The Math of Development

The very first article I posted to this blog, in December 2006, was about the impact of ongoing residential development on our school district. The crash of the housing market in 2007 - and its impact on our economy - has made this fall from the top issue in our community, but the threat has been smoldering all the while.

With the first glimpses of recovery, the developers and home builders are again eyeing our community as a good place to make a profit. And they have little concern about whether their profit opportunities are simultaneously beneficial to our community. Nor should we expect them to be concerned. They're in business to make money, and they do that by buying up farmland, building new homes, and selling them to folks who want to live in our community.

It's the officials we elect to public office who have the responsibility to represent our interests versus those of the developers. In particular it is the duty of the Mayors and City Council members who govern our cities. In our case, that means Hilliard, Columbus and Dublin. They must weigh the one-time profit desires of a developer against the long-term health of the community.

The challenge is that our community is made up of several overlapping governments, or "political subdivisions" to use the language of the Ohio Revised Code. I used this diagram back in March for the story titled "Patchwork Community" to help explain the relationships:

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While this chart tries to show how the jurisdictions of these various entities overlap, it doesn't say anything about the flow of money, and as some wise person said a long time ago, if you want to really understand things, follow the money. Maybe this diagram will help:

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I've left out a few relationships to simplify the diagram (e.g. the City of Dublin), but the main themes are captured:

• The school district is mostly funded by local property taxes, paid by both the home owners and the business owners within the boundaries of the school district. In other words, the school district is funded by the people who own property in the school district. If you live in the school district, you pay property taxes to the school district.
• The cities are funded by income taxes paid by the employees of businesses and other entities (like the school district), within the boundaries of the school district. If you work in a city, you pay income taxes to the city.
• Each city provides certain services - such as police protection, water/sewer, street maintenance, trash collection - to the entities within their municipal boundaries, including home owners, businesses, and the school districts.
• The school district provides educational services to all children whose legal residences are within the school district boundary.

When a new home is built within in a city - Hilliard for example:

• Hilliard City Schools will collect property taxes from the owner of that home, and will provide education services to any school age children living there. The amount of property taxes collected may or may not be sufficient to fund the cost of educating the kids who live in the new house, depending on how many kids live there, and the value of the house. By my calculations, a home must be valued in excess of $250,000* in order to fund the local cost of educating the 0.8 school age kids who will come with a new home, on average.
• The City of Hilliard will provide to the home owner police protection, water/sewer service, street maintenance, trash collection, etc, but will collect revenue from the home owner for only some of those services (water/sewer, trash). The home owner will pay little to offset the cost of police protection, street maintenance, and for park operations.

When a new business is built within a city:

• Hilliard City Schools will collect property taxes from the owner of that business, but will be providing the business no services. Therefore, the property tax revenue collected from businesses reduces the amount of property taxes needed from home owners.
• The City of Hilliard will collect income taxes from the employees of the business, and will provide police protection, water/sewer service, street maintenance, and so on. Additionally, this revenue will fund the cost of providing these city services to home owners as well.

So the story is the same for both the school district and the city:

The more businesses that there are in relation to homes, the less the home owners will need to pay in taxes to run both the school district and the city. 

Conversely, the more residences which are built in the city, the higher the cost of providing services, both via the schools and the municipal government.

But how do we go about recruiting new businesses to the area?

Some businesses, such as retailers, don't have to be recruited. They naturally want to have storefronts where there are consumers. As more homes are built, more supermarkets, gas stations and pizza shops will follow. We're glad to have these new businesses in our community, but only a few of them will generate significant tax revenue for the schools or the municipality.

Big manufacturing operations are great for the economy, but not always welcomed if they bring with them significant environmental concerns. The extreme example would be a nuclear power plant. I'm a big fan of nuclear power, and believe that as long as our country has an insatiable appetite for electrical power (e.g. for our new electric cars), we're going to need nuclear power to provide a significant portion of the base load.

