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Given Our Economic Times, How Can T/E Afford a Real Estate Purchase?

In the midst of contentious teacher contract negotiations, T/E School District is purchasing real estate. Can we afford it?

Here we are counting down the days until school starts, in the midst of contentious teacher contract negotiations and parents in the District hoping that school starts on time.  Residents have repeatedly been told that T/E School District cannot afford the demands of the teachers … escalating health care and pension costs.  With decreasing revenues and rising costs, in June we witnessed, as tough decisions were required to balance the District budget.

For the most part, I think that residents are starting to recognize the economic problems facing the District and the importance of School Board members to make responsible and sound fiduciary decisions. It is because of this, that frankly I was astounded to see a specific item listed under the ‘Consent Agreement’ on the agenda for the School Board meeting, Monday, August 27.

There are probably 15 or 20 consent agenda items listed on Monday’s agenda, ranging from approving minutes, and acceptance of gifts to ‘purchase property’.  All of these consent items are grouped together and then rather than going through them item by item, approved by the School Board in one motion.  The purchase property item caught my attention but I had to read to page 45 of the agenda’s supplement materials to find the following:

Consent VII, E, 3:Purchase of Property 

“That the Board of School Directors authorizes the Superintendent to execute, and the Board Secretary to attest, and deliver to the record owner of property designated as Tax Parcel No. 43-10L-2 [which is property adjoining the District's property], the Agreement of Sale in the form attached to the resolution……

The agreement of sale that follows further identifies the property as 892 Old Lancaster Avenue, the seller as the Estate of Arthur Fennimore, and the price as $265K.  The date of sale is left blank. 

On Saturday morning, I stopped by the property to take a photo and spoke with the grandson of Mr. Fennimore.  He and his brothers were cleaning out the house in advance of the purchase by TESD.  According to the grandson, closing between the Estate and TESD is expected by the end of the week.

I have attended most, if not all, of the 2012 School Board meetings and have absolutely no recall on the discussion to purchase additional real estate property, …  especially given the agonizing budget decisions, the possibility of demotion and the contract negotiations with the teachers.  Therefore, I don’t think that I missed the discussion about purchasing additional real estate.

The Fennimore house is the last remaining property between the current maintenance building and T/E Middle School on Old Lancaster Rd. – the District previously purchased all other properties.  So … I guess from an overall planning standpoint, the acquisition of this property makes sense.  However, given the District’s current economic climate and the unsettled teachers’ contract, it would seem that the topic to ‘purchase’ would still require some discussion, not just buried with 20 other consent items.  Unfortunately, the word that immediately comes to mind … transparency, or rather ‘lack thereof’.

How did they arrive at the price for the property?  The sale price is listed as $265K, the assessed value is $129,500.  Multiply the assessed value by the current Chester County Common Level ratio of 1.70 and you get $220,150. Subtract $220,150 from $265K ... and the question you have to ask, is why is the School District paying a $45K premium for the property?

Regardless of future development plans, for the time being, the District will need to tear down the house, which means an additional expense.  Another question — is the maintenance-storage facility project still on the back burner or does the Fennimore house purchase have the timetable moved up on the construction project?

Some may suggest that a $265K real estate purchase in the T/E School District is a ‘bargain’ and a ‘smart’ move for the District in these depressed economic times.  But the bottom line for me, is $265K really such a bargain for a property assessed at $130K?  And what about the public – do we deserve an explanation about the purchase?  What is the plan for the acquisition? And if there is a plan, how much will that plan cost? 

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Elizabeth August 27, 2012 at 03:22 PM
The sale price of a building is function of the offer of the Buyer and the counter offer of the Seller, with both parties taking into account the "comparables"--sales of like kind properties in the immediate vicinity. Most Realtors don't even know about the COmmon Level Ratio (nor do the Buyers and Sellers) so while that number is informative, and used in estate valuations, it doesn't usually come into play for the sale of a residential home in the TE School district.
Elizabeth August 27, 2012 at 03:25 PM
I do not mean to suggest that this purchase should "slide in", just that the price is not the main issue. It makes a lot of sense to complete the purchase of that strip of land.
Randell Jesup August 27, 2012 at 05:55 PM
This is the house. http://www.zillow.com/homedetails/892-Old-Lancaster-Rd-Berwyn-PA-19312/9185875_zpid/ The "zestimate" is $269,773 currently. It was as high as $295K last December. The houses across the street range from $215K to $290K, and generally are smaller and have 1/2 the land (or so). The house next door is $290K with more sq ft but 1/2 the land. So this seems a reasonable market price
Brian Walker August 27, 2012 at 06:48 PM
It is possible that even though having attended all 2012 meetings, you would have missed this. Plans to purchase the properties have been ongoing for years. Discussion related to this particular property may have taken place in 2011 or even 2010.
Pattye Benson August 27, 2012 at 07:23 PM
Given the fact that the District, like everywhere else, is suffering economically, I thought it important to bring the real estate purchase to people's attention. I understand that the maintenance/storage shed discussion has been going on for years ... but the 2012 economic climate is very different than a few years ago. My point for writing the article was more about the process. Whether the District is over paying or under paying on the purchase price is not nearly as concerning to me as is the process. I found it somewhat troubling, given the economics of the District, that the real estate purchase was buried in a long list of items on a consent agenda.

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