With the West Windsor Town Council’s much anticipated vote on InterCap ordinances set for Monday, September 19, the potential financial results of the project — promised to be tax-positive and revenue-generating — have come to the forefront.
A special work meeting will be held at 10 a.m. at the municipal building on Saturday, September 17.
As Council prepared for its September 19 vote, it had no shortage of financial analyses to consider. Intercap’s economic consulting firm, TischlerBise, had originally presented a 32-page fiscal impact report on September 6. That report based its projections on the impact over 20 years of 702 market rate condominiums (valued at $450,000 per unit) and 100,000 square feet of retail (with a rental rate of $30 per square foot and a sale price of $300 per square foot).
The bottom line of that report (reflected in a claim made in a full page ad from Intercap in the September 9 WW-P News) was that the project would generate $4 million of net revenue annually for the township and the school district.
At the request of Council, TischlerBice then created three additional scenarios, all based on the first eight years of the project rather than 20 years, and each based on different average sale prices for the condominiums — $400,000, $350,000, and $250,000. While less favorable than the original analysis since fewer units would be generating property taxes in the early years and since lower priced units would have a lower tax assessment, the project nevertheless was tax positive under those conditions, as well.
How did TischlerBice, a 30-year-old firm based in Bethesda, Maryland, which has prepared more than 700 fiscal impact evaluations, arrive at its conclusions?
The revenue projections were based on West Windsor’s current assessment ratio and assumed that they would stay the same throughout. The consultants assumed that the first units would come on the market in the year 2015 and that the buildout would be complete by 2022. At full buildout, the consultants projected, the transit village would have a total assessed value of $345.3 million and generate $1.27 million per year in new property taxes for the township and $5.2 million per year for the school district.
On the cost side the consultants calculated that at full buildout the project would create operating and capital costs of $819,252 per year for the township and $628,983 per year for the school district. The total new revenue of $6.47 million less the increased expenditures of $1.45 million roughly equals the $4 million net increase referenced in the Intercap ad.
Especially for critics of the project, the cost calculations attracted the greatest attention.
In calculating the costs, the consultants first assumed that the community would want to continue the same level of service that it has had in the past. It also divided costs into ones that would be impacted by the population increase in the township and those that would remain fixed.
And it assumed that, because of the projected decline in school enrollment, no new classrooms would have to be built and no additional teachers would have to be hired. For that reason, TischlerBise calculated that the new pupils generated by the project would generate expenditures of only 20 percent of the overall per-pupil cost of $13,500.
As for the number of students projected in the development, TischlerBise relied on the projections of Stan Katz, former WW-P board member who was widely recognized for his demographic studies. Katz projected that a housing project of this sort would generate 28 school-age children per 100 units, or about 224 overall.
Goldin said later in a telephone interview that, while accepting that number for purposes of the fiscal analysis, he believes the actual experience will be even fewer children. At the earliest stages of the transit village concept InterCap hired Urbanomics, headed by Regina B. Armstrong, former chief economist for the Regional Plan Association of New York.
“Our charge to them was to identify every TOD in the country and take the socio-economic and demographic characteristics of West Windsor and overlay that. They identified about 14 TODs in the country in towns that share the demographics and socio-economic qualities of West Windsor, including having really highly regarded school systems,” he said.
Goldin instructed Urbanomics to specifically visit every project and talk with tenants, residents, property owners, school boards, mayors, or “anyone you can talk to about how many kids are living in those developments.”
That study showed that 2 to 3 children per 100 units. “It was the first study of its kind ever done. Anecdotally in the industry, both on the developer’s side and government side, those are the numbers that are thrown around in conferences and meetings. At 800 units, that’s 24 kids,” Goldin said.
But for argument’s sake, the consultant also calculated the financial impact with a far greater number of students — 60 per 100 units. That number, TischlerBise reported, “is quite similar to the rate of pupil generation for single-family detached residences” — none of which will be part of the Intercap development. Nevertheless the project was still tax positive under those circumstances: a combined additional net revenue of $3.755 million for the school district and township.
After the September 12 Town Council meeting Mayor Shing-Fu Hsueh said he felt good about the progress. “We would like to see the council move along. The school board representative (Bob Johnson) responded to all the questions coming from council members. All the conversations were very positive and we will try to do whatever we can to provide more information. Hopefully before September 19 they will have more time to look into the issues and talk about them,” he said.
Goldin concurred with the mayor’s thoughts and said that concerns over the number of students generated have been answered.
“Despite what the school board said, the opponents are adding in the cost of constructing classroom space for every student and adding faculty for every student. That is the fundamental difference. From what I heard Bob Johnson stood up (at Monday’s meeting) and essentially agreed with what we were originally saying — we don’t anticipate any additional classroom space or additional faculty needed. That is a critical part of the story and to me it’s the end of the school story,” Goldin says.
At the September 6 meeting, the per-student cost in TischlerBise’s report — a figure of nearly $13,500 per student per year — was challenged by several residents. The most prominent person to speak was Bryan Maher, candidate for West Windsor Town Council, who had done his own spreadsheet calculations. Maher said the actual per-student cost would be $15,000 and there was a scenario in which he calculated losses for the township.
Goldin’s response: “I think Bryan Maher used $15,000 even though the school board validated our projections Monday. That cost assumed a capital cost. There’s no capital cost, and the school board said that. There’s no incremental personnel cost either so TischlerBise used 20 percent of that total cost to account for any related costs,” he said.
“Bryan Maher from his LinkedIn profile is an award-winning equity analyst,” Goldin said. “I have no basis to question his work as an equity analyst and I’m sure he is very good at it. But he has never done a fiscal impact study for a municipality and TischlerBise has done over 700.”
Bise’s presentation on September 6 showed a 20-year range of the development, from 2014 to 2034, where as the newest version is cut to eight years, indicative of only the build-out phase. Retail space was also reduced from 100,000 to 70,000 square feet as Linda Geevers pointed out an inconsistency on September 6, while variables such as market cost of housing units were changed from averages of $450,000 and $245,000 in the first report to prices of $250,000, $350,000 and $400,000 in the latest version. The reports demonstrated that in every one of the five scenarios that Bise has presented the project turns out tax positive and generates revenue.
“Importantly, the project is revenue-positive from the very beginning. That includes the accounting for the lost revenues,” Goldin said.
Goldin said there was no chance that units in the development would be sold for $250,000 or $350,000. “They asked us to use these numbers,” he said, referring to township officials. “I don’t want people to be angry at us” when the project is built and there is nothing available in that price range.
The $400,000 to $500,000 pricing is in line with the market rates in other locations. He also confirmed comments made by West Windsor Business Administrator Robert Hary, saying that funding for the development project would not be possible if the market value of the units was not $400,000 to $500,000 or above, and he expects there to be units sold in presale.
Basically, said Goldin, “it’s not a fair analysis to use an eight-year snapshot. It’s not fair to use the lower price points. We have used all the most unfavorable assumptions, and it’s still revenue positive.”
“I think that when this is built out and people see how few children live there they are going to kick themselves for not allowing even more density at the site,” said Goldin.