Nuclear power plants also produce an incredible amount of tax revenue for their host communities. A former superintendent of Perry Local Schools up on Lake Erie once told us about the enormous amount of money that flowed into their school district in an otherwise low-income community because of the taxes paid by the Perry Nuclear Power Station. They built a beautiful new $100+ million central school campus without the need of a local levy, just using the revenue from the nuclear plant. I think nuclear power plants are cool, and can be made very safe. Nonetheless, I don't think I'd want to see one built on Darby Creek.

Some manufacturing operations can be great neighbors, and we're blessed to have one in Boeringer Ingelheim Roxanne Labs.

So what is the ideal kind of commercial development?

I think Dublin has gotten this right for a lot of years: it's professional office space. Take a look at the Franz Rd corridor - large office buildings all around. Dublin is a place a where affluent people want to both live and work. I won't claim that the economic structure of Dublin is the perfect model - they still have the challenges of residential development outpacing their commercial development, but at least they have high-value residential real estate and a healthy amount of the right kind of commercial development to help.

I know that Mayor Schonhardt and the City Council would like Hilliard to become much like Dublin in this regard, and I applaud this vision. The redevelopment of the former Dana Manufacturing site is a good move in that direction, with a mixture of retail, residential, and professional office space.

But meanwhile, we have the huge Heritage Preserve development underway on Alton-Darby Rd. This sits on 400 acres of land newly annexed into the City of Hilliard. On it, the Planned Development company will build 687 dwellings consisting of 387 single-family homes and 300 apartments.

There was no compelling public need for the City of Hilliard to annex this land. Had they chosen to not annex this land, no one would have been harmed except the developer, Dan O'Brien. I'm not insensitive to the economic motivations of Mr. O'Brien. He was gracious to sit with us on the committee to rewrite the Brown Township Comprehensive Plan, even though he was uncomfortable doing so - knowing the objective of the Plan was to restrict his options. I'm also a commercial real estate investor, and know how hard the market has been for the better part of a decade. It's quite painful to have a big hunk of money tied up in a piece of real estate that's generating no revenue.

But it's not the City of Hilliard's job to protect the interests of Mr. O'Brien or any other real estate developer. They're supposed to protect our interests - those of the residents and businesses already in the community. And right now, I believe that means holding off on the annexation of any additional land for residential development. Let's get more of the commercial tracts along I-270 developed with professional office space first.

And if we need to use TIFs to make that happen, I can support that. Let's not leave money on the table if we don't have to, but I'd rather waive some or all of the property taxes for a few years and set up a future revenue stream than have no revenue stream at all.

But let's not use TIFs to facilitate residential development, as the City of Hilliard chose to use for the apartment complex on the corner of Alton-Darby and Roberts Rds.

* If the State of Ohio continues to provide incremental funding with incremental growth, the local share of the cost of funding the education of 0.8 kids is equal to the property taxes generated by a $250,000 home. As the amount of state funding decreases, as it did in recent years, the amount of money we must generate locally increases, which also raises the value of the home required to fund the cost of 0.8 kids.

Patchwork Community

As we help Dr. Marschhausen prepare to join the Hilliard Schools team, it occurs to me that there are some pretty obscure yet highly-impactful political and economic arrangements which we need to help him understand. I don't think any other region in Ohio is quite like ours in this regard.

I've been writing about many of these political forces for years, and have always struggled with trying to condense all the information to an 'elevator pitch' (ie - what do you say when you find yourself alone in an elevator for 30 seconds with someone who can have a big impact on your life?). Dr. Marschhauser has many things to absorb about our school district and community, and we owe it to him to make the process as concise as possible.

I'm one of those who grasps information more quickly from images than I do words. So why not try to describe these relationships in an image?  Here goes:

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In words, it would go like this:

• All of the City of Hilliard is in the Hilliard City School District, but not all of the Hilliard City School District is in the City of Hilliard
• Parts of the City of Columbus and Other Suburbs and Townships are in the Hilliard City School District
• Parts of the City of Columbus and Other Suburbs and Townships are in the Columbus City School district
• Parts of the City of Columbus and Other Suburbs and Townships are in Other School Districts
• The Big Darby Accord encompasses an area which is part of Hilliard City Schools, part of the City of Hilliard, part of Other School Districts (South Western), and all or part of several Other Suburbs and Townships
• Other Suburbs and Townships are served by Other School Districts

