Letter: Economics show farmland a good buy

To the editor:
Now that the dust has settled, I think it is worth summarizing and correcting the record on the costs and benefits to Cranbury of purchasing and preserving farmland to avoid development.
   The Cranbury Township Committee has voted 4-1 (Committeeman Michael Mayes dissenting) to pursue the purchase of two farmland properties (known asSimonson and Barclay West), comprising about 200 acres, on which otherwise 40 houses would be developed. The importance of this is that purchasing the land will not only preserve open space in Cranbury, but it will cost taxpaying residents less than allowing the land to be developed and schooling the children who would live in the 40 houses. Purchasing the land will cost each taxpaying homeowner approximately $72 per year for 25 years.
   The arithmetic is straightforward. The purchase cost will be about $7.5 million. (This is consistent with the Simonson offer of $4 million for a 24-house development.) About 60 percent of this, or $4.5 million, will be recovered by selling the development rights to the state and the deed restricted land to a private owner for farming, leaving $3 million to be financed. Debt service for a 4.5 percent 25-year municipal loan will be 6.7 percent for principal and interest or $200,000.
   Commercial and industrial property pays 60 percent of Cranbury’s taxes, leaving 40 percent or $80,000 to be paid by Cranbury’s 1,200 homeowners, which amounts to $70 per year per taxpaying homeowner.
   On the other hand, educating the estimated 80 public school children who would occupy the 40 houses would cost each homeowner approximately $80 per year now and rise every year forever with increasing school costs. The houses would likely have five bedrooms, sell for about $1,000,000, and pay Cranbury taxes of about $15,000 annually. (Each would be assessed at about 50 percent of market value, and would pay about three percent of assessed value to Cranbury in school, municipal, and open-space taxes.) Each would put two students on average, in Cranbury schools at an average cost of something like $11,000 per student per year. (High school student tuition to Princeton is $14,000.)
   Cranbury School K-8 costs are less, but our school is getting full, and Joan Rue’s testimony shows more capital outlays would be required. The estimated net annual education cost to taxpayer is $6,000 (two times $11,000-$16,000) for each new house, or $240,000; 40 percent of this is paid by Cranbury’s 1,200 homeowners, or $80 per year. This figure will increase each year as school costs rise and continue forever (empty nesters don’t stay in five bedroom houses)
   Thus the cost of preservation is zero or less, and in fact, in the long run, saves money. We can afford to buy all the developable farmland in the A-100 zone, and more if we choose. Carrying the short term financing between purchase and resale of the properties has very low costs in the current environment. In the longer run, the service of increased municipal will be more than offset by the avoidance of permanent and growing education costs. Further, the municipal debt burden will be mitigated by continued growth in taxes from development east of Route 130.
   In a presentation at the very end of the community’s public meetings, which could not be subjected to public comment, Committeeman Michael Mayes presented a much scarier picture. For a taxpaying homeowner, Mr. Mayes estimated annual costs at $520 for borrowing $2 million, $670 for borrowing $5 million, and $900 for borrowing $10 million (Cranbury Press, 12/12/03).
   If the Simonson-Barclay purchase cost is a net $3 million, Mr. Mayes figures would put the average homeowner’s annual cost at $570 compared with my estimate of $70. Besides ignoring the education cost offset and long-term commercial tax revenue growth, Mr. Mayes’ big number contains two big errors. First, his figures misleadingly include about $420 of costs for other commitments (the police station, etc.). Second, he has allocated all the borrowing cost to households, ignoring the fact that 60 percent of Cranbury taxes are paid by the commercial properties whose expansion he has consistently opposed.
   For the last two decades, this community has dedicated itself to preserving the farmland in the west. We have overcome periodic episodes of bad analysis, bad policy and unrepresentative governance. But going forward, as Michael Klein and Michael Dulin have pointed out in this space, we need better performance from the Cranbury Press, whose recent incomplete coverage has ignored thoughtful and thorough analysis in public meetings by Joan Rue, Mr. Dulin and the community, and whose editorials have not dealt with the long-run economics of this issue.
David Nissen