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Pardon The Reality: Real estate values, taxes and schools

Most major Web real estate sites list “location” and “price” as the two key home purchase decision factors, and sometimes add “quality of schools” as a third.

None of them list “real estate taxes” as a driving factor.

And a key study indicates that Westchester residential real estate shoppers, uniquely, care most about quality of schools, and very little, if at all, about property taxes, when weighing a purchase decision.

Speaking of Web real estate sites: Check those that provide data on real estate activity and you’ll find that in recent years Katonah-Lewisboro real estate has not underperformed compared to surrounding towns, contrary to constant claims in these parts.

Please, check the sites yourself.

It doesn’t make sense to equate K-L “per square foot” values with towns like Scarsdale and/or against a down-county weighted average, as the K-L Finance Committee did in its 2012 spring report. You may as well compare K-L p.s.f. to the east side of Manhattan.

But if you look at price trends, days on the market and inventory in recent years, you’ll find that K-L real estate moves in virtual lockstep with surrounding towns.

Of course, K-L isn’t a single real estate market. It’s a collection of zip code-defined markets, and performance varies somewhat from one zip code to another.

But review the secular performance of our zip codes and those of surrounding towns and you’ll find all of them perform about the same, especially if you start with 2007—just prior to the housing bubble bursting/Great Recession—and follow along thereafter.

As for the key study: In 2001, as part of an impact statement for a water treatment plant planned for Westchester, the New York City Department of Environmental Protection (DEP) asked 10 leading Westchester real estate brokers to choose the top two home purchase decision factors.

Zero brokers chose real estate taxes as first or second most important.

Note that 2001 is the starting year of the 2012 Finance Committee data that some interpreted as forging a link between school taxes and real estate values, even though the data actually demonstrated no such link.

In the DEP study, “brokers who actively market residential property in Westchester County” were asked to rank eight parameters that might influence purchase decisions, including: “price-to-value ratio”; “geographic location” (how close to job centers); “quality of schools” (measured by factors like test scores, teachers’ salaries, percent of college-bound students); “amenities” (like parks and libraries); “proximity to commuter railroads and highways”; “real property/school taxes”; future “resale value”; and “general quality of the community.”

“Among these parameters,” the report states, “the quality of schools emerged as the predominant site selection…by far the most predominant issue…

“Real property and school taxes were not considered to be the most important or the second most important factor to homebuyers…Most of the brokers indicated that buyers who have selected Westchester County as a place to live typically come to a site anticipating that taxes would be high, higher than neighboring Putnam County and Connecticut…As a result, nearly all other factors are more important in selecting a home site.”

There is no data to indicate that Westchester home buyers have changed their outlook since then. In fact, a detailed and thoughtful (though slightly conservative-skewed) 2010 Westchester Magazine article on Westchester’s real estate taxes (bit.ly/12ZGken) noted that, “The formula ‘good schools equal high home prices’ might as well be tattooed on the forehead of every realtor in the County.”

A review of today’s online real estate bulletin boards shows that buyers looking into Westchester specifically discuss quality of schools as their primary concern.

BTW: The DEP report indicates that if teacher salaries are too low, buyers consider that a sign of weak schools.

The bottom line:

No matter how one characterizes the performance of K-L real estate, it’s part of Westchester County, where buyers look at quality of schools above all other factors, especially real estate taxes.

So as we examine ways to hold down K-L operating expenses—as indeed we must—let’s remember that if we care about our real estate values, it’s more important to preserve the excellence of our schools than to irrationally suppress our real estate tax rates.

Oh, and, isn’t our community also supposed to care about how our schools affect our kids’ futures?

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  • Michael Gordon

    Aren’t we long past the point of setting up the false dichotomy between quality education and high taxes? Of course we want quality education, which anyone who pays attention knows is a prodcut of a motivated, educated, experienced teaching and support staff. But, especially is times such as these, quality education needs to be affordable, and affordability needs to be measured by reference to standards and norms. The standards and norms for the cost of teacher compensation in Westchester County public schools are way below where our teacher compensation is now pegged. That expense line has got to come down, not only because it is too high as a relative number but because it is causing our District’s budget to bump up against the tax cap. If that expense line doesn’t come down, our District will have no choice but to make cuts that impact quality education in a very negative way.

    • Tom

      Again, KL ranks 8th based on contract analysis. This is also sited in the FACE report. By characterizing normal Westchester County teacher compensation as way below that of KL contradicts this ranking.

      And again, contract analysis is the only fair way to compare districts.

      The current makeup of KL staff may tip KL salaries to the higher end of their scale in a way that is greater than the county norm. Should that be a reason to lower the salary grid ranking? Is 8th out of line?

      All around the county the tax cap will help to ensure that salaries will grow very little or not at all in the coming years and the high pension contributions will fade as a result of an improving stock market. I’m sure that KL will not get the 60% necessary to override this cap. This will help control costs and unless repealed, residents won’t have to worry about payroll increasing by the huge 2-3% it did when the economy was hot.

      But to keep suggesting that KL teachers are overpaid relative to the rest of the county is not correct. implying that the union should rip up their contracts and plunge themselves into the county median is unrealistic and the continued bashing of our teachers and their #8 ranking is confusing.

