Ann Arbor's former Freeman School makes district more money leased than sold
The former Freeman School on Dixboro Lane in Superior Township has not been used by the Ann Arbor Public Schools since about 1984, but district officials say the property brings in more revenue by renting, as opposed to selling.
Signage outside the Ann Arbor Public Schools' former Freeman School on Dixboro Lane. The property has been home to Go Like the Wind Montessori for more than 25 years.
Courtesy photo
The contract is for three years with one two-year renewal option. The new rate is $300,862 with a 3 percent increase each year. The new lease will start on July 1, 2014, with the renewal option to expire on June 30, 2019, said AAPS Executive Director of Physical Properties Randy Trent.
Trent said the Montessori school wanted to renew its lease early because it had some renovations it would like to make to the classrooms.
"We've done the maintenance part (at the property). They've paid for the renovations there. They've been a very good tenant. The property has been kept in good condition by us and by them over the years," Trent said at the April 24 school board meeting, during the first reading of the contract agreement. The second reading occurred Wednesday, followed later by a vote.
Freeman School is one of two pieces of property the Ann Arbor Public Schools owns but does not use. The second is 165.33 acres of vacant land in Missaukee County near Cadillac.
The district is attempting to sell this second property, which has been described as a "duck hunter's paradise," with some flat and rolling acres and a low-lying swamp. The total parcel was appraised and Re/Max currently has it listed at $165,000.
In light of the district's recent financial problems — a $3.8 million current-year deficit and an $8.67 million budget deficit for 2013-14 — selling the Dixboro property, or Freeman School, has been brought up at a number of community forums on the upcoming budget.
Trent said on April 24, the district did have the property appraised a number of years ago and at that time it was valued at about $600,000. If AAPS sold the property, it would generate the $600,000 in revenue once; whereas currently, AAPS makes $600,000 — and growing with 3 percent increases — on the property every two years. In five years, AAPS makes about $1.5 million.
Trent added there are other factors with the property that would make it difficult to sell and market as a school, let alone use as a school. He said it has a 225-student capacity and would required significant renovations and construction in order to accommodate the 300 to 400 students recommended for instruction and utilization effectiveness.
He estimated these renovations would cost about $5 million and require a minimum of a two-year planning and construction period, assuming the funding would be available.
There are 40 acres at the site that could be beneficial to the district down the road, Trent said, adding for these reasons it is best to continue to lease the property.
Danielle Arndt covers K-12 education for AnnArbor.com. Follow her on Twitter @DanielleArndt or email her at daniellearndt@annarbor.com.
Comments
slave2work
Mon, May 13, 2013 : 4:59 p.m.
OOO back tothe good ole days when I went to school there. It was awesome!!!.. LOts of land and nature. we had 4 classrooms then.. and an office. But last I heard there is a trip of land between Tanglwood and the school property that is owned by someone. Which was the problem when Tanglewood was started, they wanted to make a road and could not . Superior Township is very protective of it's land, to subdivide it up might not be allowed.
DonBee
Tue, May 14, 2013 : 12:46 a.m.
slave2work - Superior Township is very good about allowing land with the right zoning to be plated and subdivided. Since the building is within Dixboro, I doubt the township would have any issues at all. Oak Drive and a couple of other roads dead end at the school property line as well making other options possible.
slave2work
Mon, May 13, 2013 : 4:59 p.m.
@strip not trip
Angry Moderate
Mon, May 13, 2013 : 2:21 p.m.
The numbers in this article make no sense at all. The value of a property to a real estate investor has more to do with the net present value of the future income it could earn than some lowball appraisal that is admittedly years out of date. If it's making $600k every 2 years, an investor would gladly pay much more than $600k for it. If it's only worth $600k, renters would not be willing to fork over $300k a year just to lease it. Additionally, selling the land would potentially put it back on the property tax rolls (not that AAPS cares about the city budget--it doesn't even care about its own budget). It would also relieve the district of any maintenance costs, administrative expenses, and exposure to liability in case something goes wrong there. Clearly something funny is going on here--how can the district simultaneously claim that the property is so great that it earns high rents, and that it's a dilapidated swamp land that nobody would want to buy?
Judy
Mon, May 13, 2013 : 2:08 p.m.
My question is why would, the Ann Arbor Public Schools owns 165.33 acres of vacant land in Missaukee County near Cadillac?
AMOC
Mon, May 13, 2013 : 2:24 p.m.
I believe it was a donation, made some years ago. The donation came with restrictions about using the property for ecological education / limiting development, but the district has not been using it for this purpose for at least the past 10-15 years.
AMOC
Mon, May 13, 2013 : 1:56 p.m.
