The Tax Impact analysis that was prepared by the Board neglects to include maintenance costs, extending the breakeven cost from the presented 11.71 years to at least 21.37 years (82% increase, estimated)
The real estimated tax increase would be 260% HIGHER (estimated at $145.28 annually)
Maintenance costs are a perpetual obligation that is tied to inflation
Given the age and condition of the Richardson House, higher maintenance costs should be expected (link at the bottom)
A maintenance plan for the Richardson House has not been presented to the public
Higher maintenance costs can extend the breakeven period for residents dramatically
If the Board would choose to increase their rent expense by 50% instead of pursuing a project that is financially risky, divisive and life quality changing, the impact on each household tax commitment would be $8.78 a month. The current entry level Netflix subscription cost is $9.99 a month
The Board has prepared an Estimated Tax Impact for $600,000 Bond Issue analysis (attached below). The claim is that the tax burden on each household will be approximately $40.01 annually. In 10 years, once the bond matures, there will be a tax benefit of $232.99 for each household (as stated in the Board's press release dated March 22nd, 2022, link below). That suggests that after 11.71 years, residents will supposably break-even on their tax obligations related to the project.
Yet, as many home buyers who compare rent vs. buy know, the cost of maintenance cannot be ignored. Yet, the cost of maintenance is IGNORED in the village calculation. Ignoring a perpetual, inflation dependent and unpredictable expense poses a great financial risk.
The most common method of estimating home maintenance costs is to assume a homeowner would spend between 1% and 4% of their home’s value each year (supporting article linked below). In order to estimate the market value of the proposed village hall we reviewed the market value of the land and the market value of the house.
From public records information, the closest lot to the proposed location of the new village hall that was sold in recent years is 21 Circle Drive. The house was purchased on July 20th, 2017, for a price of $995,000. Given that the house was uninhabitable and set for demolition, $995,000 was a fair market value estimate for the land at that time. While the proposed lot is smaller, 5 years have passed since the 21 Circle Drive transaction with steep increase in home values. We assume that the proposed lot for the new village hall has a market value of at least $900,000. With regards to the value of the house, given that the village is estimating $600,000 in renovation costs, if we assume the structure itself is worthless, it is safe to say that the market value of the house in its new proposed location should be at least $1,500,000.
Assuming a maintenance cost of 2% (a conservative estimate given the age of the house and its condition) of $1,500,000 (or $30,000 annually), using a similar analysis to the Board's Tax Impact Analysis, the breakeven period will increase from 11.71 years to 21.37 years (an 82% increase). Supporting calculation below:
$66,403.95 (Bond Debt Service) - $55,000.00 (Removal of rent expense) + $30,000 (maintenance) = $41,403.95 (annual increase for 10 years) ÷ 285 (number of households) = $145.28 (annual cost per household for 10 years)
In year 11, after the bond matures, the tax benefit for each household would be:
$66,403.95 (Bond Debt Service) - $30,000 (maintenance) = $36,403.95 (annual savings after 10 years) ÷ 285 (number of households) = $127.73 (annual saving per household after 10 years)
The information above suggests a breakeven period of:
$145.28 X 10 = $1,452.80 (cost per household for 10 years)
$1,452.80 ÷ $127.73 (annual saving per household after 10 years) = 11.37
11.37 (time to recoup the additional tax cost) + 10 (time for saving to begin) = 21.37 years
2% is on the lower bound of the maintenance cost estimate range. The table below shows the breakeven number of years to recoup the additional tax increase for varying maintenance cost budgets for the new proposed village hall:
From the article linked below, a homeowner should set aside closer to 4% of their home’s value every year if:
You have an older home (30+ years old)
Your home is located in an area that gets severe weather or that’s near water.
Your home is large in size (3,000+ square feet).
You or the previous owner haven’t kept up with regular maintenance tasks (like changing HVAC filters, cleaning gutters, or getting regular roof inspections)
Additional concerns:
The Richardson House is nearing end of average projected life span (per the latest Housing Inspection Report available to the public and linked below). Given the age of the house and its current condition, it is not unreasonable to assume higher maintenance costs
Similar to rent, maintenance costs are subject to the impact of inflation
Maintenance costs are perpetual costs that can be eliminated only with the sale of the building. Rent is a cost that can be adjusted if space requirements are reduced due to digitization of documents
In her statement during the February BOT meeting, Trustee O'Neil called for "a maintenance plan that is committed to for both the building and the grounds." Such plan has not been presented to the public
Current environment is favorable for renting as commercial space is available, yet building materials, labor and maintenance costs are skyrocketing with the current rate of inflation
The current estimated budget doesn't call for a generator for the proposed village hall. Given the sensitivity of the materials that are located in the village hall, in an area that is prone to power outages, a generator is a must. Generators are considered a large expense and carry relatively high maintenance costs
The Annual Cost of Maintaining a Home: How to Set Your Budget
Plandome Manor’s Press Release on the Bond Vote