Monday, September 5, 2011

Hilliard Comprehensive Plan

Let me start by apologizing for the length of this article. I'm still learning how to be more concise, but my training is in engineering and business, not journalism. I think this is important stuff, and hope you have the patience to wade through what this 30+ year resident of our community has learned in the past six about community economics. It certainly woke me up, and I hope it motivates you to action as well.


Whether you live within the boundaries of the City of Hilliard or not, as a member of the Hilliard City Schools community, the City's new Comprehensive Plan should be of interest to you.

But the first thing to clear up is that the City of Hilliard and Hilliard City Schools are two distinct and separate government entities. The Hilliard City School District is not 'owned' by the City of Hilliard, nor does the Mayor or the City Council have any more authority over the schools than they do any commercial entity within the City's boundaries. The Board of Education of Hilliard City Schools is an independent, elected legislative body, chartered to operated a public school district under the laws and regulations of the State of Ohio.

The boundaries of the Hilliard City School district were set by the Ohio Board of Education many decades ago, and have not been expanded since. In fact, the area served by our school district has shrunk in the past 20 years under the terms of the Win-Win Agreement which specifies, among other things, that when undeveloped land in a suburban school district is annexed to Columbus, that land automatically transfers to Columbus City Schools. The best example of this is the large tract north of Hayden Run Rd, between Cosgray and Avery, which became part of Columbus City Schools when it was annexed to Columbus a couple of years ago.

City and township boundaries have been shifting more or less continuously since the start of the suburban housing boom in the 1970s, which was triggered by the 'White Flight' that followed implementation of court-ordered busing to achieve racial desegregation in Columbus City Schools.  Although our school district has always been comprised of the entire City of Hilliard and some or all of Brown, Norwich, Franklin, Prairie, and Washington Townships, some of the land that was in the townships has been since annexed into the Cities of Columbus and Dublin.

The whole purpose of the Win-Win Agreement was to keep these parcels in our school district after annexation into the City of Columbus. This was desired by the homeowners who built homes on these annexed parcels (I was one of them!), and also by the real estate developers who knew that if their land was reassigned to Columbus City Schools, its value for home building would be about zero.

I first became involved in local politics when I was invited to participate in the development of the 2005 Comprehensive Plan for Brown Township (warning: 50mb document!). It was then that I came to understand the connection between the development policies of municipalities and the economics of school districts.

This is it in a nutshell: Local school districts are funded by three sources: a) property taxes on farms and residences within the district; b) property taxes on commercial property within the district; and, c) grants from the State of Ohio. Therefore:
If the funding from the State of Ohio, and the taxes generated by new commercial property do not grow at the same rate in which the school district's spending is growing, the incremental funding burden falls fully on the existing homeowners, businesses and farmers in our community.
Before anyone starts yelling at me, let me say that I do acknowledge that raising taxes isn't the only way to align revenue with spending. We have to be willing to dig into the spending side too. But let's address that in a later article  - this one is about the effects of a city's development policies on a public school district.

Because of the current state of our economy, we haven't had to worry about new residential development for the past few years. It wasn't so long ago that we were opening a new school every year. For now the growth pressure is off. Our student census grew from 15,029 kids in 2007 to 15,635 as of last week, an annual growth rate of just 0.6%.

But if we wait until housing demand heats up again to talk about the City's development policies, it will be too late. I think we need to talk about this now - while the Hilliard City Council has this new Comprehensive Plan under consideration.

The largest remaining tract of land suitable for residential development lies west of Alton-Darby Rd, between Hayden Run Rd to the north and Roberts Rd to the south. Much of this land is already owned by large home builders, notably Homewood Homes and Planned Development.

In 2000, the City of Columbus placed this tract in an "Environmentally Sensitive Development Area," and refused to extend water/sewer service into the area until all the municipalities in the Big Darby watershed came together to develop a common agreement for how this area would be developed.

