, Gloucester, MA

September 24, 2013

Letter: Rockport lease deals still a bad deal for town

Gloucester Daily Times

---- — To the editor:

This is a version of a letter I have sent to Rockport Town Administrator Linda Sanders:

You clarified in your initial e-mail to me (in response to my Sept. 4 letter to the Times) my “misinformation” and “erroneous assumptions” did not relate to any of my numeric or town-obligation observations, but rather to statements I made that you felt reflected poorly on the competence or plans of the current Board of Selectmen regarding the leases at Long Beach.

As I said at length in my prior e-mail, I am not and was not questioning their competence or abilities; and I am pleased to have this opportunity to make that plain both to the selectmen and the public.

After listening to the Board of Selectmen — at last week’s Finance Committee meeting and Saturday’s selectmen’s meeting — I have no reason to believe that they are any less diligent or committed than were their predecessors 10 years ago.

My point is only that, by the nature of any town’s government, if the majority do not make their feelings known, any group of elected decision makers can be (I do not mean “will be”) influenced by a highly organized, well-funded, politically astute, and vocal special interest group such as the Long Beach renters, who are understandably arguing forcefully to retain the current special benefits they enjoy.

The Long Beach issue provides a very valuable local civics lesson and illustrates the obligations of the electorate. This effect is not limited to the town level; look at the effects that special interests have had on our federal budget, for example.

In that regard I fault myself, for I was unaware of this issue in 2003 when the current leases were put into place. In fact, my laxity is partly responsible for the political problem that faces the current BOS, a problem that is the result of a history of vastly — by a factor of 10 — underpriced rents at Long Beach.

To illustrate that I am not exaggerating, consider only the fact that some properties are subleased for $3,000 a week from mid-June to mid- September and at $1,500 at other times. That could yield the renter an income of over $50,000 a year if he or she decided to rent it out for the full season.

Out of that, the renter pays the town but $2,500 in rent and some $7,700 in taxes, for a potential profit of about $40,000 a year. As the selectmen noted, clearly most of that income is thanks to the town that owns the land. Ask yourself, what would that cabin rent for were it located in Dogtown?

The same implications can be drawn from the fact that three cabins recently sold for in excess of $700,000 each. Lest the inclusion of taxes in this analysis generate any misunderstanding, I fully agree with the “Considerations” Report when it clearly states that the amount of real estate taxes paid by the renters is not relevant in determining the “fair market value (of the rent).”)

I was distressed when I heard Selectwoman Lucas suggest that 1 percent or 1.5 percent of the fair market value of the land would constitute a fair rent. She did not articulate any basis for this economic judgment, and all the material you have gathered and set out in your report, together with the data on recent sales and sublease rental rates, shows the utter lack of realism of that suggestion.

I suspect her suggestion will please the renters, for it will allow them to continue to occupy, sublease, and even effectively sell town land without paying the town anywhere near a fair market rent.

While I agree that doing so would continue a 110-year tradition, I do not feel that is an adequate justification for burdening the majority of Rockport taxpayers with — as the FinCom members clearly stated a number of times during their meeting — a “subsidy” for the benefit of the renters. Call it what you want, but, as the “Considerations” Report makes plain, current rents are so far below fair market value that even tripling them would fail to bring them near fair market value.

I understand your hesitancy about endorsing the 5 percent of land value as the fair market rent.

As you note, the appraiser cautioned you only that one would need to adjust that normal 5 percent figure to account for the fact the properties are leased for only six months per year. Yet, the assessed value of the land already accounts for that fact, being based on current market sales of properties with that restriction; hence, no further adjustment is required or warranted.

In my analyses, I used an 80 percent adjustment to account for the winter period, in effect using only a 4 percent factor on an already adjust land value. Even so, current rents are only one-tenth of indicated market value.