  • Bill S

    Ridgefield 1,622 more students than KLSD
    Staff 40 more than KLSD
    Salaries $8.5 million less than KLSD
    Benefits $4.4 million less than KLSD

    These numbers compare Ridgefield’s 2013/14 budget to KLSD’s budget 2012/13

  • Lewyboro

    I’m happy to pay for good schools, but we are overpaying. Expenditures can’t rise while enrollment falls. And I question whether our schools are even that great. They have a lot of services for children with special needs, which plays heavily into these rankings. But what about enrichment programs for young, bright students? Regardless, the school budget should be lower if enrollment really does continue to get drastically lower. Can anyone even figure out how to LOWER school taxes? There isn’t even a chapter for that in government handbooks. The reality is that other school districts have equally good or better reputations and pay less than we do. Significantly less. And the reality is also that people look at what their monthly payment will be when they buy a house. Whether they specifically indicate real estate taxes as a factor in buying a house, they certainly do consider the monthly payment and for most people that includes the taxes. To say people aren’t looking at real estate taxes is just a manipulation of the facts.

  • reeve1

    The analysis in this column is wrong on so many levels.

    The annual taxes ARE part of the price and therefore one of two major factors in the decision to purchase. After the “sizzle” of the initial presentation all real estate sites and banking sites send you to the “mortgage calculator” which expresses the price in real terms-the monthly payment. The buyers must pay to stay in the house.

    Zillow.com is an excellent tool. Lewisboro prices appear to be holding their own.over the past year or so, only because they plunged so precipitously from the market highs of five years ago. Plunging almost 3 times as far as Chappaqua, for example. If you look nationally, areas in Florida and Las Vegas are enjoying a faster price rise than Westchester, for the same reason, they collapsed much further.

    Then there is the practical component. Yes, real estate values are higher in Scarsdale than in Lewisboro. But Lewisboro is a more affordable place to live and is much closer to the more affordable places where teachers like to live. So, in reality, we should be paying significantly less for the same level of quality.

    And then there is the moral issue. Even though we are worse off, the rest of Westchester is still in the same bind we are in as the highest taxed County in the United States. With the tax cap in effect, the only place this is going is the firing of more young teachers and the further degradation of quality education. Whoops, there goes the other major reason for buying here and explains the flight of young families to communities like new Fairfield, Brookfield, Newtown and Madison, Connecticut, as well as many other areas of the country. Just because the unions have been effective in bleeding taxpayers dry throughout the County, doesn’t make it right or sustainable.

    And finally, there is the irony. Most teachers themselves live outside the Town in areas with quality education, lower taxes and significantly lower compensation rates with the added irony that elite college professors, and private and parochial school teachers are often paid less.

  • Tom

    Reeve, does your employer put a compass down, find the lowest paid person at your position and demand you lower your salary to that amount?

    Bleeding taxpayers dry? Should teachers not have asked for CPI increases during the past decade?

    Is there something about a teacher that makes paying them 6 figures abhorrent to you? Is this a class thing? I guess if the top salary of a teacher approaches the median salary of the district then it’s time to bus in some new staff from the country.

    A teacher making a good salary means they can live in the area and feel like they’re not straining to make ends meet. Maybe they can even take a vacation and buy a new car once in a while. Just like the residents of KL. Can you fault the teachers union for wanting that for its membership?

    And please stop comparing KL with Scarsdale. For every Scarsdale there are dozens of local communities whose property values are significantly less than KL yet the teacher salary grid averages are only slightly more.

    If you compare district to district the ratio of teacher salaries to property values, KL would fare well. Most towns all across the state have property values at over 50% lower than here, including many that are very close. Are the teachers in KL paid double? triple? By your argument KL teachers are relatively underpaid.

    Anyway, the 2% tax cap will certainly suppress future growth of salaries even if those paying them are not likewise restricted. Tiers 5 and 6 helps to ensure that no more pension shortfalls will occur for the next wave of teachers. Hopefully districts writing big pension checks will soon be a thing of the past.

    Expect no big tax increases in the near future but also don’t expect the union to go backward either. Maybe once everyone understands that, the rancor can end.

  • Glenn DeFaber

    Tom you miss the point. Having the best employees is the goal for any organization whether it is public or private. Paying for the best is another issue for the taxpayers of K-L . The teachers union can join in the solution or be run over by the results. Most ordinary people, myself included do not need a FACE report or a statistical analysis to determine what they can or cannot afford. We can argue all day on the level of pay received by our school employees. The only number that matters is what is left in the checking account after the monthly bills are paid.
    If anyone doubts what I say look at K-L’s budget history vote over the last 20 years. Even though the budget has passed the vast majority of times, the winning percentage has been the lowest in Westchester. With a 60% majority vote needed to break the tax cap, business as usual is over for the teachers union. Either they wake up and help or are put to sleep for good.

  • Tom

    I’m sure the teachers union understands a tax cap and the reality it brings. Salary increases have been next to nothing these past few years, so they get it. And I’ve said it many times… “business as usual” has been a teacher salary grid increasing by the rate of inflation and achieving the ranking of 8th in Westchester/Putnam. That’s your big bad union.

    And I do understand that if a citizen is struggling to pay their bills they certainly don’t want a tax bill that breaks them. But “can’t afford” is a phrase that is thrown around too broadly. For every citizen who truly can’t afford to support the school budget there are many who just don’t want to, like the Ledger’s Mr. Piro. For the latter it’s about lifestyle not affordability. That’s why there’s informed negotiations ,and ultimately agreements, by two sides… a community that wants to help its struggling members as well as keep money in their own pocket vs a union that wants to be paid what they think their worth. Hopefully future negotiations go smoothly and quietly and both sides recognize what is fair.

    • Glenn DeFaber

      Tom were going great till you decided to use your ability to look inside other people’s households and determine what you consider “affordable”.
      What happened with that great “ Kumbaya” contract extension agreement from two years ago? I guess for the union it was only words. I hear to Union is going to an all-black dress code after Labor Day.