While the key contractual relationships are:

• The Water/Sewer Services agreements with the City of Columbus, which control which Township parcels a Suburb can annex and be provided water/sewer services. The City of Columbus has long used their control of the regional water/sewer system to limit how the suburbs expand, and to preserve "annexation corridors" between the suburbs.
• The Win-Win Agreement with the Columbus City Schools, which controls how school district assignments are made following an annexation. Although the Win-Win Agreement is between Columbus City Schools and most - but not all - of the suburban school district, this agreement was in reality forged to put an end to the battle between Columbus City Schools, which was trying to preserve its student population and revenue sources, and the developers who were trying to profit from the "White Flight" generated by the busing program ordered by the Federal court to eliminate racial discrimination in Columbus City Schools.

The connection between those two agreements are:

• When a parcel currently in a suburban school district is annexed into a suburb, which can happen only if the water/sewer agreement allows it, that parcel will continue to be served by the suburban school district.
• When a parcel currently in a suburban school district is annexed into the City of Columbus, it will be transferred to Columbus City Schools.

So where does the Big Darby Accord fit into this?

In my opinion, the most significant element of the Big Darby Accord is a radical policy change on the part of the City of Columbus - that it will allow water/sewer services to be extended into unincorporated townships, ending their ironclad policy of providing water/sewer service only to parcels annexed into a city.

This opens the tens of thousands of acres of undeveloped farmland along the Big Darby Creek to residential development, and will allow it to stay in the two suburban school districts - Hilliard City Schools and South Western City Schools - exactly what the developers want.

We haven't had to deal with the economic effects of rapid residential growth for about a decade. The primary effect is that new houses don't generate enough new property tax revenue to fund the cost of the additional kids they'll bring to the school district. 

For example, it is my estimate (ie - not an official estimate by the Treasurer), that the new Hilliard Preserve development just approved by the Hilliard City Council will create the need for the rest of us to allocate at least 1 mill of property taxes to subsidize the cost of the new students coming from that development.

That means either voting to tax ourselves additional millage, or reduce spending on other programs and services.

Remember, the School District doesn't control development policy - the cities do. I've never understood why they're so eager to annex land to enable more houses to be built when it's not a beneficial thing for either entity. Who is reaping the benefits, other than the developers?

Faceoff

It's been a while since I've written anything in depth about residential development in our community, mostly because there hasn't been much of that for a while. But we're starting to see the developers test the waters, and I'm encouraged that it may mean that the economy - the local economy at least - may be starting to recover.

One real estate trend that's emerging is the interest young families have in nice apartments in great school districts. It makes sense. Even with mortgage interest rates at an all-time low, there's more the potential buyer of a new home has to think about: Have home prices have pretty much bottomed out; is your income secure enough to take on the mortgage payments; do you feel confident that the local school district is in good shape, and will stay that way at least until you decide to sell your house?

If you can't check off all those requirements, it can make a lot of sense to rent a nice apartment for a while. We've seen two such apartment developments in the last year, both by Schottenstein: Hilliard Grand, near the intersection of Hayden Run Rd and Wilcox Rd, and Hilliard Summit, at the corner of Roberts Rd and Alton-Darby Rd. The target market for these apartments includes young families, and they make sure to point out in their advertising that these apartments are in the Hilliard City school district.

Planned Development, the outfit which developed Heritage Lakes, has been working on a project to develop another 400 acres they own on the west side of Alton Darby Rd, just south of Davis Rd. This is significant not only because it is the first sizable single-home development in our community proposed in quite a while, it is also the first one in our school district that is within the boundaries of the Big Darby Accord.

First a little history...

The City of Columbus and the Regional Water/Sewer System

When the construction of a regional water/sewer system was being contemplated many decades ago, it was decided that the City of Columbus would be given exclusive control of the system. This power was subsequently used by every Columbus mayor starting with Jim Rhodes to significantly influence the pattern of development in Central Ohio.

A key component of their strategy was to execute water/sewer services contracts with the suburbs that gave the suburbs the ability to expand, yet preserve 'annexation corridors' between the suburbs which would allow the City of Columbus to continue to grow.

