Newton Rezoning and Newton's Private Golf Courses
[Updated: 08/15/21. Zoning Content as of 8/15/21.]
This is a continuation of the discussion begun in Newton Rezoning and Newton's Current Land Use and Taxation about the proposed rezoning of Newton's private golf courses from Residential Districts into Recreation Districts. This chapter on the golf courses is being placed near the end of the Table of Contents, because not everyone is interested in golf courses.
Newton's currently has 543 acres (0.85 sq. mi.) of private golf courses. This acreage is a relatively large number, representing half of all taxable nonresidential land in Newton. The private golf courses are currently all zoned in Single Residence Districts which would allow housing to be built on the golf course land. The proposed new ordinance Article 5: Public Use and Recreational Districts would rezone the private golf courses into standalone Recreational Districts, however, where almost no housing is allowed, other than one accessory caretaker's cottage per lot. This would reduce the land available for housing and it "might" also reduce Newton's property tax revenue from the golf courses, where the qualified "might" is explained below. Most importantly, In the case of a golf course sale, this change in zoning would give potential financial benefits, in the hundred million dollar range, to nonresidential golf course buyers.
Since all three courses are in Single Residence Districts, this means that if a private golf course was sold today, then it could be developed into housing - and its fair market value would reflect that development capability. If the golf course was rezoned into a new Recreational District before the sale, however, then housing could only be built according to the Recreational District's specifications, which, again, in the proposed new zoning ordinance, allows no residential housing other than one accessory caretaker's cottage per lot. This means the proposed rezoning of the private golf courses into Recreational District would reduce the land available for housing and should also reduce the market value assessments of the private golf courses, because they would no longer be eligible for housing development, unless they were rezoned back to Residential Districts at a later date.
This reduction in market value would help some potential golf course buyers because the golf course buyer and seller could then justify a far lower purchase price to the Massachusetts Attorney General, something they would have to do because the private golf courses are all nonprofits. In addition, the golf course rezoning, if permanent, would obviously discourage housing developers from buying the golf course land, pushing down the purchase price for buyers who do not want to use the land for housing.
It may be that the golf course rezoning is not planned to be permanent, however. Hypothetically, it would be possible to rezone the golf courses as recreational to justify a lower sale price to the Massachusetts Attorney General, but then rezone the golf courses back to residential after the sale. Hypothetically, this would be a very profitable (and ethically questionable) favor for the Newton government to do for a private party. This would also be a conflict of interest IF the rezoning caused the Newton Tax Assessor's office to also decrease the golf course valuations and the resulting resulting golf course property tax bills, as explained below.
Importantly, there are two types of "fair market values." If a golf course was to be sold, the non-profit seller would have to submit an appraisal to the Massachusetts Attorney General justifying that the sale price was fair market value. In addition, the Newton tax assessor's office has to supply an annual fair market value assessment in order to calculate the property taxes owed by the golf courses. Theoretically, these two fair market values should be the same value. That is NOT always the case, however, if the property use, such as a college campus or a golf course, is not part of an active market where frequent local sale transaction prices can be used as a empirical reference in estimating market value. Without these sale transaction prices, there is a lot of room for subjective differences of opinion on fair market value. This happened in the case of the Mt. Ida campus sale, for example, in which the appraised market value (and sale price), was only half of the Newton tax assessor's value.
As can be seen in Table 1, the private golf courses currently bring in the smallest property tax revenue/square mile of any taxable land use in Newton. This is because of two things. First - Newton's private golf course land is currently claimed as 61B recreational land which allows a temporary 75% property valuation reduction under M.G.L. 61B(Classification and Taxation of Recreational Land), while the land remains in recreational use. Secondly, even before the 75% reduction is applied, the golf course valuation itself is difficult, because, again, there is no active market of local golf course sales, meaning that the golf course can be undervalued.
Note that it is only the land, not the buildings, that get the temporary 75% valuation reduction - and not all Massachusetts private golf courses claim 61B status, although all three private golf courses in Newton claim this status. In addition, if the golf courses are sold to anyone other than "for a natural resource purpose by the city or town in which it is situated, by the commonwealth or by a nonprofit conservation organization," then Newton would be PAID 5 years of roll-back taxes (with interest) on the full 100% taxable valuation (rather than 25%). This would be an approximate lump sum property tax payment of 17 times the PAST 5 year average of the actual annual golf course property tax payment (5+0.75 interest)*(0.75/0.25). M.G.L. 61B, §8 (Disqualification of land; roll-back taxes).