      • Tom

        Glenn, I didn’t mean to offend or imply that taxes aren’t a burden to some. But my stating that affordability is relative is simply a reaction to you and others making the blanket statement that teacher salaries are “unaffordable”.

        And I don’t think the guy at Briefing Book will care if I try to read into his angle. He doesn’t hide it and certainly has no problem making public and insulting generalizations regarding the hearts and minds of our teachers. But for the purpose of civil discourse I will keep my future points general.

        Isn’t the contract up this year? I don’t get the union crack. And please no black. Call me an optimist. However if either side comes to the table with a radical take it or leave it proposal then all bets are off.

  • Glenn DeFaber

    Tom were going great till you decided to use your ability to look inside other people’s hea

  • Bill S

    Tom Let me try to give you a dose of reality. People in KL work 240 days per year vs the teachers working 180 days. Yet the teachers want to earn the same if not higher salary than those people who work 2 month longer per year. My healthcare contribution is 33%, the teachers’ contribution is 11%. On top of that I have a $3,000,00 deductible. You want to talk about cars, my wife’s car is 14 years old and mine is 11 years old. It sure would be nice to be able to buy a new car. Vacation!! What is that? Haven’t been on vacation in six years. At the hight of the financial crisis my pay was cut two years in a row. Many of my fellow taxpayers experienced the same and pay the same healthcare as I do. I don’t work for a mom and pop operation; I work for a Fortune 5 company, which is very profitable, and they know how to manage their cost, something the BOE is incapable of.

  • reeve1

    Hey Tom, since you asked, my organization does included geographical considerations, including housing costs, when determining what is a fair rate of compensation in the areas where we are hiring.

    More importantly, we use a merit-based system in hiring and promotions with a rigorous annual system for evaluations and we do not give out tenure.

    • Tom

      Tenure means that teachers get due process before they can be terminated. Any teacher can get fired.

      You may know that in recent years, supervisory positions have been cut to the bone. There is just a small group of administrators in each building. The HS has eliminated department leadership. This was in response to community demands. You can’t have a rigorous evaluation system thats accurately measures effectiveness without the people to do it.

  • Tom

    Bill, I assume you went into the private sector and a Fortune 500 company so you can make your way up the corporate ladder and provide a nice living for your family. I assume that was the plan since you bought a house in a very expensive area with high taxes. Hopefully that rise has continued since your pay cuts and the assent to the top of your field has resumed. You have limitless potential. You can be VP one day. You don’t max out mid career like a teacher does. By the way, teachers don’t get huge raises when those in the private sector are doing great but they immediately become a target when things slow down. The Hare gets pissed at the Tortoise.

    I Googled “fortune 500 record profits” and I got a lot of hits from articles written last spring so perhaps you and you’re company are doing well again. If so, good for you. Your salary won’t have to resemble a teacher’s anymore.

    But if not, then you have to make a decision as to whether or not KL is the right place for you. You can buy a nice house in Brewster or Mahopac for less than half of what it costs in KL. You can drive even further and find some really nice places for even less. And if some of the other posters are correct, then the schools are just as good. Maybe you can find out where teachers live and move there.

    But you purposely bought a house in KL. You deliberatively didn’t live in much cheaper areas. Since no one likes spending more money then you must have had your reasons. Could the quality of the schools be one of them? I spoke to a friend in one of the neighboring districts in Putnam and he told me the schools are awful. But yes, lower home price and lower taxes and that was presumably that was also the case when you bought your house. Its a choice.

  • Bill S

    Tom You have much to learn; one is don’t make assumptions about people you don’t know. I have lived in Lewisboro for nearly forty years. I moved here for the natural beauty of the town, when taxes were much lower than today. Before the various school administrators and BOE’s gave away the store. Don’t ever tell me or any of my fellow taxpayers to move. We have supported this community and school district for many years. We are tired of selfish people such as youself who live in a make-belief-world..

    • Tom

      I didn’t tell you to move. I said you had a choice. If it came off differently I apologize. But please forgive another assumption… After 40 years, you may own your home outright. If so, you many have made a wonderful profit. Don’t you think the quality of the schools have something to do with that? Other places have natural beauty at half the price. KL is doing a lot right.

      I joined this conversation to defend the teachers against the bashing I read from columnists and posters. Many many personal assumptions about teachers … greedy, selfish, etc. The personal attacks on the union president have been vicious and cruel. But I guess that’s OK.

      I suppose when private sector employees seek competitive salaries and advancement in their own personal financial security they are just hard working and ambitious. When they climb to the top they are go-getters! When a teacher looks to simply keep up with inflation and the high cost of the area in which they work they are greedy and selfish. Oh well.

      • Bill S

        You had a choice also, you could have sought a job in the private sector, or perhaps you can apply for a teaching position in a lower cost of living area of the country. Over the years I have been very close to what goes on at KLSD, and I am not impressed. The quality of the education is mediocre; at best I have never bashed teachers nor made assumptions about them on these comment sections. I merely try to present the facts. You on the other hand have made the “argument” personal. Aren’t you supposed to be working today, or do you think it is okay to post comments on the district’s time?

  • Tom

    Now whose making assumptions? I’m not a KL teacher. I’m someone with ties to both sides of the issue. Let’s leave it at that. I began posting to refute the claims that KL pays its teachers far and away more then their wealthier neighbors.

    And I’ve certainly not been personal. I’m not sure why you think otherwise. Posters have been talking about teachers and residents in general throughout these discussions. You’re the one who chose to write about your personal situation and make it relevant to the discussion.

