Did the Schools pay too much for the land? Read the following article and you decide.

Toll, Centex, Lennar Join `Moron' Speculators in Land Grab Bust
By Bob Ivry

Feb. 7 (Bloomberg) -- Brian Tuttle owns so much land that he paid $3.6 million to get rid of 125 acres ready for development in the middle of Florida's Palm Beach County.

``In 2005, I was a brain surgeon, and in 2006, I was a moron,'' said Tuttle, who walked away from his deposit on the land rather than lose even more money buying it and building homes on it. ``The only good news is that I'm not alone.''

The worst housing slump in 16 years made a lot of smart money vanish. D.R. Horton Inc., Pulte Homes Inc., Lennar Corp., Centex Corp. and Toll Brothers Inc., the five biggest U.S. homebuilders, said plummeting land prices cost them a combined $1.47 billion in the fourth quarter.

Builders paid more for land during the boom because home prices were rising, too. They didn't realize speculators were pumping up demand by buying houses to sell quickly. When prices reached a point where speculators quit buying, homebuilders were forced to abandon so much property they helped create a glut that drove down land prices more than 9 percent last year, according to data compiled by New York-based research firm Real Capital Analytics Inc.

``Homebuilders allowed their own enthusiasm for price increases on houses to affect their decisions on what they would pay for land,'' said Mike Inselmann, president of Metrostudy, a real estate research firm in Houston.

The decline in land values reveals the role short-term buyers played in the housing boom, when the median U.S. home price rose to $276,000 last June from $177,000 in February 2001. Industry executives, including Toll Brothers Chief Executive Officer Robert Toll, estimated that about a quarter of their houses were bought by people interested only in flipping them -- buying and selling quickly rather than moving in.

`Dried Up'

Louis Genuario Jr., a regional builder in Alexandria, Virginia, said speculators may have made up about 40 percent of housing customers. In some new condominium complexes in suburban Washington, every buyer was a speculator, Genuario said.

``When land came on the market, you competed against national homebuilders who were flush with money and speculators who were jumping into the market and trying to resell it immediately,'' Genuario said. ``The price was high and the supply became limited. Then the market stopped when you couldn't get people to buy because it exceeded their ability to pay. Now we see land that's been on the market for months.''

These days, the speculators are looking foolish, too. In Florida, where they helped inflate land values as much as 10-fold from 2000 to 2005, prices have dropped by as much as 50 percent.

``The land market has dried up,'' said Alex Barron, an analyst at San Francisco-based JMP Securities LLC. ``Most builders are on the sidelines because they expect prices to go down another 30 percent.''

Florida Market

St. Joe Co., Florida's biggest private landowner, said yesterday the average price per acre of land it sold in the fourth quarter dropped to $1,900 from $4,100 in the third quarter.
Jack McCabe, a real estate consultant in Deerfield Beach, Florida, said land prices in his region will keep falling. He said investors are waiting for prices to hit bottom, probably in the second half of this year.

``It's going to be pretty ugly,'' McCabe said. ``Lots of people will lose money and a lot of paper wealth will be going away.''

Henry George wrote in his 1879 book ``Progress and Poverty'' that land's boom-and-bust cycle is natural because land isn't produced by human labor and prices can be manipulated by owners who are able to delay selling to get higher prices.

Speculators discovered Florida real estate in the 1920s, when the low cost of borrowing and improved transportation made second homes in the warm climate attractive to wealthy Northerners.

Tokyo Palace

At one point, a third of Miami residents were real estate agents, according to economist Jacob Freifeld. Some prospered by selling swampland to unsuspecting speculators. After a hurricane swept through the region, causing property prices to drop, many speculators left the Florida market and sunk their money into the stock market in the years before 1929.

Japan's land prices skyrocketed in the late 1980s, fueled by low interest rates and easy credit. The peak came in 1991, when some Japanese boasted that the land under the Imperial Palace in Tokyo, home of the Japanese emperor, was worth more than the gross domestic product of Canada.

After the bubble burst, Japan was stuck in the mire of a stagnant economy for at least a decade, said Mark Thornton, an economist in Auburn, Alabama, with the Ludwig von Mises Institute.

``Japan in the 1990s tried to prevent the collapse of the bubble, so the correction took much longer,'' Thornton said.

Polo Club

Brian Tuttle's latest deal to go bad was a housing development he planned on the site of the Gulfstream Polo Club in Lake Worth, Florida, on what he calls the largest undeveloped tract in the 40 miles between Boca Raton and Jupiter on the state's Atlantic coast.

