[UPDATED below with comments from Mr. Rattner.] The Martha's Vineyard Times has a dispatch about a three-way real estate deal involving the money manager, former Obama administration official, and New York pension-fund-scandal-figure Steven Rattner, his Martha's Vineyard farmer neighbor, and the Martha's Vineyard Land Bank, which is funded by a tax on the island's real estate transactions.
In the deal, the Land Bank bought 13 acres in West Tisbury and an agricultural preservation restriction on an additional 25 acres for $3,450,000. The Land Bank borrowed the money from Mr. Rattner and will repay it over nine years "at terms and rates comparable to those now paid by municipalities of between one and two percent," the Times reports.
A reader comment on the Martha's Vineyard Times site, upvoted by four readers, has about the same reaction I did:
We are constantly hearing about the high taxes and lack of housing here on the Vineyard. When you remove buildable property from the usage and then require the rest of us to pick that revenue loss that will result from this process you wonder why we have less affordable houses and jobs. Mr. Rattner said he wanted to do his part to help save the farm."We've spent a fair amount of time up there and it's an incredibly beautiful part of the Island," Mr. Rattner said Thursday. "I love the fact it's still a family farm and I wanted to do my little part in trying to keep it that way."
The loan is to be paid back over nine years, Mr. Lengyel said. Mr. Rattner owns the neighboring Crow Hollow Farm.Boy talk about having your cake and eating it too. He now has property next to his that will not be developed and will make his property worth more and he get ALL his money back with interest.In my opinion this was not for the community but for Mr. Rattner and the sooner that we / you might want to consider the Vineyard will only be inhabited by those with the wealth to do so, by stopping someone else from enjoying and having the same right to enjoy this land is wrong.
In other words, if Mr. Rattner wanted to buy the land from his neighbor, or buy a conservation restriction on it from his neighbor, that would be one thing. But instead he's using a tax-funded quasi-governmental body to do it, and getting his money back with interest. The effect is to make it harder for those who want to buy houses on Martha's Vineyard to do so, by constricting the supply of new homes. And it gets the Land Bank to spend the funds on preserving this site rather than on some other site on the island that is farther away from land Mr. Rattner owns.
Mr. Rattner did not comment to the Martha's Vineyard Times, but in an interview with the Vineyard Gazette (not easily accessible online, and I've already recycled my print copy), his main comment was to praise the guy who runs the land bank.
Disclosure: The publisher that brought out Mr. Rattner's book on the auto bailout is publishing my next book. A member of my family owns some land in the same Martha's Vineyard town where this deal is happening, and I usually spend some time there in the summer.
Update: Mr. Rattner emails to say, in essence, that instead of being criticized for the deal, he should be thanked, because he's giving up the potential to earn a higher return on this money somewhere else, and the public will benefit by getting access to the property. In his words:
- I didn't approach the Land Bank; they approached me.
- They have apparently been talking to the farm owner for something like 20 years about conserving that property because of its prominence on the farm.
- Yes, I could have bought the land myself but I wanted it open to the public, even though having it remain private would probably have been better for me, particularly if I am now going to get a lot of [expletive deleted] for trying to do something for the community.
- Yes, I am going to be paid back for my loan including interest at 1 to 2 percent. But you do the math, using whatever you think is a reasonable cost of capital for me. I may not be Warren Buffett but I can assure you that I earn a good bit more than 1 to 2 percent on my investments.
He went on: "I was originally approached by another neighbor and by the Vineyard Conservation Society with the idea of providing financing, and then ended up in direct contact with [the Land Bank executive] Lengyel. The note has not yet been executed. They have done many financings — I assume that I am an unsecured creditor like the other lenders. BTW, it sounds like the MV Times reader is also objecting to the whole concept of the Land Bank and preserving land on the Vineyard. Perhaps you'd like to offer your readers your opinion of that?"
Since he asked, I'd say that I don't have a problem with parks.
The New York Sun originally opposed the creation of Central Park, and on the 100th anniversary of the park, we did an editorial saying that original opposition had been a mistake. As a general principle of public finance I oppose creating dedicated special-purpose revenue streams, so if I'd had a vote on creating a special tax with proceeds dedicated to property acquisition and preservation, I'd have opposed it. Why privilege that over other worthy government functions such as policing, education, or road maintenance? Better to let all the priorities be weighed and allocated from the same pool of funds.
I use some of the Land Bank properties on Martha's Vineyard such as Ice House Pond and Great Rock Bight and am glad they are available for my use, though I also use properties that are owned by private groups, like the Trustees of the Reservation, that are not funded by tax dollars, and properties that are funded by general (non-land-bank) tax or fee dollars, such as Lambert's Cove Beach or Seth's Pond.
It doesn't seem to me that the Land Bank quasi-public tax-funded way of preserving land that created Ice House Pond or Great Rock Bight is necessarily better than these two alternatives, or superior to the alternative of private land ownership, either by individuals or by voluntary associations. But when the voters did authorize the Land Bank and the tax to fund it, I'm not sure they contemplated that the bank would be borrowing millions of dollars from individual property owners for the purpose of preventing building on adjoining properties.