That argreement is the Big Darby Accord, and includes all the land between Alton-Darby Rd and Big Darby Creek. I've never quite figured out all the political maneuvering associated with the crafting of the Big Darby Accord, but I know that it was a time of frustration, especially for the developers who wanted to open this tract to homebuilding while the market was hot. I've always suspected that the abandonment of the Grener Property near Homestead Park as the site for our third high school (the school district still owns this land by the way), and the selection of Emmelhainz property was the result of such maneuvering.

The Brown Township Comprehensive Plan specifies that this land to the west of Alton-Darby Rd is to be developed in a 'conservation' style, meaning that the typical rural development pattern of single family homes on 5+ acre lots would be abandoned, and instead homes would be arranged in to dense clusters surrounded by substantial open space.

The Big Darby Accord repeated this specification, and I'm happy to say so does Hilliard's new Comprehensive Plan (see Chapter 5). It says that the development density will be one home per acre, but with 50% open space. This means 100 houses can be built on a 100 acre tract, but all the homes must be concentrated on 50 acres, and the remaining 50 acres left as open space.

What we don't know is if the economics of this will work out for the developers. After all, they have much experience that tells them that people are willing to buy fairly expensive homes sited at 2-3 to an acre, and entry level homes packed in at 4-6 homes per acre. Why would they ever want to leave 50% of their land undeveloped?

It's going to take developers who are willing to try something new, and a city government willing to stick by its guns, even if the developers start crying that this conservation development isn't working for them.

So why do the rest of us need to care which kind of development approach is used?

Because it is one of the primary drivers of future revenue demands, for both the schools and the municipalities!


The average new dwelling in our school district will add 0.8 new school age kids to our school population. Since we currently spend $11,475/kid to run our school district, the building of a new house adds $9,180 in new expense (yes, I understand the difference between fixed costs and variable costs). If the average new home costs $200,000, then it will generate roughly $5,000 in property taxes.

Who funds the other $6,475 $4,180?

It's not the State of Ohio. Even before the State got into its own budget mess, the incremental funding for new students had been approaching zero. In the current biennial budget, the funding from the State of Ohio has gone down - substantially. It's one of the key reasons that there's a levy on the November ballot.

Nor are we seeing much new revenue from commercial sources. There has been some, notably the construction of the building housing BMW Financial. But we haven't seen much of that lately, and one of the most promising projects, the Hickory Chase retirement community, flamed out before it was ever occupied, and is currently $1m behind on its property taxes.

So the answer is that the $6,475 $4,180 has to be picked up by the rest of us - the current homeowners and business owners in our school district.

The deal the City of Hilliard has with the City of Columbus allows the construction of 2,000 new dwellings in the tracts along Alton-Darby Rd. That means 1,600 new kids times $6,475 $4,180, or $10.4 million that we have to subsidize. This would require 4.4 2.8 mills of new property taxes.

If the developers chicken out on the conservation development approach and convince the Mayor and City Council that they need to go back to their old way of doing things and the City of Columbus is convinced to provide the necessary water/sewer service, then we could potentially see 10,000 homes built on this tract.

That would mean 8,000 new kids, and $52 $33 million in subsidy required, or 22 14 mills!

I'll admit that I'm engaging in a little sensationalism. The housing market isn't going to heat up all that quickly, and the City of Columbus is unlikely to provide additional water/sewer capacity to the area until they are assured that someone else will pay for the necessary new main pipelines, water towers, and sewer pumping stations.

But we - the people of the community - got caught sitting on our hands during the last housing boom. We ended up with crowded schools and rapidly escalating property taxes as a result.

It will happen again during the next rise in housing demand if we don't pay attention to what the Hilliard, Dublin and Columbus city governments intend to let happen within the boundaries of our school district.

Another thing we need to pay attention to is the use of Tax Increment Financing, or TIFs, by the City of Hilliard. This is a mechanism made available by the State of Ohio to municipal governments. It allows the municipality to redirect the property taxes on a new development, whether commercial or residential, to fund infrastructure projects in the municipality.