Tuttle owns about 100 acres of the land, and he put down a $3.6 million deposit to reserve an additional 125 acres in 2005. If he chose to buy the land, he would pay $310,000 an acre, almost 10 times more than the $33,000 an acre he paid for his first parcel there in 2000. The land represents about 2 percent of his total acreage.

Two years later, land values have fallen by as much as 40 percent. Tuttle said it was impossible for him to make enough on the deal, so he chose to give up the deposit rather than buy the land.

``I'm just this humble guy and I didn't see prices going this low,'' Tuttle said. ``The big guys didn't see it either.''

In the last three months of 2006, the publicly traded homebuilders were forced to write down the value of their land, a practice mandated by accounting rules. When a company expects to lose money on a budget item such as land, it must account for the loss at that time rather than incurring the losses in the future.

Option Costs

Fort Worth, Texas-based D.R. Horton, the biggest U.S. homebuilder, took inventory impairments and land option write- downs of $270.9 million in fiscal 2006, up from the $17.1 million that it claimed during the prior year.

Lennar of Miami, the third-biggest U.S. homebuilder by market value, incurred costs of $494 million for land write-downs and canceled options in the last three months of 2006.

Homebuilders typically buy options to purchase land from landowners like Tuttle. In exchange for paying a percentage up front, builders can decide whether to develop the property without the expense of owning it.

Pulte, the second-biggest homebuilder, wrote down $350 million last quarter on the sliding value of land and deposits it won't exercise.

The unpredictable outlook for land prices is hurting Pulte's ability to plan ahead.
Tighter Rules

``Our earnings visibility going forward remains limited due to rapidly changing market conditions and uncertainty regarding possible future land-related charges,'' CEO Richard Dugas Jr. said in a Jan. 31 statement. ``Given this fluid environment, we aren't in a position at this
time to provide full-year guidance for 2007.''

Horsham, Pennsylvania-based Toll Brothers, the biggest U.S. builder of luxury homes, reduced the land it controlled by 19 percent in the second half of 2006.

Centex, a Dallas homebuilder that's the fourth largest in the U.S., disposed of 56 percent of the land it controlled between March and December 2006.

Shares of homebuilders rose 28 percent in the past six months, based on the Standard & Poor's Supercomposite Homebuilders' Index, as investors anticipate a recovery in the housing market later this year.

Florida Widow

Lenders have been less bullish. They've toughened loan requirements and tightened the availability of funds, said John Levy, a real estate investment banker in Richmond, Virginia.

``Six months or a year ago if you wanted to do a development deal on land, all you had to do was walk into any bank and they couldn't do it soon enough,'' Levy said. ``The music on that has stopped incredibly quickly. Now you walk into the bank and they say, `We don't do that.'''

Margie Bushnell is one land speculator who said she's willing to wait to get the price she desires. The 77-year-old widow from Flagler County, Florida, owns a half-acre parcel on Highway A1A in the coastal town of Hammock. The carrying costs are killing her, she said. She's paying property taxes of $4,500, triple what she paid when she made the purchase three years ago.

``It's an extremely lot of money,'' Bushnell said. ``I'm retired and it's hard for me to come up with that.''

Bushnell is offering the land on Craigslist.com, a free on- line advertising site. A year ago, her price was $699,000. Now she's asking $650,000. She said in a half-whisper that the land, zoned mixed commercial and residential, could be had for $595,000. She's ready to wait another year for a buyer at that price.

How much did Bushnell pay for the half-acre in 2004?
$80,000.

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net .
http://www.bloomberg.com/apps/news?pid=20601109&sid=aA90FVv3DDrY&refer=home

$34.06 an Hour That's how much the average public school teachers makes. Is that "underpaid"? BY JAY P. GREENE AND MARCUS A. WINTERS
Friday, February 2, 2007 12:01 a.m.

Who, on average, is better paid--public school teachers or architects? How about teachers or economists? You might be surprised to learn that public school teachers are better paid than these and many other professionals. According to the Bureau of Labor Statistics, public school teachers earned $34.06 per hour in 2005, 36% more than the hourly wage of the average white-collar worker and 11% more than the average professional specialty or technical worker.

In the popular imagination, however, public school teachers are underpaid. "Salaries are too low. We all know that," noted First Lady Laura Bush, expressing the consensus view. "We need to figure out a way to pay teachers more." Indeed, our efforts to hire more teachers and raise their salaries account for the bulk of public school spending increases over the last four decades.