There is no way in the world that the Freeman School site is worth only $600,000. Randy Trent's assertion of that valuation is either incompetence or an effort to steer the BoE decision in the direction some members of the administration prefer. $600k might be a reasonable estimate of the taxable value of the school building (half of market value) if Go Like the Wind or another for-profit organization were to buy it from AAPS and continue to operate a school on that site. However, if you take the land-only value of the homes along Dixboro Lane and the adjoining Tanglewood subdivision and apply that value / acre to the 40 acre site, you'd get a value a lot closer to $20,000,000 than $600,000. Freeman may be too small a building for AAPS to want to operate it as an elementary school, but even if the Superior Twp Zoning Board won't consider re-zoning the site for residential development, there are several churches, child care centers and charter schools desperate for appropriate classroom space in the area. Cutting off consideration of the possibility of a sale to renew a lease at least a year early looks like favoritism on the part of AAPS staff. Claiming an artificially low value and not discounting the leas income by the cost of maintenance work performed as part of the lease arouses my suspicion at least as much as the early renewal.
Charles Curtis
Mon, May 13, 2013 : 12:49 p.m.
AAPS might be making money on the property, but the real question is why is the school system a property manager? I thought the charter was to teach children, not be a landlord. I have the same issue with UM and the buildings they buy, and then rent out. Why is our tax money being used for buying property that only gets rented out to private groups/companies? Couple that with AAPS cannot tell you what is spent on specific things. Everthing they tell you is big lump sum catagories. Ask for a breakdown and they have no idea. So how the hell do they make a budget? Just strictly based on a 3% increase over whatever they spent the previous year with no idea of where specific money goes? Garbage in and garbage out.
A2anon
Mon, May 13, 2013 : 12:29 p.m.
I bet if the AAPS decided to sell this property, the same people (who criticize EVERYTHING they do) would be all over these boards with what a terrible financial decision that is, given how much rent they can get. It's just knee-jerk crticism no matter what.
DonBee
Mon, May 13, 2013 : 1:52 p.m.
A2anon - 1) It costs maintenance money to maintain a building that is leased - cost unstated - but I see a truck there from AAPS anytime I go down the lane 2) It was valued at the bottom of the market with significant restrictions on what the land could be sold for 3) The value that Mr. Trent is putting on the land does not match what a couple of real estate people tell me they could get for it in weeks 4) The district is rushing a new 5 year lease through right now, Wednesday it will be approved at the board meeting with a second reading...at the latest - the first reading for the new lease was at the 24 April meeting. This lease is to extend one that ends in mid-2014. This is a pure and simple get this issue off the table by the administration before the public realizes it.
DJBudSonic
Mon, May 13, 2013 : 12:45 p.m.
I don't thinks it is all knee-jerking here. One of the problems is not having access to all the facts, another is that there has been a series of poor financial decisions made by BOE AAPS recently, so every move is suspect.
DonBee
Mon, May 13, 2013 : 12:23 p.m.
The real issue is that AAPS is worried about the building being used as a charter. SO...they lowball the value and claim that it has not potential. Lots in that area of 1 acre in size are selling for upwards of $100,000. 40 acres - that is $4 million in raw land value. The appraisal was done a couple of years ago at the bottom of the market. The land abuts the Tanglewood subdivision, one of the nicest subdivisions in the North East corner of the district, houses in Tanglewood sell for from the low $400,000s up to close to $1 million based on real estate ads. I have walked the land in question, the "duck hunter's paradise" is a statement I would challenge. Go walk it yourself Mr. Trent, there might be a low area, but most of it is used for playground on a daily basis. As Mr. Ranzini says real question is how much of the $300,000 a year does AAPS spend on Maintenance? This is a get out in front of something and stop it. The April 24th board meeting saw the first reading of a new 5 year lease to Go Like the Wind, a lease that is not due to be renewed until July of 2014. Now why would the district want to do that lease so early in a rising market? Maybe because they don't want to see the property on the market? Maybe because they fear that the building would be used for a charter school. 40 homes at $500,000 each is $20,000,000 added to the tax base. Connecting this land to the existing Tanglewood Drive would be easy, should the developer want to do so, take a look at the county plat book, or better yet take a walk out there. There are other unused properties in Ann Arbor as DJBudSonic. If they were to consolidate AATech and Roberto Clemente in the current AATech building, that would give them another property to sell, again with a building suitable for a charter school, so don't expect them to be very interested here either.
PhillyCheeseSteak
Mon, May 13, 2013 : 3:12 p.m.
I thought the "duck hunters paradise" property up north was sold by AAPS in the past year? With dismal state of the current AAPS budget, I'm rather surprised that the administration and BOE are not looking at selling un-used assets. I would prefer that AAPS sell these un-used properties than cut teachers and programs.
AMOC
Mon, May 13, 2013 : 1:35 p.m.
DonBee - The "duck hunter's paradise" description is about a different parcel of land, one AAPS does actually want to sell. I think the 2 very short paragraphs that describe that other parcel stating "This is one of two pieces of property the Ann Arbor Public Schools owns but does not use. The second is 165.33 acres of vacant land in Missaukee County near Cadillac." are intended to be a distraction, or maybe to set a district-preferred context for the early lease renewal of Freeman School.