And the City of Columbus made it their policy that they would not extend water/sewer services to any parcel of land which had not been annexed into the City of Columbus or into a suburb, and then only into areas within the suburb's water/sewer expansion areas, as defined in the contract.

School Districts and their Boundaries

School district boundaries are set by the State Board of Education, and for many years it was the policy of the State BoE to move school district boundaries with municipal annexations. As the City of Columbus grew, so did the Columbus City School District. The names can create some confusion, but a school district is a wholly separate political entity from a city, and they don't necessarily share the same borders. But for many years, it was a common practice to keep them aligned.

Then came the 1977 decision by the Federal court in Penick vs. Columbus Board of Education, which declared Columbus schools to be illegally segregated, and ordered the implementation of a busing program to correct it. It turned out to be a disaster.

Rather than leading to better racial integration in Columbus Schools, this decision started a stampede to the suburban school districts - the so-called "White Flight."  Hilliard was one of the destinations. The demand for suburban homes exploded, as did the population of our school district. Meanwhile, the result of the busing order was to make Columbus City Schools less integrated and poorer.

Remember the water contracts?  In many cases, the parcels of land in suburban school districts which were most ready to be developed at the beginning of this migration were those right at the edge of the then-current Columbus City limits, where the water/sewer infrastructure ended. But they were often outside the suburban city's water/sewer service territory. So to keep with Columbus' policy of no-water-without-annexation, these parcels were annexed into the City of Columbus, but remained in the suburban school district. Win for the developers, and win for the homebuyers.

The members of the Columbus School Board were understandably alarmed at this phenomenon. So they petitioned the State School Board to realign the school district boundary with the city boundary, and made some pretty good arguments as to why the State Board should grant their petition, including the fact that Columbus school buildings were emptying out (e.g. Central High School, now COSI) while the taxpayers were being simultaneously burdened with building new suburban schools.

The effect was to immediately dry up the demand for new houses in the suburbs. Those wanting to escape the busing program in Columbus Schools were understandably fearful that they could spend a lot of money on a new house in a suburban school district, and then get shifted back into Columbus Schools anyway.

The developers were outraged with this interference with their booming market. They have great political power in central Ohio - always have. Something had to be worked out, and after a few years of arguing and negotiating, the so-called Win-Win Agreement was finally signed between Columbus City Schools and many, but not all, of the central Ohio suburban school districts. Hilliard City Schools was one of them.

The Win-Win Agreement said, in a nutshell: a) existing homes in the City of Columbus, but a suburban school district would get to remain in the suburban school district; b) any undeveloped land in a suburban school district which is covered by the water/sewer agreement with the suburb would be allowed to stay in the suburban school district as well; but, c) any undeveloped land which is subsequently annexed into the City of Hilliard Columbus would automatically shift to Columbus City Schools.

There are a few developments in our area which fell under that last clause, notably the large parcel north of Hayden Run Rd, between Cosgray Rd and Avery Rd. That land is outside the water/sewer agreement with the City of Hilliard, and so was annexed into Columbus. Simultaneously it ceased being part of Hilliard City Schools, and became part of Columbus City Schools.

A Radical Change: The Big Darby Accord

Then around 2005, the City of Columbus had a dramatic change in policy. They said they were no longer interested in aggressively pushing out their boundaries, mostly because they said it was no longer economically viable for the City to extend police, fire, street maintenance, etc farther and farther out. In particular, they said they would be willing to extend water/sewer services into the townships of the western part of Franklin County, as long as development was done in a manner that preserved the unique ecosystem of the Big Darby watershed.

Whether the City of Columbus is really interested in conservation, or they have another political agenda, we don't know. But this policy drove the development of the Big Darby Accord.

The Big Darby Accord was intended to be a legally binding agreement between the ten jurisdictions which had responsibility for the western part of the county: Columbus, Hilliard, Grove City, Harrisburg, Brown Twp, Norwich Twp, Washington Twp, Pleasant Twp, Prairie Twp, and Franklin County. The agreement would specify not only land use restrictions and development requirements, but would set up a method for making the control of development density economically viable, using what are called Transfer of Development Rights (TDRs).