During that time per-pupil spending, adjusted for inflation, has more than doubled; overall we now annually spend more than $500 billion on public education.

The perception that we underpay teachers is likely to play a significant role in the debate to reauthorize No Child Left Behind. The new Democratic majority intends to push for greater education funding, much of which would likely to go toward increasing teacher compensation. It would be beneficial if the debate focused on the actual salaries teachers are already paid.

It would also be beneficial if the debate touched on the correlation between teacher pay and actual results. To wit, higher teacher pay seems to have no effect on raising student achievement. Metropolitan areas with higher teacher pay do not graduate a higher percentage of their students than areas with lower teacher pay.

In fact, the urban areas with the highest teacher pay are famous for their abysmal outcomes. Metro Detroit leads the nation, paying its public school teachers, on average, $47.28 per hour. That's 61% more than the average white-collar worker in the Detroit area and 36% more than the average professional worker. In metro New York, public school teachers make $45.79 per hour, 20% more than the average professional worker in that area. And in Los Angeles teachers earn $44.03 per hour, 23% higher than other professionals in the area.

Evidence suggests that the way we pay teachers is more important than simply what they take home. Currently salaries are determined almost entirely by seniority--the number of years in the classroom--and the number of advanced degrees accumulated. Neither has much to do with student improvement.

There is evidence that providing bonuses to teachers who improve the performance of their students does raise academic proficiency. With our colleagues at the University of Arkansas we found that a Little Rock program providing bonuses to teachers based on student gains on standardized tests substantially increased math proficiency. Researchers at the University of Florida recently found similar results in a nationwide evaluation.

Of course, public school teacher earnings look less impressive when viewed on an annual basis than on an hourly basis. This is because teachers tend to work fewer hours per year, with breaks during the summer, winter and spring. But comparing earnings on an annual basis would be inappropriate when teachers work significantly fewer hours than do other workers. Teachers can use that time to be with family, to engage in activities that they enjoy, or to earn additional money from other employment. That time off is worth money and cannot simply be ignored when comparing earnings. The appropriate way to compare earnings in this circumstance is to focus on hourly rates.

Moreover, the earnings data reported here, which are taken directly from the National Compensation Survey conducted by the Bureau of Labor Statistics, do not include retirement and health benefits, which tend to be quite generous for public school teachers relative to other workers. Nor do they include the nonmonetary benefit of greater job security due to the tenure that most public school teachers enjoy.

Educators sometimes object that hourly earnings calculations do not capture the additional hours they work outside of school, but this objection is not very compelling. First, the National Compensation Survey is designed to capture all hours actually worked. And teachers are hardly the only wage earners who take work home with them.

The fact is that teachers are better paid than most other professionals. What matters is the way that we pay public school teachers, not the amount. The next time politicians call for tax increases to address the problem of terribly underpaid public school teachers, they might be reminded of these facts.

Mr. Greene holds the endowed chair of education reform at the University of Arkansas and is a senior fellow at the Manhattan Institute, where Mr. Winters is a senior research associate. Their report, "How Much Are Public School Teachers Paid?," was released this week.

Copyright © 2007 Dow Jones & Company, Inc. All Rights Reserved.
http://www.opinionjournal.com/editorial/feature.html?id=110009612

Voters have spoken again...

YES 858 37.16%

NO 1451 62.84%

This should be a clear message to the School Board... Its time to go!!!

CHECK THE FACTS:

􀀻 How has D46 managed financially since the last referendum? Since 2002, D46’s tax levies have increased 109% (a combination of increased tax rates from the 2002 referendum, increased home values, and new home construction). Since the 2002 referendum, D46 enrollment increased in total by only 5 children (less than 1%). Tax and spend needs to end!

􀀻 What will D46’s plan really cost? THERE IS NO TAX CAP ON TAXES FOR BOND AND INTEREST. Current residents will have to pay whatever is necessary to meet the payments on $25MM in bonds.

􀀻 How many children are really coming? D46’s history of projections is poor. In March, 2006, D46 projected 40 more students by September. Actual enrollment increased by 1 student. If D46 is so far off in a 6-month prediction, how can D46 project the next six years? D46 may not need a new building for 10 years.

