An MBA’s View: Council Member Hardi’s Referendum Blog Either Misleads or Is Evidence of Ignorance

  • Is There a Letty Hardi Effort to Mislead the Voters on the Referendum?

  • Are Her Allegations Intended to Purposely Mislead the Voters?

  • Or Is Hardi Simply Ignorant on “Little City” Finances?

By Mark Kaye

Kaye is a Program Analyst and is a graduate of the Georgetown University Law School and earned an MBA from the University of Chicago.

My responses to Council Member Hardi’s blog statements are for the most part based on City documents, with which Ms. Hardi should be very familiar but that apparently is not the case.

I

Hardi says that the renovation of GMHS as an option is not off the table, even if the bond referendum passes

Kaye responds:  The statement itself is extremely misleading as the FCC school board decided on a new $120 Million GMHS, ALTHOUGH it never issued a formal INDEPENDENT Request for Proposal (RFP) for a renovation.

Letty suggests a renovation is technically on the table due to the language of the bond referendum; however, her statement is hollow since the school board wants a new high school and will spend all $120 Million based upon past history of managing major infrastructure project–and most likely much more.

What is not stated is that the planned course of action and development of the 8 acres (not 10 – will cover that later) permanently removes land that could be used for park space and recreation. City documents show that 1000 more apartments will be constructed on the GMHS land. This will generate at least 2000 more residents plus 150 more school age kids.

II

Hardi says that opponents wrongly view mixed use developments (MUDs) as a money loser for the City

Kaye responds: The big myth of economic development in the Little City is that development will generate huge piles of revenue.  The MUDs are NOT big money makers. In the last 15 years, 18 acres of land have been MUD developed and they yield net revenue of $3.8 Million per year (2017). Based on a population of 14,000, per capita, that is about $270 per person. Increases in our real estate tax rates over the past 10 years have been considerably higher than $270 per year!

However, the $120 Million school bond will cost about $7.5 Million per year. Thus, barely half of the yearly bond cost would be covered by the net revenue of $3.2 Million per year generated by developing the school site.

Is it realistic to believe 8 acres of developable land at GMHS will save the financial future of the city?  The 8 acres will only generate $3.2 Million per year … and that only comes true (1) if the land is developed (big if) and (2) it should be noted that we are not scheduled to receive the $3.2 Million per year until year 2033!

III

Hardi says that opponents wrongly contend that new MUDs are flooding the school system with students.

Kaye responds: For a change – Hardi’s statement is correct – but her ‘facts’ are wrong again.

There is the myth (propelled by Hardi and others) that all the school growth in the past 5 years is generated by single family homes.

That is not true.

School data shows that the new MUDs and single family homes are equal in generating new growth for our schools.

In the past 5 years the pendulum has swung from where single family homes generate 50% of school age growth to about 20%. The other 80% of school growth is coming from MUDs, older apartments and other multi-unit homes.

The school data shows that once you build large apartment buildings, they have the potential to generate sustained growth in student population. In contrast, most single family homes in FCC  ‘age out’ (much like most of the U.S.).  That is, the kids graduate from GMHS and move out and the parents stay in place. We now face a situation in the future where MUDs/apartments could be generating even more kids year after year.

IV

Hardi got land values wrong–but with a twist

Kaye responds: A $40 Million value for 10 acres of land at GMHS campus is dubious and therefore you also can’t trust the City’s revenue projections.

She claims that the land (It’s 8 acres, not 10, since land will be dedicated for roads, sidewalks, open spaces, etc.) could be worth $50 Million.

Magical thinking at its finest.

This is prime example of either a case of very poor analysis or intentional effort to mislead voters.

Whatever the case it is a shame.

Hardi states that since 100 N. Washington street property sold for $13.6M and that you can extrapolate and, therefore, state the 8 acres of GMHS land is worth $50 Million.

Hardi makes a major error.

She added together land and improvements (buildings) which are still generating revenue for the new owner of 100 N. Washington.

BUT the land is, based on public records, assessed by the city at approximately $2.5 Million per acre.

The more accurate GMHS property value (assuming the full 10 acres is utilized for development): $2.5 Million x 10 acres = $25 Million–surely NOT $40 Million and NOT $50 Million.