The idea is that if the overall density of development for the Big Darby Accord area is set to one dwelling for every five acres (which is the current rural residential zoning in Franklin County), and there are 50,000 acres in the Accord territory, then a total of 250,000 dwellings would be the limit. But some parcels of ground could support much higher density, and some much less - and there are some which should be left undeveloped forever.

It's not fair to tell a landowner that suddenly the rules have changed, and that their land can no longer be developed just because there is a wetlands on it, when in years past it has been okay to just fill in those wetlands and build like crazy. A great number of us live on land where exactly that happened.

So the idea of TDRs is that folks who have land which is ecologically acceptable for higher densities - like the 2-4 homes/acre we see in most developments - would have to buy 'development rights' from some other landowner, who in the process would be giving up their development rights. If 100 acres comes with the right to build 20 homes (5 acres/home), then to get the right to build 200 homes, the landowner would have to buy the development rights of another 100 acres. The buyer gets the right to build his 200 homes on 100 acres, but the seller can never develop his land thereafter.

However, the City of Hilliard never really bought into this concept. They said they were on board with the Big Darby Accord, but refused to yield 'home rule' of the land within their water/sewer service territory. I think the issue was that the developers who owned large parcels of land in the Hilliard water/sewer service area were distrustful of the whole TDR concept, and motivated the Mayor to fight against it.

Mayor Schonhardt has seemingly won that battle on behalf of the developers, and the Big Darby Accord never became a binding contract which would control development for the Big Darby Watershed. The Big Darby Accord Advisory Panel became just what its name implies - a body which can advise the City of Hilliard on development applications, but has no power to enforce its recommendations.

... and now Back to Today

This week, the Big Darby Accord Advisory Panel held a hearing on the first big application for development in the Hilliard part of the Big Darby Accord territory, the one called Heritage Preserve.

The application was prepared by John Talentino, the City Planner for the City of Hilliard, and was presented by him to the Advisory Panel. I take this to mean that the City has tacitly approved this plan. Next was a presentation by a representative of the developer.

The primary concern of the Advisory Panel was the development density. Every land use plan that covers that parcel of ground specifies a density of 1 dwelling unit per acre with 50% open space. This means a total of 418 dwellings could be built, but that they would have to be sited on 209 acres or less, leaving at least 209 acres as open space. This open space could be a golf course, a horse pasture, wetlands, woods, etc. The basic plan proposed by the developer is within these parameters, with 387 single family homes.

But there is a problem. The developer proposes 300 apartments be built on the site as well, for a total of 687 dwelling units, or a density of 1.68 dwelling units per acre - way above the density limits.

Why?

Simple - for aesthetic reasons, the City of Hilliard wants the developer to incorporate certain expensive features in the plan, such as an entry street bordering a wooded area along which no homes would be allowed, which will also serve to connect Davis Rd to Scioto-Darby Rd. They also want to realign Alton-Darby Rd so that it can serve as a southern entrance into the development. For these things to be economically feasible to the developer, they need to be able to sell more units, and since apartments are in demand these days, they likely already have someone in the wings ready to buy and operate the apartment buildings when the project is complete.

Advisory Panel Chairman Joe Martin, a respected long time member of our community, and a leader in the land use planning effort for Brown Township, wisely and appropriately cautioned his fellow panel members to recognize that this is not an isolated application, but rather one that will set a precedent for all future applications that will come before them.

As reported in the Dispatch, the Advisory Panel voted 9-0 to reject this application.

Now what?

The City of Hilliard may decide to simply ignore the vote of the advisory panel. The City might even decide that this is the last straw, and withdraw from the Big Darby Accord altogether.

Then the question will be what the City of Columbus will do. After all, they have the ultimate power via their control of the water/sewer system. If they come to the conclusion that there is no capacity to serve this development, that's it. Of course, the developer or the City of Hilliard could take Columbus to court and seek an order for Columbus to provide the water/sewer service. My understanding is that Columbus has typically prevailed in such lawsuits in the past.

I worry that this decision by the Accord Panel - and I absolutely support them in this case - puts the very existence of the Big Darby Accord in jeopardy. It likely depends on how much power the developers and the Hilliard elected officials feel they have relative to the Mayor Coleman and the Columbus City Council.