􀀻 How much will it cost to staff and operate a new building? Unquestionably, D46 will need another referendum for a tax increase in the education fund to staff and operate the new school. School districts do not build a new building without obtaining additional money to staff, furnish, and operate the building.

􀀻 Are there other options to dealing with unknown future growth? Yes. Adding classrooms to the junior high building will accommodate 300 additional students. The junior high building was designed for such an expansion. Adding three classrooms on the elementary building could house another 72 students. Expansion does not require increasing taxes, does not risk the financial well-being of taxpayers, and does not threaten D46’s financial stability, protecting education funds that directly affect the children.

􀀻 Why should D46 wait to build a new school? It is not certain D46 needs a new school. As developments begin, D46 will have more taxpayers to share the burden of a new building if one is required.

Click here for additional FACTS

VOTE NO

The Naperville Formula: A Formula that others are questioning

Extracted from minutes of Dekalb County Regional Planning Commission—November 10, 2005

School-Age Children Population Table

Mr. Nicklas opened discussions related to the method by which the number of school age children is determined for proposed residential development, as a way of determining both school land cash contributions and impact fees. He noted that many governmental units in Northern Illinois rely on a population chart developed for the City of Naperville. This chart relates the number of children of each age group based on the number of bedrooms and type of housing. The latest version of this chart is dated 1996. Mr. Nicklas explained that not only is the data nearly 10 years old, it does not represent the population mixture that typically occurs in houses in DeKalb County.

Mr. Rasmussen agreed, noting that the Naperville formula had been developed in response to rapid growth in Naperville the 1980's, where many young families were occupying new housing. In DeKalb County, there is little new housing that is being priced to attract young families and first-time buyers. Many of the new four and five bedroom-houses are being bought by families with no school-age children due to empty-nesters moving up to larger housing.

Mr. Miller added that young families in DeKalb County are likely to buy and move into older housing stock, so that the impact to the schools may not be best estimated by evaluating the number of children in new housing.

Mr. Heiderscheidt stated that Waterman has been working with Dave Emanuelson, who indicated that a school-age children population calculator could be created that would be specific to the Village. Mr. Heiderscheidt wondered whether the other communities that make up the RPC might be interested in having Mr. Emanuelson or some other consultant create a means of estimating the impact to the schools from new growth that is more up-to-date and reflective of DeKalb County.

Following discussion, Mr. Nicklas suggested that an intern that will be working for the City of Sycamore could be asked to conduct a study of the housing that has been recently constructed and occupied in the various communities in order to generate a new school-age children multiplier. The other members agreed and requested that Mr. Nicklas explore this possibility and report back to the Commission in January of 2006.

Roundtable in Dekalb where the Naperville formula was proven to exaggerate enrollment significantly.

Extracted from Dekalb County Online. Report at a business roundtable on March 28, 2006.

The DeKalb County Economic Development Corporation hosted a Business Roundtable on March 28, 2006 at the DeKalb County Farm Bureau. Presentations were given by Dave Emanuelson of Strategic Management Alliance, Walter Magdziarz of Land Vision Inc. and Bill Nicklas, City of Sycamore. The topic was “Fiscal Impact of Residential Growth.” The event set a DCEDC record, in terms of attendance.

The panelists used local surveys and data to analyze, forecast and discuss topics such as demographics, homeowner profiles, and infrastructure needs related to new residential growth in primarily Sycamore and Cortland. It was refreshing to see actual local data being used as a source.

Magdziarz discussed trends in residential growth on a regional basis as well as an informative update on Cortland. On regional trends, according to his research on projections through 2040, there were unexpected results:
________________________________________
• 70% of new home buyers desire traditional urban density as opposed to the large single family-detached lots of suburbia.
• 57% prefer lot sizes of 7,000 sq. ft. or less. Only 15% preferred town homes.
• 54% indicated a preference of the city or older suburbs as the likely location of their next home purchase.
• 26% of home purchases are made by single females.
• 86% of the households will not have children living in them (source: Chris Nelson, Virginia Polytechnic Institute and State University)
________________________________________

Cortland is DeKalb County’s fastest growing community. The town has 3,502 approved residential units. More are waiting in the wings. The community is served by three different school districts (DeKalb #428, Sycamore #427 and Kaneland #302).

According to Magdziarz, Cortland will receive about $34.8 million in contributions from developers (who will then in turn pass those costs on to their customers).