This would be all well and good if the redirected property tax revenue would otherwise go to the city anyway. But it doesn't - it's not their money!  Rather it's the key revenue source for the local school district and other agencies. In our community, that includes the Norwich Twp Fire Department, which provides fire/safety services for many of us.

So many of us on the School Board were alarmed when the City of Hilliard granted a TIF to Schottenstein Homes for their new residential development at the corner of Alton-Darby Rd and Roberts Rd. That TIF was used to fund the construction of the new realignment of the Roberts/Alton-Darby intersection.

In other words, revenue was taken away from the school district to pay for a road. The last I checked, public roads are the responsibility of the City or the County - not the school district. Several members of the School Board let the Hilliard City Council know that we objected to this use of our revenue. I made comments during the City Council meeting when this TIF was being considered, stating that this was a bald political maneuver - allowing the City to get a new road at the expense of the School District, essentially making the School Board be the bad guys for raising taxes.

The Norwich Township Trustees also spoke at this City Council meeting, making substantially the same point.

In their new Comprehensive Plan, the City of Hilliard makes it clear that they intend to continue using TIFs. TIFs aren't a new thing for the City of Hilliard, but they are being configured in a new way. The law says a municipality may redirect up to 75% of the property taxes without permission of the affected school district. In the past, TIFs have been like the one granted to BMW Financial, in which the School Board gave the City of Hilliard authority to grant a 100% TIF, but the TIF agreement specified that the school district would  receive 100% of the revenue it would have otherwise received.

This one for Schottenstein Homes is different. The City granted a 75% TIF - which it can do without permission of the school district - for the multi-family part of their development, but will not attempt to keep the school district whole. This is why I say that the school district is funding the new Roberts Rd connector. I recall hearing the City leaders state that the multi-family part of this Schottenstein development would be for folks aged 55+, like their Tremont Club development, and therefore would not be bringing new kids to the school district. That made the TIF a little more palatable.

But those plans have apparently changed. Instead, Hilliard Summit is to be an apartment complex without age restrictions. The web site even shows a photo of a couple with young children. So it seems to me that not only is the school district losing out on critical new funding, there is also the potential that a number - maybe a large number - a new kids will come from this development. In today's real estate market, more families are choosing to rent rather than buy a house, and upscale apartment complexes in desirable school district may be in high demand.

So the school district might get double-screwed in this deal:  no new tax revenue and more kids. And that means even more tax burden on the rest of us as we subsidize the cost of educating those kids.

As much as I've complained about the City of Hilliard in this article, the City of Dublin has its own strategy to protect its economics at our expense. At a meeting last year at Bradley High School, a representative from Dublin's planning department told us that Dublin's master plan keeps all new commercial development in the Dublin school district, and puts only residential development in the Hilliard school district. So we get the kids, and they get the commercial revenue. Thanks for being good neighbors.

By the way, their school district's service facility and bus garage is within the boundary of our school district, as is Upper Arlington's. In both cases, they're occupying valuable land zoned for commercial uses, but as government entities, pay no taxes to our school district. Meanwhile, they preserve their own commercial land for revenue-paying businesses.

The City of Columbus is often painted as the bad guys in these matters. But we have to remember that while there has been about the same amount of residential development in the Columbus part of our district as there has been the Hilliard part, the amount of commercial development in the Columbus part has been double that in Hilliard. That whole huge retail zone at the intersection of Hilliard-Rome Rd and Trabue/Renner is in our school district, and it is contributing a substantial amount of funding to our operations.

A couple of new members will be sworn onto the Hilliard City Council this January - Nathan Painter and Joe Erb. Nathan was a member of our school district's Audit and Accountability Committee, and through that process had the same kind of awakening I did to the realities of the school district economics, and the role the municipalities play in helping create economic sustainability for the schools. His voice on the City Council will be vital.