    On that note, I think our side debate has run its course. I respect your desire to maintain an affordable lifestyle in the town you’ve lived in most of your life or perhaps your entire life if you grew up here. I merely point out that teachers have a right to pursue their own financial security, too, within the constraints of a salary grid and lifetime mid career maximums that change only by the whim of the CPI.

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  • mundtt

    HOLY DISTORTION Batman! What BS! Where does one begin to address the skew of this column?

    1) The “Realtor dodge”: Citing a 12-year-old DEP survey [entirely scientific to have 10 people represent all of Westchester, no doubt] of “leading” realtors as your “Key Study’? Really RR? You must be on some very potent medical marijuana. Because you seem to forget that in one of your earliest columns, you took great exception to a realtor who said her customers noted the tax burden as a reason not to buy here. [I wish the Ledger’s archives were better; it would have been nice to quote you verbatim.] Hmmmmm……an old survey, conducted before taxes DOUBLED, or the recent anecdotal evidence provided by a local business woman who had no reason to talk down her product? I know which I would place more faith in. But you? You have that “progressive” axe to grind, where all taxes are good and higher taxes are better. Why aren’t you arguing to spend $50,000 per student? Why not $100,000? It would instantly send home prices soaring, at least in your fantasy world.

    2) The “Zillow dodge”: Yes by all means, check those sites yourselves, but expand your horizons. In the long-run, KLSD areas significantly underperformed – on average — the ~90 towns in Westchester and the 5 surrounding NY, NJ and CT counties whose home prices are today in the $400+k – $600+k band around Katonah Lewisboro’s Zillow index guesstimate. Please explain in a future column RR.

    3) The “Half the Story” dodge: “….buyers who have selected Westchester County as a place to live typically come to a site anticipating that taxes would be high, higher than neighboring Putnam County and Connecticut…” Correct. What is missing is that they also expect prices to be consequently lower. Picture this: A $700,000 home in Vista; the identical home, lot, etc less than ½ a mile away in New Canaan, with lower taxes, say $8,000/ year. In RR’s fantasy world, those two identical houses sell for the same amount. Sadly, that is not the case for those of us who deal in reality.

  • mundtt

    Tom:

    1) You shouldn’t ask Reeve to stop using Scarsdale as a comp; he didn’t start it. Your issue is with the unions. You recognize it is a bad comparison; why then have they used it in that past in bargaining negotiations?

    2) No matter how many times you say it, at this minute KLSD teachers are NOT 8th, they are 2nd or 3rd, as reported by the Education Dept. Who knows what will happen over a 5-yr, 10-yr, 15-yr etc period? Today is what we can say with certainty and today KLSD teachers are NOT 8th. Helpful hint: look at the New Canaan budget presentation; check out the salary comparisons, and you may start to understand the view about KLSD teacher pay being excessive.

    3) Regarding pensions, the Teachers state pension trust [thankfully!] has a high funding ratio, but that assumes a certain investment performance. KLSD expects a 10%+ growth per annum in pension expense per the FACE report; it is unlikely the state’s investment performance will match that. Moreover, the OPEB trust, unlike the pension trust, is vastly underfunded, ie about a 10% funded rate the last I saw. And that amount is more of a SWAG than the pension liability as health issues are much more variable. KLSD and all towns will be hit by that obligation for many years to come.

    4) You seem to be sympathetic to the union position; fair enough – that is your right. This week the union followed through on its threat to litigate the tax cap, arguing, inter alia, the cap interferes with local control. Remind me: how many times did the unions file suit over unfunded mandates and the like, as they too, interfere with local control? I suppose if the community won’t “care about how our schools affect our kids’ futures” as RR intones, then the unions will? It’s “all for the kids”, right?

  • Tom

    Mundtt,

    We’ll have to disagree on salary rankings. When the union and BOE negotiate salaries they look at the salary grid. The grid is 8th. That is what the union “won”. They didn’t demand to be 2nd or 3rd. If the grid happens to be filled with more senior teachers why is it the union’s fault? They don’t hire teachers, the board does. When these senior teachers retire, replace them with younger cheaper teachers. Then, maybe KL actual payroll will rank lower than their grid ranking. And again, the grid increases typically by just CPI.

    But remember this… the 2% tax cap will keep a lid on future salary growth even if inflation returns. Even if the economy is growing faster than 2%. The hare can run away again.

    Yes… if current salaries are tipped at the higher end of the scale that will cause higher payrolls that taxpayers don’t want. I get that. I just don’t know what the union should do about it. I’m sure the faculty would rather be younger. I would.

    And yes… teachers in CT are generally paid less than all over Westchester. The KL union has bargained for the going rate in this county. I’m tired of attacks on the union because of it.

    Again, I am optimistic that large pension contributions will abate. I’ve been told they will. We’ll see. I agree that something will have to change if they don’t. And regarding OPEB, I have to learn more about it. I’m not avoiding the topic or dismissing it’s impact but I can’t comment on it yet.

    I have a question, though… When you were in college, what was the view of becoming a teacher? Were teacher’s salaries “excessive” years in the past? If they weren’t then how could cost of living increases make them so?