Former DeKalb Park District director, Dave Emanuelson, who is now president of Strategic Management Alliance, reported on demographic studies he has performed in DeKalb County.
He cautioned governmental units, especially the education sector, against over-reliance on the “Naperville formula” for student enrollment projections. Those tables are overestimating enrollment figures and, as a result, could lead to successful challenges by developers to impact fees and contributions derived from those projections. The number of children produced by town homes is so low that Emanuelson believes they should be regarded similar to industrial development.

Bill Nicklas shared demographics from Sycamore’s recent new residential developments. Since June of 2004 the City of Sycamore has made mandatory, as a prerequisite to obtaining a final occupancy permit, a completed survey that identifies the number of school aged children living in each new home.

A total of 694 surveys (dwelling units) have been collected. Those homes have generated 427 new students (of those 134 are preschool aged). Almost 68% of the new homes built in Sycamore do not have any children living in them.

For more information:
http://www.dekalbcountyonline.com/index.php?Option=com_content&task=view&id=35&Itemid=37

November 7th Referendum isn’t entirely a NO Vote.

Q1. Shall Prairie Grove Consolidated School District No. 46 use excess property tax proceeds on hand to reduce the district's bond and interest levies as long as the District's cash reserves are greater than four months? VOTE YES… What took them so long? Lowering our liabilities does not seem to be a priority for the School Board. They should have been doing this since 2002.

Q2. Shall the Board of Education of Prairie Grove Consolidated Community School District 46, McHenry County, acquire, improve, build and equip a school building and issue bonds to the amount of $25,000,000 for the purpose of paying the costs thereof? VOTE NO…the justification is not there to support this size of a referendum. We can wait and we can save ourselves a lot of money in the process.

District 46 - NO -
Northwest Herald Oct . 22, 2006


Student enrollment has been nearly stable in Prairie Grove District 46.

And although new residential developments are coming, one is in a holding pattern, and it’s likely at least a couple of years before the others start adding large volumes of students into District 46, which serves Prairie Grove, Oakwood Hills and surrounding areas.

District 46 is asking voters Nov. 7 to approve a $25 million construction referendum. It would cost the owner of a $300,000 house $91 a year in property taxes, according to district figures.

We do not believe that Prairie Grove taxpayers need to begin paying for a school that the district does not need to begin building just yet.

District 46 school officials say the $7 million increase from the failed March request is due in part to having to buy land, but the largest difference is in increased construction costs.

The building program would include a 525-student junior high, additions to two buildings, air conditioning for the elementary school, and a new bus entrance off Valley View Road.

The student-teacher ratio is about 24 to 1. The ratio can increase; it might not be ideal, but other schools can do it, if temporarily.

We do not support approval of the school referendum.

Anonymous said...

As a “yes supporter” in the last referendum, I have been disappointed. I am surprised that the School Board has proposed a new referendum. After the referendum was defeated in the spring, and with down-turn in housing I do not understand how the School Board can justify a new referendum. I have been asking questions around the neighborhood and have learned quite a bit about our situation.

As citizens, this referendum raises serious concerns about the integrity of the School Board and Dr. Fasbender. The campaign for the last referendum was positioned by the School Board and Dr. Fasbender as being tax neutral. In retrospect, that was too good to be true. Since I have started to look into our actual situation, I have been shocked to learn that our taxes could actually go down, by as much as 30%, if we do not pass a referendum in the near future. This was not presented to the community by our School Board as an option to the community. Instead, looking back at the last referendum, it appears that the School Board was creating a need for a new school; and a reason to keep taxes high.

Our elected School Board has been chosen by the community to oversee the school in the interest of the citizens. I am now concerned with the integrity of the School Board. I am starting to question everything we get from the School.

Needless to say, I am not naive anymore about our school. Just because the Steve Todd and Luara Domoto claim the school is at capacity does not make the statement "true". I have learned that school enrollment is virtually the same now (2006) as it was in 2002. In 2002, we did not hear cries from the school that it is overcrowded. In 2002, we did not have a school board searching for mobile classrooms. In 2002 we did not condemn children to converted "janitor's closets". If the numbers of students have not gone up since 2002, what has changed in the building to create over-capacity?

As a former “yes supporter”, I am happy now that the last referendum was defeated. I will vote no, because I do not believe that the school board's intentions are aligned with the community and it is not evident to me that the School Board and Dr. Fasbender truly have the best interest of the community in mind.

This Comment was Posted 4:43 PM, October 19, 2006 under Six Months later and $7M more... It was so great that I needed to move it to the main page. Vote NO