It is difficult to estimate the market value of golf courses because, yet again, there are so few local golf course sales, making it an inactive market. Furthermore, most 61B golf courses are zoned in residential districts, meaning they are available for housing development, but the precise value of that development potential is also difficult to estimate. It would grossly over-estimate the value to simply value the golf course land using 100% of the measured single-family land values or even the measured developable residential land values, because it is unknown how many housing lots could be obtained from the golf course or how much it would cost to make them developable. Rezoning land from a Residential District to a Recreational District (where no housing is allowed) would unequivocally decrease the actual market value of the land, however, because there are fewer uses allowed on the land. It's unclear if this actual market value decrease would also decrease the tax assessor's market value.
Despite the precise valuation difficulties, there are useful questions that can be roughly answered by looking at the zoning and the tax assessed values of the Massachusetts population of 61B golf courses. NewtonRezoning.Org found 16 Massachusetts municipalities with 61B golf courses with land greater 10 acres. The zoning, land valuations, and other parameters of all 16 golf courses are shown in Table 2, and the relative valuations of the 14 golf courses zoned in Residential Districts are shown in Figure 1.
Of the 16 61B courses found, only two courses, Stow and Framingham, were zoned in Recreation Districts. The other 14 courses were all zoned almost totally in Residential Districts, with some small Commercial District portions. And of the two courses that were zoned in Recreation Districts, the assessed average single-family land values of those towns were extremely low, roughly 10% of Newton's expensive single-family land values of $2.5M/acre, as shown in Table 2.
Thus, it seems strange for Newton's Planning Department to even suggest rezoning such a large area of Newton's high value land into a Recreational District, where only a caretaker's cottage can be built on each lot. This strangeness is especially noticeable, given the Planning Department's rebranded mission of increasing the supply and diversity of Newton's residential housing supply with the rezoning.
Figure 1, shows the empirical measurement of the ratio of per acre golf course assessed value to single-family assessed value for the 14 61B golf courses in residential districts. From this figure, it appears that Newton is on the low side on its Tax Assessed valuations of 61B golf courses, compared to the other municipalities, although Newton's value is still in the normal range.
Ten of the golf course assessments in Figure 1 (Lowell, Salem, Peabody, Plymouth, Nantucket, Melrose, Arlington, Belmont, Needham, and Weston) fit a strong empirical pattern, in which golf course valuations have a base value of 2% of single-family land valuations, but then this percentage rises linearly with the relative per capita income of the golf course location. Two towns (Andover and Concord) have valuations that fall somewhat below this pattern, and two other towns (Newton and Lexington) have valuations that fall significantly below this pattern. It should be emphasized that Newton's golf course valuation at 2% of single-family land values is still in the normal valuation range, however. It is only the Lexington valuation that appears unusually low at 1.05% of single-family land values, especially given Lexington's high per capita income.
While Newton's current assessed golf course values of 2% of Single-Family Land values fall within the acceptable range, Figure 1 presents solid evidence that the values could be higher - at least up in the 3% range assessed by Concord and Andover. Figure 1 also presents even stronger evidence that the assessed values for Newton should not be lower, as Newton is already in the low range of municipal assessments of 61B golf courses, given Newton's high per capita income.
The Silent Role of the Private Golf Course Owners
The proposed rezoning of the golf courses appears in Section 5.1.2 of the 10/19/18 Draft Version of proposed zoning ordinance, where, again, the 10/19/18 draft was the the result of the Newton executive staff's rapid rewrite of Newton's entire zoning code in the summer of 2018. It is unknown what role, if any, the private golf course owners played in this rezoning proposal that would dramatically decrease the market value of their land.
It would be expected that the private golf course owners would protest loudly about the golf course rezoning, but instead they appear to be silent. Although the private golf courses are owned by nonprofits, the nonprofit directors have a fiduciary duty to protect the value of a nonprofit's assets. Since rezoning to a recreational district would devalue the golf courses' land assets, it's unclear why these directors aren't protesting. Even if there are no plans to sell an entire golf course, a devaluation would make it harder to borrow money or to sell off a land parcel to raise cash.
It's possible that Newton's private golf course owners are planning to use their more restrictive Recreation District rezoning to request a lower tax assessment value. Requesting a lower tax assessment would be in the Golf Course's financial interest and could possibly justify the Golf Course owner silence about the rezoning. If so, then this requested reduction in assessed value should be refused by the Newton government because Newton's golf courses are ALREADY being taxed at a fairly low rate compared to other municipalities - and there does not appear to be a single other instance in Massachusetts where 61B golf course land is located within high value residential land and zoned in a Recreational District.