In addition, the land at GMHS will need major improvements (water, sewer, electrical, etc.).

What is the cost?

No one knows because it has not been determined.

VDOT needs to approve changes (entrances and exits) that impact Route 7 and 29. How long could this take–especially involving a state agency and input from Fairfax County?

City hired consultants believe that the value of the land near WFC Metro is ambiguous. There is no reasonable basis to assume land near but not directly connected to a Metro will be worth any more than $2.5 Million per acre.

Just more magical thinking by Ms. Hardi.

V

Hardi demurs facing facts: The school budgets are showing sustained growth coupled with enormous debt.

Kaye responds: School operating costs must be separated from infrastructure/capital costs. Those are two separate financing mechanisms, each with their own limitations.   School budgets have been growing and compounding much faster than tax revenue for several years.

And the schools have a poor financial history of managing infrastructure projects.

Nothing suggests the future will be different.

The schools have mis-managed and grossly miscalculated school infrastructure costs at Thackrey, TJ and Mt. Daniel.

Mt. Daniel is a particularly egregious example of actual costs running 20% higher than estimated. Will this happen on a $120 Million major construction project managed by the same school system?

You bet!

Implementing the referendum–if it passes–would involve an extremely complex process of timing and coordination for which the School Board, City Council and staff have no in depth experience: These involve coordinating the very tight timing of bond issuance; marketing and sale of ground leases; new school construction; teardown of old school buildings and delivery of raw land; agreement on common infrastructure for both school and new development.

Based upon past history – it is dubious if operating budgets will be tightly managed. Most of it is personnel based. Of course, the school board could help things by eliminating the fulltime position of communications director – a small but symbolic step.

VI

Hardi talks up recent growth in tax revenue – the automobile personal property tax, sales, and meals taxes.

Kaye responds: However, non-real estate taxes generate annually approximately $13 Million in tax revenue – thus a $500K growth–about a penny on the real estate tax rate–is not remarkable.

What Hardi does NOT say:

  • Real estate taxes generate 60% of City tax revenues which is approximately $51 Million.
  • Most sales tax receipts go to Richmond.
  • The City is permitted to only retain one cent.

Thus, while our restaurants and supermarkets may be doing well, the sales tax contribution to the city will NOT be a significant contributor to paying the $120 Million school debts–or to cover the ever increasing operating costs of the schools and city services.

Homeowners will foot a large majority of the bill.

The strategy of rhetorical dissembling by Hardi and others is clear: They want a new school regardless of the impact on the citizens and the children who sit in the classrooms.

4 Comments on "An MBA’s View: Council Member Hardi’s Referendum Blog Either Misleads or Is Evidence of Ignorance"

  1. Ms. Hard I has provided a lot of good information for voters to chew on. I agree with her when she says voters need to make an informed decision.

    If one is considering voting NO on the referendum, read her July 24th blog where she in her own words expressed her major concerns with the huge amount of $120 million.

  2. Hey! I’m one of those people who lives in the MUD’s. I have two kids, and guess what? I’m voting NO! None of this adds up. Taking our debt up to 12%! Also has anyone seen how bad the traffic already is in that area? So let’s just throw an MUD right by that intersection! If you use the park and ride at the WFC Metro Station, you can add another 30 minute to your drive home with that potential nightmare.

  3. Good write-up analyzing comments made. Ms. Hardi originally voted to move the referendum forward to voters, but in a lesser amount. Then she voted to move ahead with $120 million. That combined with these more recent comments from her blog, should indicate to voters that she has little or no credibility on this matter. Communicating is a good thing, but in her case she needs to say less because she tends to over-communicate and comes off saying incorrect or contradictory things especially for the position she holds.

  4. How Long Does this Go On? | October 3, 2017 at 7:20 pm | Reply

    Excellent fact based analysis. Thank you Mark!

    Our city has one of the most highly educated populations in the world, yet I continue to be amazed that many people buy into hype, scare tactics, and weak or no facts. Something needs to be done with the high school, few will argue that. But an all or nothing deal that the city can’t afford and that sells out our future to residential developers is not the way to go.

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