But it is also vital that you understand and speak up about these things. Our school district can't raise new revenue by any means other than asking you to raise your taxes. Only a municipality, like the City of Hilliard, can control how and at what pace our community develops. If they make sure that there is plenty of new commercial development to subsidize the cost of all the kids that come with new residential development, then our school district has a chance.

If however, the City of Hilliard just allows thousands of new residences to be built without corresponding commercial development, the tax burden on all of us will continue to escalate. Or the breadth and quality of programs offered in our school district will continue to diminish. The only winners will be the real estate developers and their friends.

Meanwhile, if the City of Hilliard wants any more new roads or water lines or sewers, let them raise taxes to pay for them and quit using the school district as a piggy bank.

17 comments:

  1. Great post Paul. We need this sort of transparency and awakening. It drives me nuts that we can't trust Hilliard City Council to look out for our interests despite it being their job description to represent us, not the developers. It's sad we have to watch them like hawks concerning things like TIFs.

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  2. I think a lot of the reason they get away with this stuff is the newspaper isn't much of a watchdog and because of the maneuvering is clouded in complexity. We need a scorecard for local officials like the one we use to measure congress members.

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  3. Paul,

    FYI... The Hilliard Summit web site is almost identical to the web site for the Hilliard Grand complex (near the corner of Wilcox and Hayden Run).

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  4. Well done, Paul. It's certainly disappointing to see members of our own community playing political games with us at the expense of our citizens and our children, but sadly, I'm not surprised.

    Size and complexity make it difficult to achieve complete accountability and transparency in government in all but the smallest communities. Although I really think we can do better than we are, I have my doubts that the average citizen can, or is willing to, follow the money through both the City of Hilliard and the Hilliard School District so that they can understand who's being unfair to whom and vote accordingly. I've never seen an analysis of funding that's simpler than yours tend to be, and you started yours off with an apology for being so lengthy.

    Barring a sudden attack of conscience, it seems like political business as usual would predict more deception and sleight-of-hand -- not less. Given that the City of Hilliard and the Hilliard City School District remain two completely separate entities, I'd be floored if the City didn't continue to try to grab free money when it sees it.

    I'm almost afraid to ask this, but if the City and the School District don't answer to one another (and voters aren't clear where to assign accountability), how can we ever achieve anything other than chaos?

    This smacks of one more place where the fundamental organization and funding of State and local governments is letting us down. If you're going to co-mingle funding for the City of Hilliard and the Hilliard School District, then they need to be aligned and accountable to one group of elected officials, and if you wish to keep these two organizations separate, then they need to be funded separately with mechanisms in place to ensure that one can't play games with funding for the other.

    Our current "it's complicated" relationship provides all sorts of nooks and crannies for political gamesmanship, and that's exactly what we're getting.

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  5. dlambert wrote:
    Size and complexity make it difficult to achieve complete accountability and transparency in government in all but the smallest communities.

    --------

    And there, ladies and gentlemen, is exactly what's wrong. Hopefully no one is naive enough to think that this isn't by design. They don't want us to follow the money, they want us kept in the dark.

    And that is why we are now broke.

    And now it is up to up to restore order via the ballot box.

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  6. As independent political subdivisions, both the city and the school district will always act in their own interest, but collaboration and openness are essential to sustaining a well organized community (ie. Dublin).

    I have been told that Hilliard CSD does not hire its own independent legal counsel, but gets its legal advice on general matters from the city solicitor (they might hire counsel for a specific case, for example). I don't know how the school district can assume that the solicitor is giving completely independent review -- or even apprising them of issues that may affect the school district's jurisdiction (as Paul states above, actions of the city came as a surprise to the board). I'm sure that city solicitor is cheaper than hiring independent counsel, but are the best interests of the district always being served? (Admittedly, independent counsel may not be apprised of these specific actions earlier, but again, I ask whether the solicitor is always acting in the best interests of the school district. Please don't say that professional conduct rules that would require this -- there are always gray areas on what counsel has an obligation to reveal.)