  • KatResident

    Tom, I believe you are relatively new to posting on this subject, but I have been going back and forth with several others on the issues of teacher comp, property taxes and home values (KLSD vs comparable neighbors) for years now. While you are nearly 100% correct in your observations and analyses on these issues, you’re never going to get any agreement from Briefing Book, Mundtt and several others who regularly contribute here. Obviously these have been some tough economic conditions locally and nationally ever since the Wall Street elite destroyed our real estate market, our retirement savings and the entire economy in 2007-08-09. The recovery has been slow and uneven — although in my view, the recovery has been a huge success given how bad things were at the end of the Bush administration — with many economists forecasting 25% unemployment, Bread lines, and the entire collapse of our financial system, auto industry, etc.. While its never fair to generalize — it is fair to note that many of our local friends here are Conservative Republicans who simply want to blame Democrats, Obama, public sector and private sector unions for every difficult economic consequence that occurred since election day in 2008. Again admittedly generalizing — but the majority of our neighbors have done OK throughout the past couple of years. Most of our neighbors are in the top 10% of household incomes nationally — and every objective study of the economy notes that its the middle class and the lower income folks who have suffered more in recent years. Take a look at all the BMWs, Lexuses and gas guzzling SUVs in the JJHS parking lot — and note that most of them don’t belong to our teachers. Did you notice how empty town was during the recent President Weekend holiday — undoubtedly many on vacation in the Caribbean and other nice resorts. None of the most expensive local restaurants appear to be hurting for business. Almost every kid 9 years or older is walking around with an I-phone and most likely has a computer, a tablet and high def TV in the bedroom. There seems to be no drop-off in teenage and younger local athletes competing in private sports leagues, getting private coaching and music lessons, tutoring for SAT prep, etc. How much has the average family increased their cost for cell phones and internet and TV and fancy computers over the past few years? I would guess the monthly costs for the average household has increased by an average of more than 200% over the past five to ten years. For some reason though a lot of these same families are outraged by the salaries of the very same people they want to help get their child into Harvard in a few years. They want their school taxes to go down while the cost of everything else goes up! don’t understand it, but that’s the reality of our local community — obviously not everyone, but quite a few!

    • Glenn DeFaber

      Now I know why you use a screen name., you don’t want your neighbors to know how you really feel about them.

  • Ewing33

    KatResident. I guess the world looks a little different after you have been perusing your Occupy Wall Street scrapbook. I bet you have Elizabeth Cherokee Warren as your screensaver. Newsflash: The Wall Street elite that you speak of may have greased the wheels of the housing bubble, but (New York States number one employer -the one that actually foots the bill for a large chunk of your cherished public employee benefits) was most definitely not the root cause. That honor goes to the Federal Reserve Bank. You probably don’t want to believe that regular people, the 99 percent plus 1, also played a featured role. In case you forgot, in response to the bursting of the dot com bubble, the Fed lowered interest rates to 1 percent. Perish the thought that capitalism should work it’s magic by cleansing the excess out of the system, Mr. Greenspan embarked on a new experiment. His theory was that money printing could eliminate recessions. He kept rates so low for so long in order to inflate a new bubble…the real estate bubble. People got greedy and thought prices could only go one way. Wall Street also thought prices would only go one way. So, in his attempt to banish the word recession from our vocabularies, the Fed created a depression. Everyone suffered of course, except for the entrenched members of most public sector unions. They got raises and never noticed a drop in their retirement plans because the private sector bears all of the risk. Now Tom this is where we come to you. Who is “telling” you that the pension contributions will go away. Last time I looked at the rates on government bonds which is a huge component of the funding system, a thirty year obligation paid a fat rate of 3 percent. In case you haven’t noticed, the stock market has been gone nowhere for 13 years. If you look at past cycles, there is a good chance this condition will persist for another 3 to 5. Since we are bumping up against the stock market ceiling that has been in place since 2000, I have a hard time believing we are about to embark on a new era of stellar returns from financial assets. But hey what does any of this matter….Katresident thinks everyone in our district is rich. Of course, Ben Bernanke wants you to feel that way……until we all have to take the red pill.

  • Tom

    Glenn, I don’t know why you feel KatResident is insulting his neighbor by saying they are doing “OK”, can afford a vacation and can by a nice car. Why is it while we are tearing apart the payees, we can’t even make mention of the payers without someone taking offense? Are you saying an honest observation of the community’s ability to support teacher compensation isn’t relevant?

    Ewing33, When you say unions keep getting raises during tough times in the private sector you are referring to the same CPI salary grid changes they get even when times are great, correct?

    Steaming hot economy, Nasdaq 5000, huge bonuses on Wall Street, property values soaring … CPI raise
    Tough 3-4 years…CPI raise

    Yes, private sector workers take on more risk/reward but isn’t that what they signed up for? The same way a teacher signed up for security?

    And people talk like their haven’t been changes. KL teachers now have a one day furlough each year. Salary gird changes have been small. New tier 5 and 6 faculty are contributing to pensions at a significantly greater rate. There’s a 2% tax cap that will tie the hands of every school board and union in the State. But tomorrow I’m sure there will be another hate filled column…

    • Ewing33

      Tom,

      Fair point but I believe raises we’re a bit better than CPI during the bubble years. Even so, I think a reasonable discussion could be focused on how to compensate teachers beyond our current framework. Personally, I would like to see shorter term individual contracts with the potential for great teachers to make more money than they currently do. Perhaps 5 years in length and no tenure. Furthermore, I believe the current pension system is mostly bad for everyone, teachers included, because it rewards longevity and nothing else. Pensions should be portable and public contributions should be directly correlated with financial market performance. How many people outside the public realm actually stay in the same job for 30 years. How many teachers are just mailing it in because they no longer have a passion for what they are doing? Anyway, none of this matters today but it would be nice to blow it up and start from scratch. Our community would still spend a lot on the school system and we could get a much better return on our investment.