The City of Hilliard has the next move.

Back from the Brink

The Cincinnati Enquirer recently ran a story about the Little Miami Local School District down in Warren County, describing how that school district seems to have hit bottom, and is now on the path to recovery.

The Little Miami school district almost ceased to exist. It has been in Fiscal Emergency for two years, meaning that a panel appointed by the State is running their school district, not the local School Board. They had closed down buildings, eliminated arts, music, physical education, AP classes, and busing. Parents were pulling kids from the district and enrolling them elsewhere. There was talk of dissolving the district and parceling out the territory to the surrounding school districts.

It's a tale we should learn from.  Little Miami isn't a school district in an impoverished rural area. Rather it's an affluent bedroom community of the Cincinnati/Dayton metro area. Like Hilliard, it had been mostly farmland until the last twenty years, when it was rapidly developed and covered with upscale houses. According to the Ohio Dept of Education's Cupp Report, the average property valuation per student in Little Miami is $178,000, which is 15% more than ours here in Hilliard. Average income is almost identical to ours.

Their schools perform very well, achieving an Excellent rating on their State Report Card, with a Performance Index of 102.9.

So how did they get into so much trouble?

One problem seems to be that they didn't pay attention to the balance between residential and commercial development. The Little Miami local property tax base is 94% residential/agricultural, compared to 75% for Hilliard. And because their per-pupil property valuations are high, they don't get much state funding - $2,900 per pupil in FY11, and that has gone down slightly in recent years (our state funding was $3,600/pupil in the same year).

That means the burden of funding their school district falls substantially on the back of their local homeowners. While their cost of operations rose due to both growth in the number of students, as well as growth in the compensation of their teachers, staff and administrators, they had no other place to go for additional funding than the homeowners, and the voters refused - repeatedly.

The effective operating millage (ie not including bond levies) paid by Little Miami homeowners was 24.39 in FY11, compared to 42.03 for those of us in the Hilliard school district. At their millage rate, the average Little Miami homeowner was paying $4,300/yr $1,336 to fund operations. Had they been paying our operating millage rate (effective), it would have  been $7,500 $4,785.

As a district in Fiscal Emergency, what solutions did the state-appointed oversight Board come up with?  They said an operating levy issue had to be put on the ballot - a whopper this time - and it had to pass. They didn't say what would happen if it didn't pass, but the implication was that the district would be dissolved. I'm not sure that would be an easy, or politically acceptable solution either.

After all, why would the surrounding districts want to take on that mess? Absorbing Little Miami would just screw up the residential/commercial funding mix of the 'acquiring districts,' forcing them to raise their taxes (or cut programs/services) to underwrite the cost of the new kids from Little Miami, who would not be bringing enough funding with them - even after being lifted to the tax rate of the acquiring district.

That scenario was avoided. The Little Miami district put a whopping 13.95 mill operating levy on the ballot, and it passed, raising the property taxes of the average homeowner by $2,500 $765 per year.

The Little Miami situation was entirely predictable, and avoidable. But the general ignorance of the public in regard to school economics allowed them to be led like lambs to the slaughter.

Who was doing the leading?  The land owners, land developers and home builders of course - same as always. I have confidence that during the housing boom, potential buyers were being enticed to come to the bucolic setting of Maineville OH, where their kids could attend the high-performing and safe Little Miami Schools, which by the way also has the lowest property tax rate in Warren County.

The problem is that with every house built, the school economics got more screwed up: the incremental taxes generated by a new home do not cover the fully-loaded costs of the school age kids who will live there. If there is not commensurate commercial development to help pay the bill, the cost of new kids has to be underwritten by the rest of the community.

Meanwhile the land owners, land developers and home builders ride off into the sunset with their pockets stuffed with all the money the new homeowners borrowed to get into a great school district (see also "How Should Our Public School System Be Organized").

Why should we in Hilliard care about what happened in Little Miami?

Because those same dangers lie ahead for us. The Hilliard City School District grew from a little village operation into one of the ten largest school districts in Ohio in the span of twenty years. The student population exploded, we constructed new school buildings at the rate of one per year, and our taxes took off.

