It’s Cheaper To Keep Her
“Daisy” is a 1,600-pound Holstein milking cow who, for most of her five-year life, has been grazing on a quiet hillside in the northern Dutchess County town of Red Hook, a familiar symbol of the open spaces, rural lifestyle and agricultural economy that define much of the Hudson Valley. But to the citizens of Red Hook, faced with mounting pressures from new home construction, keeping Daisy grazing is also a way to keep a lid on skyrocketing property taxes.
Red Hook voters last year approved a novel land preservation program—one which is only starting to draw planners’ attention in Columbia County—to address a disturbing economic fact about housing development: on average, a new house costs the surrounding school district about $5,000 more each year than it contributes in new property taxes.
By a nearly 5 to 1 margin, the town’s residents agreed to borrow $3.5 million worth of bonds to purchase farmers’ rights to develop their land into residential building lots, preserving the open land for farming in perpetuity. Proponents of Red Hook’s purchase of development rights, or PDR program, estimate that every dollar the town spends in acquiring open acreage will bring savings of $5 to the school district’s taxpayers.
“It’s cheaper to keep her,” said Robert McKeon, Daisy’s owner and chairman of the town’s Agriculture and Open Space Advisory Committee.
“A lot of families who have come to the town for the schools and the quality of life voted in favor of the plan, ” added Red Hook Town Councilwoman Jean Bordewich. “But so did a lot of old-timers who love the land and see that the plan is financially good for them, too.”
As the issues of preserving open space and restraining runaway property taxes take center stage in the debate about our towns’ future, a look behind the numbers may help public officials and voters assess the pros and cons of raising taxes by a small amount today in order to save much more money in the future.
Under Red Hook’s program, the town borrows money in the bond market to cover 50% of the cost of purchasing development rights to local farms. The remaining money must come from county, state and private programs dedicated to preserving open space.
Requiring an independent second purchaser, Ms. Bordewich noted, helped ease concerns over the program’s potential conflicts of interest. The main opposition to the bond referendum, she said, came from people concerned that the Town Board would be “paying off their friends.”
The annual cost of the $3.5 million bond, once the total amount is borrowed, would add about $350,000 in principle and interest payments to the town’s annual budget in each of the subsequent 20 years. But without the PDR program, according to school district officials and my own financial analysis, current development pressures would cost the district’s taxpayers at least an additional $1.7 million per year. Over the 20-year life of the bond, the gap widens remarkably: spend $7 million in principal and interest to save an estimated $34 million in higher school taxes.
The basic arithmetic behind such big numbers is a gap of nearly $3,600 between the cost of educating a student for one year in Red Hook’s public schools and the annual tax revenue per student that a new house now contributes to the district’s coffers. In addition, school officials suggest that, if recent enrollment trends hold, the district would need to start construction on a new classroom building in 3-5 years. Allocating this capital cost to each new house whose owners’ children would attend Red Hook schools brings an additional cost per house of $1,400, for a total deficit “per new home” of roughly $5,000.
These estimates understate the future tax burden in two ways. First, school costs per student have been rising at 8-10% a year. Adjusting for the likelihood that the $3,600 per house operating deficit grows at an 8% inflation rate would tack on another $700 to the annual funding gap, which is not reflected in these forecasts. Moreover, future property taxes would have to cover the additional cost of providing fire, police, EMS and road maintenance to the new homes, a cost we will attempt to quantify in a future column.
Despite the compelling economics of farmland PDR programs adopted around the nation, Columbia County governments and planners remain far behind the strides made in Red Hook and elsewhere in Dutchess County.
“We have a lot of farmers who want to sell their development rights,” said Columbia Land Conservancy Executive Director Judy Anderson. “But we don’t know where to find the money needed to help them at this point.”
While large-scale developments on open farmland are still scarce in Columbia towns, planners just across the county line in Pine Plains are mulling proposals to build over 1,300 new houses, which would more than double the town’s current housing stock and could have an even larger impact on school taxes.
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