It's also possible that Newton's private golf course owners are planning to use their more restrictive Recreational District rezoning to justify a lower golf course sale price to the Massachusetts Attorney General. While this would be in the financial interest of the gold course buyer, however, it would not be in the financial interest of the seller, meaning the current golf course owner.
Finally, if both the rezoning and golf course sale go through, the appraisal sent to the Attorney General would allow the public to get an approximate understanding of how much the Recreational District rezoning benefit was worth to all the private parties involved. This is because the appraisal would most certainly use recreational comparative sales prices. This private benefit could then be compared to the public cost of the rezoning effort, a public cost born by the Newton taxpayers. NewtonRezoning.org is currently working on estimating this public cost. We will also be writing the golf course non-profit entities to ask why they are not protesting the proposed devaluation of their land that would occur with a rezoning to a Recreational District.
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The Effect of Golf Course Rezoning on 40B
Some advocates in favor of rezoning the golf courses into Recreational Districts argue that the rezoning will decrease the denominator in the 40B safe harbor formula, meaning that fewer 40B projects could be built in Newton. This might be true, but this 40B formula change was NOT what was represented by the Mayor's staff to the City Council's Zoning and Planning Committee (ZAP) when the golf course rezoning was discussed.
On 1/28/19, there was a ZAP meeting on all the proposed Single Purposed Districts (Articles 5,6,7), including the proposed new Recreation Districts. The proposed golf course rezoning and its effect on the 40B formula were not part of the Planning Department PowerPoint presentation, which was limited to a picture of a golf course without any written details about the golf course rezoning's consequences on 40B or anything else. The golf course rezoning's effect on the 40B formula, however, was part of the four-minute discussion that the ZAP City Councilors held about the golf course rezoning after the presentation.
Specifically, a City Councilor asked Deputy Director of Planning and Development James Freas if the golf course rezoning would affect the 40B formula. Mr. Freas, who had given the presentation about the golf course rezoning, replied that he "hadn't looked into the calculation and would defer to the Law Department." Unfortunately, the Law Department was not actually at the meeting to give their opinion, but the Planning Department's Long Ranger Planner Rachel Nadkarni voiced the opinion that the rezoning would cause the Golf Course land to be counted as COMMERCIAL land in the 40B formula, meaning that the rezoning would NOT affect Newton's 40B safe harbor status. It was unclear from the tape if Ms. Nadkarni was quoting the Law Department or not. This exchange is summarized in the 1/28/19 ZAP Meeting report as follows:
- "It was asked if the residential golf course properties would have an impact on the 40B formula for the city if it were rezoned to this new district. Ms. Nadkarni said that under the new district it would be counted as commercial use which is calculated into the 40B calculation. Naming conventions are not what the state uses to determine what is residential, commercial or industrial."
It is suggested that when, or if, the golf course rezoning is discussed again at a later ZAP meeting, that the Law Department OFFICIAL WRITTEN OPINION of the 40B effect be a central part of the proposal, and that the discussion of the proposal take longer than four minutes. If golf course rezoning advocates are assuming that the rezoning will decrease 40B projects by changing the 40B formula, but Newton's Law Department is NOT planning on supporting that position, then the Law Department's position should be known by everyone when, or if, the golf course rezoning is discussed again.
[The 1/28/19 ZAP Meeting Audio contains the four-minute golf course rezoning discussion about three hours into the ZAP meeting, between the 2:53 mark and the 2:57 mark, with the golf course rezoning/40B formula discussion beginning at the 2:55 mark. The 1/28/19 ZAP Meeting Report summary of the Golf Course rezoning discussion, including the above quote, is on page 16 of the report. The rezoning in 2018 appears as item #518-18.]
Table Methodology and Data Checking
The 61B golf courses (with areas >10 acres) in Table 2 and Figure 1 were identified with the help of the Massachusetts Department of Revenue's "Parcel Count and Valuations by Use" report. It is possible that some 61B golf courses were missed with this approach, however, and NewtonRezoning.org may add to the data sample in the future, as well as possibly include some non-61B golf courses. In addition, there was an adjustment made to the Nantucket single-family land value measurement. All of the golf courses and the majority portion (by area) of single-family homes in Nantucket are zoned in "Limited Use Districts," that requires significant open space. NewtonRezoning.org only included the 1,300 single-family homes in the Limited Use Districts in the Nantucket single family land value measurement, and not the entire island.
It is clear that rezoning the golf courses from residential to recreational will decrease the actual market value of the golf course land, where actual market value means the most probable sale price of the golf courses for an immediate sale. We looked at the laws governing the tax assessor valuation of 61B land, which might possibly allow a different market value calculation that actual market value.