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The recession slammed the brakes on residential growth in our district, but it's showing signs of picking up again. The City of Hilliard has for a couple of years been accepting annexation requests from the various developers who own the thousands of acres of land on the west side of Alton-Darby Rd. One of them, Planned Development, the developer of Heritage Lakes, has submitted a plan to the Big Darby Accord Advisory Panel - with the support of the City of Hilliard - for a large new single-family and multi-family development near the corner of Alton-Darby and Davis Rds. In March, the Hilliard City Council, at the request of Dominion Homes, rezoned 57 acres north of Homestead Park for development.

We' re in a kind of quiet time right now. No levy on the ballot, and another year to run on the teachers' contract. We have some room to grow in our school buildings, and enrollment has been stable for several years.

I think this makes it an excellent time to embark on a community education program with the goal of equipping folks to engage in the dialog about where we should go next. In a way, we're fortunate that the recession came along and stopped what could easily have become a runaway train - putting us in the situation of Little Miami.

We have the opportunity to go forward in a well-managed manner if we use this interlude to get our strategic plan together, taking input from all the stakeholder groups. I hope we will begin this process at the annual Board Retreat, coming up in September.

Your thoughts are appreciated.

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.

The Big Darby Accord and Hilliard

The September 19, 2007 issue of the Hilliard Northwest News published an article titled "Hilliard, Columbus grapple over water, sewer for sites" in which it is reported that the City of Hilliard continues to be a holdout on signing the Accord. Several reasons are given for Mayor Schonhardt's opposition to signing the Accord as is, and with some of them I agree.

A key factor of the Accord is a radical new position being taken by the City of Columbus in regard to water/sewer service. For decades, going back to when James Rhodes was the Mayor of Columbus, the big city has used its exclusive control over the regional water/sewer system to influence development policy county wide. Each suburb has a contract with Columbus which specifies the boundaries where the suburb can annex and be provided water/sewer service by Columbus, provided Columbus agrees it has the capacity to provide the water/sewer service or can construct new capacity at a reasonable cost.

In the case of Hilliard, the most significant parcel of unannexed land remaining in its water/sewer agreement is the several thousand acres bounded by Alton-Darby Rd, Roberts Rd, and a sawtoothed line running generally north from the site of Bradley High School. A good deal of this land is already owned by developers, such as Homewood Homes and Planned Development. Much of the rest is owned by individuals and families hope to soon sell to developers.

The land use plan for this acreage as defined in the Big Darby Accord is for Tier 1 conservation zones and conservation style development. What this means is that the creeks that drain the area would be preserved or restored to a natural state, and that homes would have to be constructed on 2-5 acre lots. This reflects the role this acreage plays in protecting the environment, and in particular the Big Darby River. Clearly this is an undesirable state of affairs for the developers accustomed to placing 4-5 homes per acre.

Alternatively, according to Accord policies, a developer can build to a density of one house per acre, as long as 50% open space is preserved. This means that on 100 acres, a total of 100 homes can be built, but those houses need to sit on only 50 of the acres, and the other 50 acres must be left as common open space. This is still an uncomfortable scenario for developers.

Mayor Schonhardt subsequently announced his own development scheme for this area - from the Conference Room of our school district's central office building no less - stating that he also supports the 50% open space requirement. However, the mayor's definition of 50% open space is that for each acre developed, a half-acre is reserved as open space. This means that on 100 acres, the Mayor's scheme would allow 66 houses rather than 50. The Mayor's definition also, I believe, allows unusable creek paths and flood plains to be counted as open space in his formula. Overall, the housing density for this area under the Mayor's plan would be at least 33% higher than that allowed by the Big Darby Accord. The language sounds the same, but means something different. The Mayor's language is more developer-friendly that the Big Darby Accord, which is I believe to be his primary motivation, but it is still an improvement over the 4-5 homes/acre density the developers typically use.

