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 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.

[Continued in top right column, under images]