Advancing the Dialogue on Future Elementary Enrollment: Request for Extension

Ladies and Gentlemen of the Board,

As promised, here is

I. Our summary and follow up from our presentation last week, followed by our conclusions and recommendations. 

II. A request for a response on the record, 

III. An update on the petition, and
IV. Our plans for disseminating this info to the wider community.

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I. “Whither KLSD” – Summary and Follow-up

Attached is a copy of the presentation we gave to several Trustees last Monday.  As we believe you may all know by now, here are the key findings: 

·         General consensus that the Grip enrollment forecast, as acknowledged by Dr. Grip himself on page 12 of his study, lacks adequate historical data to be reliable.

·         Home sales shown to correlate strongly with enrollment[1]; several regression models explored.

·         Understanding future home sales acknowledged to be critical in understanding future enrollment

·         Housing and home sales markets are extremely volatile and difficult to forecast. Few, if any, get it right.

As a result, we suggested it is not the province of the Board of a school system to be speculating as to future home sales without a) careful research and b) factoring in a wide margin of error to allow for volatility.

To better understand – and illustrate - what forces could be at work to influence future homes sales and as a result, enrollment, we offer the following analysis as a starting point.  

Supply – Potential “Empty Nesters” – about 435 homes in pent-up supply? (see accompanying table).   As per table, there are 5,681 owner-occupied units in the KLSD. 

-       Method A – About 7% of the population, or 1,165 people, are over age 60.   We have no info at present as to how many are living alone or with a partner (perhaps Dr. Grip could advise the Task Force as to how to drill down on the Census, and we could figure this out?)  Assuming for now a .75 handicap (ie, half have a mate, half don’t), we get almost 900 homes occupied by people over 60.   What % would like to sell over the next few years – half?  That would yield about 435 homes.

-      Method B – assumes a 4% annual turnover in the housing stock (ie, if 100% of stock turns over on average every 25 years, then 4% turns over every year on average).  Four percent of 5,681 owner occupied units would be 227 homes a year.   As we know, during the 2007-13 period, average annual home sales were only 165, or 62 below the average of 227 per year.  Multiply that by 7 years – you get 436 EN homes in  “pent up” supply.

Interestingly, both methods seem to imply we could have as much as 435 homes for pent up supply.   We presume we don’t need to do the math here on what that could do to elementary enrollment (?).  This is of course would occur in addition to the “normal” annual turnover...

It is also important to remember that once momentum builds in the housing market, it can accelerate... as we know.

Demand – Echo boomers  - cresting onto age of migration to suburbs?

As per Chris Sommer’s groundwork, there is evidence to suggest that the affluent portion of the NY echoboomer population is approaching the age (35) where they are more likely to have small children and enough resources to consider moving to the suburbs.  Further, given that there are about 530,000 children under age 5 in New York, and that we only need, perhaps, 150 per year to move here to supplement birth rates, low fertility rates don’t seem to be anywhere near as an important factor as understanding migration.  150/530K is less than .03%!  (to be clear, that is not 3%; that is 3 hundredths of one percent).

Conclusion/Recommendation
A. The Board needs to direct the District and the SCTF to do more, careful research.  There is inadequate/no research thus far on home sales outlook, acknowledged to be a key factor in enrollment.
 
Given the importance of this historic decision, we believe it is of vital importance for the Board, the District and the Task Force to have a better-researched understanding of the critical factors shaping supply and demand for home.

The best way to get some data about what EN’s and EB’s (empty nesters and echoboomers) are thinking is to ask them.   There are professional firms who do surveys.  We could hire one.  Yes, this could cost maybe $25,000, but that is a drop in the bucket compared to the believed $1.7 mm savings that would accrue.  

Considering what this is at stake, including the high cost of failure, this is not only reasonable but de rigeur.  It will also lay to rest a lot of the subjective “hunches” that seem to be driving important decisions, and which are viewed by many to be arbitrary. 

B.  Given the volatility, a wider margin of error needs to be factored in for home sales.
Although we are still collecting data, it would appear that the number of homes on the market is rising quickly.  In November we counted 128; in December we counted 169.  With this as a backdrop, we are more concerned than ever that for the Board to be effectively banking on enrollment declining next year, using a demographic study that is now known to be flawed, is ill-conceived at best and arguably reckless at worst.

Even in the scenario where enrollment does drop by 70 children next year, the schematic in the EIS clearly shows that “goal” class sizes will be violated for 10 different classes.  It’s hard to see how this can be considered prudent.

In financial terms, this would be the equivalent of shorting the market with an uncovered position.

We are a school system, not a hedge fund; we respectfully submit that the Board needs to defer this decision until more research can be done and a decision can be made with an adequately wide margin of error.

The children - and the entire community – deserve nothing less.

II. Request for Response on the Record

We hereby request a response from the Board on the Record to our Recommendations.  Specifically, will the Board be calling for more research to be done on the forces affecting the KLSD home sales outlook, acknowledged to be a key factor in enrollment? If not, why not?

III. Update on the Petition

At this writing, we have over 850 signatures and could soon be reaching 1,000.   Bearing in mind that voter turnout for the last school budget vote was 1926 votes, we view that to be a political mandate for the Board to suspend the current timeline in order to properly address all relevant issues.

IV.   Information Sharing

As noted previously, in the interest of widening the circle so that all may be informed, we will be sharing Sections I-III of this letter shortly with the community.   As a courtesy, we wanted to let you know in advance, and to assure you we will do so as respectfully as possible.  Thank you in advance for respecting our goal to support the best possible understanding of this weighty decision.

Sincerely yours, in the quest for the best information for the best decision, for the highest good,

Satya and Claire

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[1] R2 of .68

Claire Alrich holds a BA in Economics and Political Science from Yale University and a CFA. Claire has worked as a credit analyst on Wall Street for 30 years.

Satya Nitta holds a Ph. D in Chemical Engineering from Rensselaer Polytechnic Institute.  He is a Master Inventor at IBM's TJ Watson Research Center.  Nitta has 15 years of experience in Nanoelectronics inventing and developing future chip technologies, with a recent focus on applications of Cognitive Computing.