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  7. Paul, I think your math is a little off regarding the cost to the school district for new students. If you are figuring .8 new students/home, the total cost is indeed $9180. But if the new owner pays $5000 then the district needs to come up with $4180. So for those 1600 new students there is a total gap of $6,688,000. Still a heck of a lot of money!

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  8. Important, and powerful discussion,Paul. As always, we are so fortunate in Hilliard to have you willing to put the time and effort into getting this information to the public. We can see now, where close observation is necessary.
    Any forewarning of hearings or actions (votes) that council may be undertaking will be greatly appreciated.

    I found nothing on the Hilliard web site that provides upcoming council agenda, only a bulletin of past meetings. They are in the process of being able to send newsletters by email, but again, that might only be for details of what's already happened.

    Do you know of any mechanism for the public to be aware of upcoming council agendas?

    Thank you so much for all you do, Paul!!

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  9. Erika: Thanks for checking the math! I've made the appropriate corrections in the article, denoting them in blue...

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  10. The problem goes much higher than city council.

    The president and members of congress want to be popular and pass a tax cut. The governor and state legislators, although now receiving less federal funding, want to be popular and pass a tax cut, sending less money to school and local government entities. Everyone wants to be popular (re-elected) and they end up sticking the "lowest" government entities with the bill for their popularity. Enter libraries, schools, police, fire, etc.

    That $100 a year that you get back in your check from federal and state tax cuts tax is going to cost you five times that amount in property tax increases, and tens of thousands in home equity. Increased property taxes further limit the number of people who can afford homes, further eroding your equity. The downward spiral continues.

    The next time some politician, or candidate, tries to lure you with the proposition of tax cuts, if you are a property owner, you might want to think twice about who you're really helping. Either the cost of government is spread out among everyone (through income or sales), or taxes are cut leaving the cost to fall disproportionately among property owners.

    The last round of illusory federal tax cuts did no more than subject tens of thousands more families to the alternative minimum tax, destroy state and local government funding, and instigate the current housing crisis. Better save that extra $10 a month in tax cuts you got in your paycheck - you're going to need it to may the extra $120 a month for police, fire, schools, and other services that you actually need. For working families, it was a significant tax increase.

    Why not increase taxes at the state level in order to more fully fund local school districts - then there would be no place to hide via development plan, i.e., Dublin and Upper Arlington. Significantly broaden the base and it may even be possible to lower the rate. A modest increase in state income or sales tax rates could raise enough money to provide much of the funding for education, and other local services, across the state.

    Commence skewering me ...

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  11. OH: You're welcome. The feedback from readers makes in worth it, whether online here, emails to me, or conversations in person.

    You can contact Lynne Fasone at lfasone@hilliardohio.gov to request to be put on the email notice list for council agendas.

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  12. M2 said: "Why not increase taxes at the state level in order to more fully fund local school districts"?

    There has been a group called Ohio Coalition for Equity & Adequacy of School Funding which has taken this position for years, and in fact were the originators of the landmark lawsuit DeRolph v. State of Ohio, which led the Ohio Supreme Court to declare the State's school funding system of that time to be unconstitutional (a decision which is now moot since that system has been abandoned via Ted Strickland's so-called Evidence Based Model", which has been subsequently abandoned via the Kasich interim funding system).

    This is far from a simple problem.

    In the large metro areas, the main problem is the segregation of affluent families into the suburban school districts, leaving a core of poverty in the urban district. Money isn't a solution here - the urban districts spend as much or more per student as the suburban districts. There's something deeper going on in the metro areas, for perhaps another conversation.

    In the rural areas, the problem is that farmland is valued at a small fraction of its real market value, depressing school revenue. In a very real way, CAUV is a farm subsidy program funded via school taxes. I'm not saying that's bad, but it hurts the school districts. It's one of the reason you often find farmland school districts using income taxes to augment their property tax income.