Brad
Mon, May 13, 2013 : 1:16 p.m.
How about they consolidate at RM and sell off the Stone School building? I think a charter there might be a better fit with the neighborhood.
DJBudSonic
Mon, May 13, 2013 : 11:48 a.m.
These are not the only two properties they own that are going unused. County maps show another property near Ellsworth and Stone School roads, behind the just approved townhouse project as belonging to AAPS. I would like to know the real terms of that lease, if the current tenant is doing major renovations are they on a triple net lease? Lastly, I cannot help but think that every time there is a news story put of the blue like this, it is really a PR attempt by the BOE to pave the way for some action. Are they softening us up for redistricting, when they will close the underperforming buildings and lease them to charter schools? Just thinking out loud.
DJBudSonic
Mon, May 13, 2013 : 12:42 p.m.
Yes the eWashtenaw map is the one I saw it on when reviewing the site plan for the just approved condos. It shows as a separate lot, but is it in use as part of the Bryant complex? My mistake.
alarictoo
Mon, May 13, 2013 : 12:36 p.m.
@DJ - The land near Ellsworth and Stone School that you refer to would likely be part of the property that Bryant Elementary was developed on. Check it out viaGoogle Maps or the eWashtenaw maps.
Soothslayer
Mon, May 13, 2013 : noon
They should close, consolidate or modify all underperforming schools and charter schools aren't the answer as they can be just as terrible also. The new WiHi consortium IB school program looks very promising.
thecompound
Mon, May 13, 2013 : 11:55 a.m.
Or rebuttals towards criticism or suggestions? I get what you're saying though.
Soothslayer
Mon, May 13, 2013 : 11:40 a.m.
As Stephen asked what is the total operating and expense costs AAPS attributes for this property and estimated annual property tax if it were sold? Without all the numbers it's hard to determine if leasing this space is a great deal for anyone but the private school. Please find this out Danielle. Bob does raise a good point. The property is held by a non-taxable authority (AAPS) but it is used for a private school, so in effect the taxpayers are subsidizing the private school and those that own it. This should be taken into account in the figures.
Angry Moderate
Mon, May 13, 2013 : 8:58 p.m.
Thank you. I didn't realize it was for-profit, I thought it was a religious school.
AMOC
Mon, May 13, 2013 : 2:54 p.m.
Angry Moderate - Non-profit schools registered as such with the IRS are tax exempt. Unless they've re-organized since my older son was there, Go Like The Wind is a for-profit private school. GLTW administrators were actively soliciting donations from parents and wanted to set up a non-profit PTO/PTA in order to let parents and other donors get tax deductions for their donations. Unfortunately for them. IRS rules prohibit non-profit 501(c)3's from benefiting only private schools which are not themselves non-profit or, in the case of religious schools, run by an overseeing non-profit religious organization. So they still solict donations, but those donations, and the tuition, are not tax deductible by the donors.
Angry Moderate
Mon, May 13, 2013 : 2:38 p.m.
Aren't private, non-profit schools exempt from property taxes too? The bigger problem is U of M leasing North Campus to private corporations.
Basic Bob
Mon, May 13, 2013 : 11:01 a.m.
AAPS is keeping the property public and untaxed, even though a private school is operating on it. Not only would they make money selling it, but all branches of government would then be able to collect tax on it. Their assertion that it can't be used as a school is contradicted by its current occupants, who have signed a contract to use it as a school for the next 6 years.
Stephen Lange Ranzini
Mon, May 13, 2013 : 10:22 a.m.
"If AAPS sold the property, it would generate the $600,000 in revenue once; whereas currently, AAPS makes $600,000 — and growing with 3 percent increases — on the property every two years. In five years, AAPS makes about $1.5 million." This statement is false. First of all, what the development potential of 40 acres northeast of Ann Arbor is, is debatable and the market would have improved since the last time the property was appraised. Secondly, the AAPS pays for all maintenance on the property under the current lease. Third, the rental rate is $300,000 a year plus inflation escalators, not $600,000 as stated. The real question here is what is the annual maintenance cost, but because AAPS does not have a budget that can give line by line data broken out by each of its 31 schools and other properties, I doubt they even have accurate data to know.
Stephen Lange Ranzini
Mon, May 13, 2013 : 1:03 p.m.
@Resident A2: You are correct. I think I misread that part of the sentence, thinking they were talking in terms of an annual lease revenue, when in fact they were talking in terms of the two year minimum lease. At any rate, the appraisal is way off, the expenses are not subtracted and the rest of my observations are valid.
Resident A2
Mon, May 13, 2013 : 12:44 p.m.
Stephen, the article states "whereas currently, AAPS makes $600,000 — and growing with 3 percent increases — on the property every two years", which is $300,000 a year.
timjbd
Mon, May 13, 2013 : 10:53 a.m.
Still, better to keep it. The last thing A2 needs is another McMansion farm.