However, we must remember that this plan the Mayor has revealed is not cast in stone, and that if the developers request annexation to Hilliard (which incredibly forces the school district to request annexation of its land to Hilliard as well), the City of Hilliard can enact zoning policy which makes this land developable at whatever density it wants. After all, one of the demands the Mayor makes relative to the Big Darby Accord is that he wants to retain control of land use policy in Accord areas within the boundaries of the City of Hilliard - in other words this hunk of land west of Alton-Darby Rd. I don't understand how a municipality can be part of the Accord and retain control of land use within the Accord boundaries.

One consequence of Columbus' new water/sewer policy is that it neutralizes a key provision of the Win-Win Agreement, which governs how annexations and school boundaries relate. The Win-Win says that if undeveloped land is annexed into Columbus, the resulting houses would be assigned to Columbus Public Schools. This is a big negative if you are a home builder, which is the reason folks like Homewood and Dominion prefer to build houses in suburban school districts where they can demand higher prices.

Mayor Schonhardt rightly points out that if Columbus provides water/sewer without annexation, any resulting land stays in the suburban school district. This is a big win for the developers, but a big problem for the suburban schools like ours, who would like to see population growth slow down. I'm not sure why Columbus would suddenly make this radical policy change, but would have to observe that it's good the developers, and that seems to be the answer to a lot of questions.

After all, Hilliard is just one piece of the pie - there are many many square miles of land still ripe for development around central Ohio, and the developers are more interested in the upside from the new water-without-annexation policy than they are what happens in the few thousand acres annexable by Hilliard.

And now Columbus is asserting its power by refusing, until Hilliard signs onto the Big Darby Accord, to provide water/sewer service to the 125 acre site near the intersection of Alton-Darby and Scioto-Darby Rds that will be soon annexed into the City of Hilliard at the request of Skilken Development.

I am a supporter of the Big Darby Accord as a land use strategy. As part of the team that updated the Brown Township Comprehensive Plan, I learned about conservation style development, and how it can allow residential housing construction to take place while preserving an open and natural setting.

I also recognize that the ten political entities which make up the Accord group have objectives which are sometimes in the conflict, and that even the landowners are not in agreement. Some landowners want to sell out to developers and leave (indeed, many are absentee landowners now), while others, such as me, want to stay in the Hilliard community without having my current rural setting converted into high density housing and shopping centers.

So while I believe Mayor Schonhardt is fighting the Big Darby Accord primarily as an ally of the developers, I do agree with his position that the neutralizing of the Win-Win Agreement through the new water-without-annexation policy is a bad thing for our school district, and for all suburban school districts.

What happens if the City of Hilliard never signs the Big Darby Accord agreement? The obvious impact would be that Columbus could choose to never provide any additional water service for Hilliard expansion. The land west of Alton-Darby Rd would remain in Brown Township, and developers would have to live under the rules of the Big Darby Accord. Hilliard City Schools would get lots of new kids, but not as many as would be the case in typical residential development.

This would also mean that Bradley High School would remain in Brown Twp and the City of Hilliard would lose all the income taxes that would be paid by the faculty and staff if the land were annexed. Lest we forget, the school district is the largest employer in the City of Hilliard, and income taxes are the way the City gets funded. The placement of Bradley High School on the Emmelhainz property, versus land south of Roberts Rd, was significantly influenced by this fact, in my opinion.

Tough spot for Mayor Schonhardt and our school district. The City of Hilliard needs the income taxes generated by the Bradley High School staff and the folks who will work in the Skilken development, and therefore needs water/sewer service from Columbus. The school district needs the property taxes that would be paid by the Skilken development and other new businesses the Mayor and his team can recruit into the district. Meanwhile the City of Columbus has signaled that it doesn't care if Hilliard expands and develops - Columbus has its own agenda and is willing to use its control over water/sewer services to get what it wants.

What do I think is best?

For me personally, I'd like to see Hilliard sign on to the Accord and get on with seeing if we can make this progressive land use plan work for everyone.

For the school district, I think it doesn't make much difference what the City of Hilliard does. Through its control of the water/sewer system, Columbus will dictate development policy in the township land within the school district anyway. I'd much rather see this accomplished under the principles of the Big Darby Accord than have western Franklin County become another sea of houses with hordes of kids to house and educate.