    Then there are the post-industrial areas of Appalachia. I understand these areas because that's where I grew up. My family bought land in Lawrence County over 220 years ago, and there are seven generations buried there.

    But you know what, most of those in my generation have left for better opportunities. Just as our ancestors left their relatively safe homes in the East to seek a better life in what was then the Northwest Territory (encouraged by the land grants they received for service in the Revolutionary War), we need to encourage the folks in these post-industrial areas to move on and make a life where there are better employment opportunities. Whatever the unemployment might be here in central Ohio at any given time, it's about 4x higher in Appalachia, and I don't see it getting any better - ever.

    It's hard to say we shouldn't underwrite the Appalachian schools, because it's not the kids that are making the choice to stay. But there are some school districts down there who pay only 10% of the cost of running their schools - the rest is State and Federal funding. We have to, with compassion, encourage those folks to honor the memories of our pioneering ancestors, and move on to greener pastures.

    That's what I think anyway.

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  13. Oh, and the point I almost missed responding to M2. Since the State can't print money, any increase in State funding has to come from increased taxes, lessened spending, and most likely both.

    I've been saying for years that any solution that involved greater State funding will be a net loser to the Hilliard community. Why?

    Because there is no net gain to raise our effective taxes by $100 per kid in our community and then give our school district $100/kid more in funding.

    The more likely scenario is that the State would raise our taxes $100/kid and give us back $25/kid. Meanwhile other districts would see their State taxes go up $1/kid and get $100/kid. In other words, it's a redistribution of wealth.

    That's a sticky problem too. If you really believe in this kind of funding, then you also be in favor of abolishing local school districts and going to a statewide system, where each building is funded exactly the same per student, and any student could attend any school they want.

    Turns out that lots of suburban folks like the invisible fences around their school districts which keep the poor folks out. That's the reason we had the White Flight in the 80s - the function segregation in Columbus City Schools was torn down by the busing program ordered by the Federal Court (Penick v. Board of Education). So the folks who could afford it fled to the suburbs, and consequently screwed up the economic fabric of central Ohio from that point forward...

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  14. So then, if we pass the levy in the fall, does 100% of THAT money stay in Hilliard?

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  15. ABM: Yes! The most efficient and reliable way to fund our schools is with local property taxes.

    Property taxes are a much more stable source of income than income taxes. The reason the State and Federal governments have such large budget deficits is that their revenue is almost completely based on income taxes. So when the economy faltered, their revenue plunged.

    The State dealt with its deficit by transferring it to the local governments, like school districts. It did so simply by reducing the amount of State funding we will get in this biennial budget.

    My estimate is that by FY13, 4 mills of the new 5.9 mill levy will be used just to replace the $10m/yr less we'll get in State funding vs FY09.

    The rest will be used to fund a 3.5% annual growth in spending for years FY13-FY16 (ie after the aberration caused by the early retirement incentive program), mostly for comp and benefits. That's down from the 4.8% annual spending growth rate from FY03-FY11, again, mostly to cover increases in comp and benefits.

    We plan to have some of the reduction in the growth rate due to teachers retiring from the top of the pay scale being replaced with teachers who will be at the starting point of the pay scale. Some will come from less-aggressive rates of base pay increase than we had during times when the economy was booming.

    For now, we don't have to worry about subsidizing the cost of growth - which I see as subsidizing the developers. But the point of this article is to remind us that growth is still a monster that just happens to be asleep at the moment.

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  16. Kicking the can said...

    Well Then, If our good Mayor and the developers would get out of the bed, maybe the monster could sleep a little longer !!!

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  17. Paul - I have a kindergartner this year and have often wondered, is there any cost savings in going to full-day, every other day kindergarten? It would seem to me that there would be significant savings in bussing.

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