    • Glenn DeFaber

      KatResident
      February 26, 2013
      “Obviously these have been some tough economic conditions locally and nationally ever since the Wall Street elite destroyed our real estate market, our retirement savings and the entire economy in 2007-08-09″.

      Tom do you think there are any Wall St. elites in Katonah?

  • KatResident

    “The Fed created a depression”? What are you smoking? Quite a bit of revisionist history in Ewing’s post — the Fed never lowered the Fed Funds rate to 1% in response to the bursting dot com bubble. That bubble burst in March 2000 and Fed Funds were roughly 5.5% at the time. A full year later in March 2001 Fed Funds were still around 5.5%. Rates started coming down steadily over the next 6 months, but the huge drop off in rates from 3.5% to around 1.5% occurred almost immediately after 9/11/2001 when world financial markets, credit markets and global economies were in panic — and the Fed rightfully decided to pump liquidity into the system — as it had to do again post 2008. Again we all should be thanking Obama and Bernanke and the Fed for avoiding a repeat of the Great Depression, for avoiding Bread Lines and 25% unemployment, for saving the Financial system and American automobiles and related industries. No I don’t dislike all my neighbors and I don’t think they are all super rich by standards of Westchester, Greenwich, etc. But most of us are rich by standards of 90% to 95% of America. A good number of us are somewhat spoiled and entitled — and it is reflected in how some of the kids are being raised. Again not all — but come on, just look around. I think many of my neighbors are not all well informed on the workings of the economy and financial markets. But I do give my neighbors credit for mostly passing school budgets over the past 10-20 years to keep our schools’ quality quite good, if not perfect. Most of those in the silent majority don’t post here — they just go about their daily business and value quality education and are willing to pay for it, even if the cost is relatively high. As far as the future of the stock market? Well its up more than 100% since March 2009, so a move sideways for a while would not be disastrous. Longer term, every time in the past 100 years or so we have had 10 years or more of stagnation like we did 2001-2010, the next ten years have been terrific. So I wouldn’t bet against the US stock market, especially as compared to Europe and compared to expected returns from holding bonds.

  • KatResident

    Another re-make of history by Ewing33:

    “Mr. Greenspan embarked on a new experiment. His theory was that money printing could eliminate recessions. He kept rates so low for so long in order to inflate a new bubble…the real estate bubble.”

    Whatever real estate bubble that was created certainly did not materialize due to Greenspan’s monetary policy in response to the economic downturn we had in 2001-03. The huge run up in housing values leading up to 2007-08 goes back to the 1970s, 1980s and 1990s, with periodic and sometimes severe bumps in the road of course — but for the most part you can draw a straight trend line upward sloping for housing values in the US for 30 years prior to 2007-08, even adjusting for overall inflation.

    Come on Ewing33, if you’re going to argue the economy and monetary policy, at least know your facts.

    • Ewing33

      Facts (This is directly from a speach mande by Ben Bernanke in 2010):
      The target federal funds rate was lowered quickly in response to the 2001 recession, from 6.5 percent in late 2000 to 1.75 percent in December 2001 and to 1 percent in June 2003. After reaching the then-record low of 1 percent, the target rate remained at that level for a year. In June 2004, the FOMC began to raise the target rate, reaching 5.25 percent in June 2006 before pausing. (More recently, as you know, and as the rightward portion of the slide indicates, rates have been cut sharply once again.) The low policy rates during the 2002-06 period were accompanied at various times by “forward guidance” on policy from the Committee. For example, beginning in August 2003, the FOMC noted in four post-meeting statements that policy was likely to remain accommodative for a “considerable period.”2

      More Facts:

      “After some years of slow growth, U.S. house prices began to rise more rapidly in the late 1990s. Prices grew at a 7 to 8 percent annual rate in 1998 and 1999, and in the 9 to 11 percent range from 2000 to 2003. Thus, the beginning of the run-up in housing prices predates the period of highly accommodative monetary policy. Shiller (2007) dates the beginning of the boom in 1998. On the other hand, the most rapid price gains were in 2004 and 2005, when the annual rate of house price appreciation was between 15 and 17 percent.Thus, the timing of the housing bubble does not rule out some contribution from monetary policy.

      More facts:
      Between 1977and 2003 the ratio of home prices (nationally) to median household incomes stayed at 4X which if you are statistically inclined happened to be within 1 standard deviation (somewhere between negative one and positive one) which accounts for your “bumps”. In 2002, the trend accelerated to over 5X which was about 2.5 standard deviations above the mean.

      I can keep going…

  • Tom

    Just did a little reading about tier 6 teachers. There are drastic changes in regards to pension calculations and the retirement age, which has been raised to 62. It will take time for tax payers to feel these changes but at least it’s done.

    As far as relating tenure to mediocre teaching, I’m sure that’s the case for some but the majority I believe do their best regardless of the added security. Yes there are mediocre teachers gainfully employed (as in any industry) but there are also many good teachers who could lose their jobs based on a whim without the due process tenure affords. Teachers can be let go and I support getting the truly horrible ones out. Districts need to step up their efforts to do so. Perhaps salary freezes for those who won’t follow improvement plans would be a start. It’s tough to do thoroughly and fairly with the lack of numbers in leadership positions. Assistant Principals and Principals run the school, deal with parents, etc. They don’t watch the day to day performance of a teacher. FAIR evaluation is the key.

    • Ewing33

      Tier 6 is a big change…I’d rather see some component be defined contribution (with some upside for teachers in the contribution rate when times are good).

