 thousand! Really??? I understand pay freezes have been in affect, but they should be. Teachers took a half year freeze, TENIG took a full pay freeze, in addition to the Custodians taking two years of freeze and a ten percent pay cut. How in the world does the Board justify these kinds of salaries for secretarial work???? As I said, I think some of these salaries are high. Why then have we not seen a pay cut of at least ten percent here as well?? This could be a tremendous help with the budget. Everyone needs to share in the problem, not only a select few. The admin and direct staff should not be exempt.

  14. “confidential secretaries” are more like administrative assistants, not secretaries. The title is somewhat misleading. I’m not arguing sharing the burden of cuts, but I will tell you that the salaries for these people are more then the clerical secretaries who mostly are not FTE, work hourly and do not get benefits.

  15. Pattye, I too rode by the property in question yesterday afternoon. I must say that in my opinion that the property is in extremely poor condition and not marketable as a livable home without MAJOR repairs… certainly not for the amount being paid.

  16. We heard last night that the price was intended to split the district and seller appraisals – $225,000 and $282,000. Seems like the district could have stuck to their number and even the split ended up in the seller’s favor, but I’m not sure the difference is material.

    There is apparently no specific plan for the site, beyond the general options of expanding the maintenance facility or providing flexibility for TEMS needs. I imagine that pretty soon we’ll see some capital allocated for demolition, though.

    Also in Facilities, the study for the IT network upgrade is moving towards the dissemination of bid packages in October. A $3 million plus budget that we should pay attention to, I think.

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