  • KatResident

    don’t know what happened to my last post it disappeared somehow. Anyway Ewing33 your new “facts” refute your original claims. First you claimed the Fed dramatically lowered rates in response to the dotcom bubble burst. But that bubble burst in early 2000 and the Fed did nothing for a full 12 months until the normal cyclical recession started in mid 2001 — and then rates were only dramatically lowered in late 2001 and 2002 in response to the post 9/11 crisis in world markets and world economies. So to tie the significant monetary easing two years after the dotcom bubble burst is a stretch to say the least. And your second new fact claims the housing bubble began formulating in 1998 (I still think much earlier) whereas your first post claimed it was formulated mostly due to fed monetary policy in the 2003-05 period. So your new facts are much closer to the truth than tour original claims that were clearly way off.

  • KatResident

    Now both comments are there again — sorry for the basic repeat

  • Ewing33

    Well kat resident…I guess you’re not statistically inclined! Feel free to keep reading selectively and believe what you want…..

    To your point, in the early 70’s the us government left the gold standard and adopted the “money printing” standard….inflation soared in the late seventies and home prices started to rise.l.

    Anyway…adios and say hello to Mr. Rourke for me……

  • Ewing33

    More Facts:
    Home Price Appreciation by Decade (According To Robert Shiller)
    1890: .53%
    1900: 1.4%
    1910: 3.3%
    1920: -.7%
    1930: -.45%
    1940: 8.16%
    1950: 2.67%
    1960: 2.57%
    1970: 8.12%
    1980: 5.86%
    1990: 2.84%
    2000: 9.27%

    In the 1970’s average inflation rate was 7% throuout the decade. It was about 2.56% in the first decade of the 21st Century. KATRES, do you know the difference between real and nominal rates of appreciation? I’m sure you will keep dismissing anything I say as fiction, even though you offer zero evidence to support your positions.

  • Katresident

    I may not be the world’s greatest statistician, but let’s take your numbers as “facts”. If inflation averaged 7% per year and housing prices went up 8.12% per year over the same period, then compounded rate of general inflation was 97% and home value inflation was 118% in the 1970s. — Hmm, sound to me like home values were up 20% more than general inflation during the 1970s. In the 1980s, the numbers are even more staggering. At most, general inflation averaged about 3.5% during the 1980s, but let’s give you the benefit of the doubt and call inflation 4% per year during the 1980s. 4% compounded for 10 years comes to 48% general inflation total for 10 years. Home values were up 5.86% per year on average — so compounded for 10 years that comes to 77% inflation in home values. That’s 30% more in house values than general inflation during the 1980s. Hmm, sounds like air is inflating in the housing bubble? Correct? So is this what you mean by “real appreciation”? Home values went up by about 50% more than general inflation in the 1970s and 1980s. Please educate me some more Ewing33.

  • KatResident

    By the way, Ewing33, you need to do a lot more homework on your economic history, especially as it relates to monetary policy, inflation and home prices. Home price bubbles have been created and burst several times in the past 30-40 years, although certainly none were as severe as what happened in 2007-08. From personal experience, I can tell you that housing prices in the NYC metro area about doubled in just 4 years between 1983 and 1987 (again nothing to do with any significant change in monetary policy during those years), before the mini stock market crash in October 1987 began a prolonged period of weakness in the housing market. So picking arbitrary 10 year periods like the 1980s and 1990s for analyzing average inflation and housing value changes does not at all coincide with some of the rather severe swings up and down in house values during the 1980s and 1990s. Seems like you want to blame all negative economic events over the past 30 years or so to an easing of Fed monetary policy. In fact the Fed (Volcker) should first of all get credit for wiping significant inflation off the economic landscape in 1979 through about 1982 after the two major OPEC oil shocks of the 1970s had ignited inflation and inflationary fears. Note again that it was an external shock (not monetary policy) that created inflation and economic misery during the Carter years — and the Fed rightfully stepped in to correct it. The Fed then rightfully stepped in again post 9/11/2001 and post financial collapse in 2008 to provide liquidity when the world’s economies were on the verge of collapse. And note also that even with your complaints about the Fed printing money for the past 30+ years, severe inflation has not been a problem for our economy ever since the Volcker policies were in place more than 30 years ago. The only brief spike in significant inflation that occurred since was once again oil price related during the first Gulf War of George HW Bush.

    • Ewing33

      KatRes…there is only so much I can write on a board like this. I can get much more granular but I really see no point in it. You are 100% correct about reporting a decades worth of numbers…they certainly do not the capture more precise ups and downs (We agree….terrific!). I would also agree that Paul Volcker was a hero. A truly great Fed chairman who helped get rid of the inflation of the late 70’s and early 80’s. I am most definitely not blaming the Fed for 30 years of economic woes. My original point was a response to your assertion that “The Wall Stree Elite” was the sole cause of the economic collapse from 2007-2009. If you reread my original post (which contained a fair amount of snarkiness) I agreed that Wall Street played a role, but asserted that the Fed was the number one culprit. I stand by that.

      Delving back into the 70’s is a different matter all together. We had inflation, alot of it, and housing prices participated. That wasn’t a bubble. In the 80’s I guess there was a bubble and a crash. I wasn’t there and haven’t studied the period so I can’t comment on the dynamics of what transpired. Furthermore, I do not think the Fed was directly responsible for the inflation of the 70’s. I blame Nixon and Lyndon Johnson (I don’t like Republicans or Democrats). Johnson thought he could have guns and butter (Great Society plus Vietnam=inflation). We ran up a ton of debt and Charles De Gaulle decided to trade in his dollars for gold when he lost confidence in our currency. Nixon decided not to honor the convertibility of our currency into gold and “closed the gold window” instantly devalued the dollar and setting off a massive bull market in the price of gold while simultaneously letting the inflation genie out of the bottle.

  • KatResident

    Ewing33, You gotta re-look at the data from the 1960s and 1970s. Blaming Nixon and Johnson for running up a ton of debt and leading to inflation? At the beginning of Johnson’s Presidency the total federal debt outstanding stood at $310 billion. Total GDP in 1963 was $618 billion so the debt was almost exactly 50% of GDP. Even with Johnson’s guns and butter and Nixon and the Vietnam War and inflation starting to heat up (the first OPEC crisis) in 1975, a full 12 years later, the national debt stood at $542 billion, which was about 33% of GDP in 1975 which had now grown to $1.64 trillion. So as a percentage of GDP (or in “real” terms) our debt actually declined from 50% of GDP to 33% of GDP during Johnson/Nixon/Ford. So how can you say they ran up a ton of debt which then led to a de-valued currency? You want to talk about the real beginning of debt run-up? Look to Mr. Ronald Reagan who inherited $900 billion of national debt and tripled that in 8 years to $2.7 trillion. As I have said here before, for Obama to match Reagan’s record of fiscal Conservatism, he would need to triple the national debt he inherited ( lets say $11 trillion) to $33 trillion in his 8 yeras

    • Glenn DeFaber

      Just saw Dr. Kreutzer’s budget and I think it is quite good. My school taxes go down in Lewisboro but your taxes goes up almost 7% Katresident. Being that the voters in Katonah have been the primary contributors in passing budgets that has led us to this I think you have received your just deserts. I guess you can say you have put your money where your mouth is. Over a 12% increase in two years, keep up the good work.

      • Ewing33

        This is an interesting trend…..at some point my annual tax bill will be greater than the value of my home….

  • KatResident

    Just for the record once again Mr. DeFaber, I have never said I enjoyed paying high taxes and didn’t think efficiencies could be found in the school budget. I have frequently suggested pay for play for sports and extra-curriculars (with safety nets built in for those who can prove financial hardship); I have also always suggested increasing class room sizes and using that in negotiations with teachers, etc. What I do find very objectionable in some of the posts here is the “demonizing” of our teachers and public unions in general and the blame game going on as it relates to economic conditions nationally and locally — as if teachers and government employees are somehow major culprits. As Tom said — this is the deal they signed up for and we signed up for when they were hired. We’ll forego the opportunity to own our own business and/or work on Wall Street or as lawyers or Doctors and or the opportunity to climb the Corporate ladder and potentially make millions — but in return we will teach the kids, enjoy the benefits of the school calendar, and get significantly better than average pension and medical benefits. Now when times are tough, we want to break those promises made in the deals — but of course we never offered any extra bonuses when times were good – as many in the private sector received. And for the record again, I don’t think there is any proof that KLSD teachers make significantly more money (when compared apples to apples in terms of credentials and experience) to other teachers in Westchester. If someone can prove that then I would blame present and past School Boards for poor negotiating. And Ewing33, since you posted and failed to reply to my suggestion to rethink your conclusions on inflation during the 1970s, should I take that to mean you now agree with me?

    • Glenn DeFaber

      Just tweaking you a little bit on the tax increase. I agree with you on many things. Play for pay is against NY state law but a good idea. Teacher bonuses and higher pay for difficult subjects I like. I always thought it was crazy that my daughter an art teacher makes the same money as an AP chemistry teacher. Unions are preventing that. As for the K-L teachers union, compared to many other districts I am familiar with (I have siblings and relatives who are educators) are the most radical and least caring about the plight of the community’s ability to pay. I never advocating abridging a signed contract but I have been in favor of negotiating with the same vigor and vitality as the union.
      Not every private sector worker is a top doctor, lawyer, or Wall St. banker. Most are ordinary employees collecting a pay check. Their pay and working conditions change as the world changes. Public employees on the other hand have a sweet little mechanism called the Triborough Amendment which prevents any loss of pay or benefits in future contracts without the union’s consent regardless of conditions. It would seem under any condition their total package can never go down. Do you think that is a major cause of hostility towards public unions?
      Lastly I do not need a ton of data to see that the country, state, county, town, and school district are in trouble with past and present overspending. Don’t care who caused it, that is why we have elections. I take a very simple approach to life, I want the best I can afford and maintain without going broke in the process and I am aware that many people around me are a lot worse off.

    • Ewing33

      No….I have been traveling abroad. I’ll get to it…..

  • KatResident

    I didn’t know pay for play was against NY law. Tough to judge peoples’ true intentions in negotiations and what goes on behind closed doors. To me, both sides should negotiate using whatever levers they have and when an acceptable deal is reached, you shake hands and live with the deal until the next round is up. I still believe that even though most private sector employees are also ordinary Joes making a living wage, but not millions — by being in the private sector they chose to take a risk with the OPPORTUNITY, not a guarantee by any means, to make a lot of money, maybe even millions some day. Teachers and public sector employees did not take that risk and thus do not have the OPPORTUNITY to make millions in salary — but instead they chose more of a “guarantee” of superior pension and medical benefits. I don’t think it’s fair now, when times are tough to look at the deal public sector employees signed up for many years ago (and we all shook hands and said OK) and say now “That deal we made we can no longer honor it”. And by the way, let’s not forget that teachers in general have as much if not more education credentials and professional certifications as the generally more successful folks in the private sector (the Wall Street MBAs, CPAs and the like) — so I believe we should narrow down the population in the private sector to whom teacher comp is compared.

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