The Nittany Valley Environmental Coalition (NVEC) is preparing to file a lawsuit in January, seeking court review of Penn State’s nonprofit and public/private status, property tax exemptions, and fiduciary obligations regarding Commonwealth natural resources. The suit will be filed if Penn State’s leadership fails to negotiate a land swap with student housing developers before a 2012 sales contract for Whitehall Road parcels closes later this month or early next year.
NVEC remains willing to negotiate.
The Nittany Valley Water Coalition (NVWC, which is in the process of incorporating as the non-profit Nittany Valley Environmental Coalition) formed in late 2015 to challenge the Ferguson Township Board of Supervisors approval of the land development plan under the provisions of the Pennsylvania Municipalities Planning Code. Although Centre County Court of Common Pleas Judge Jonathan Grine vacated the supervisors’ approval in a July 2016 ruling on substantive grounds, remanding the case for further township review, Grine’s decision was overturned on a procedural technicality by the Commonwealth Court in May 2017 and in November 2017, the Supreme Court declined to hear an appeal brought by the water coalition.
At stake is the safety and quality of the State College area’s public drinking water supply; the community’s two main wellfields are located nearby and downslope of the proposed student housing development, in a rural agricultural area with fragile karst geology, many fractures and sinkholes, and thin soils unsuitable for filtering runoff from intensive development.
For brief background, the water coalition proposed alternative PSU-owned land to Toll Brothers during the Summer 2017 citizen occupation of the Whitehall Road site. Penn State officials raised no objections to the alternatives assessment; Toll Brothers looked at the sites and selected one parcel along West College Avenue near Blue Course Drive for feasibility studies. On Oct. 31, Toll Brothers submitted a “letter of intent” to Penn State, indicating an interest in moving their escrowed deposit for the Whitehall Road site to a purchase of the alternative site on W. College.
NVWC subsequently proposed a mediation to work out the land swap details among Toll Brothers, Ferguson Township (involved in zoning and permitting the alternative site), Penn State administrators, and water coalition representatives. To date, Penn State Vice President for Finance and Business David Gray has refused to participate in mediation, and refused to consider Toll Brothers’ offer on the alternative site.
The new lawsuit will be a constitutional challenge, not a regulatory challenge under the Municipalities Planning Code, and will ask the courts to rule that Penn State is a Commonwealth trustee with fiduciary obligations to protect public resources under the state Environmental Rights Amendment (Article 1, Section 27 of the Pennsylvania Constitution), which was ratified by a four-to-one margin by state voters in May 1971, in response to centuries of environmental degradation and costly mitigation of industrial deforestation, unregulated hunting and mining pollution.
NVEC will ask the courts to apply the state Supreme Court’s June 20, 2017 ruling in Pennsylvania Environmental Defense Foundation v. Commonwealth to Penn State’s actions. PEDF v. Commonwealth found that the Environmental Rights Amendment (“ERA”) created an enforceable trust imposing a fiduciary duty on all Commonwealth state and local agencies to protect public natural resources.
In the alternative, if the courts find that Penn State is not a state agency with fiduciary obligations under the ERA, but that it has, through its real estate transaction history and other actions – transformed itself from a public, land grant institution into a fully private, non-governmental corporation, the coalition will ask the courts to strip Penn State of its tax exemptions and other public subsidies.
“We’ll be striking at the root of Penn State’s hybrid legal status that has allowed it to become a tax-exempt, publicly-subsidized, privately-governed, for-profit corporation,” said NVEC President Kelli Hoover.
The case will further give the courts an opportunity to apply the PEDF v. Commonwealth decision to another series of court decisions about Penn State’s taxability under Article VIII, Section 2 of the Pennsylvania Constitution related to tax exemptions for governmental and nonprofit entities and related legislation, including the 1997 Institutions of Purely Public Charity Act.
Two key case are often referred to as “Penn State I” and “Penn State II.”
In Penn State v. County of Centre, (1992) (“Penn State I”), the Supreme Court discussed, but didn’t decide, whether Penn State still qualified as an agency of the Commonwealth. The issue in that appeal was whether the doctrine of issue preclusion prevented the trial court from determining PSU’s status, since, in 1939, the Centre County court had ruled that Penn State was a state agency. Remanding the case for further county court review, the Supreme Court agreed with the appellants, Centre County Commissioners, that “significant changes in the factual circumstances of the University’s relationship with the Commonwealth and in the property’s uses have occurred in the last 50 years.”
In Penn State v. Derry Township School District and the County of Dauphin (1999) (“Penn State II”), the Supreme Court ruled that Penn State no longer qualified for property tax exemption as “an instrumentality of the state,” because the legislature no longer controlled governance of the institution through a majority of the Board of Trustees and state and federal support were no longer a majority of funding (outweighed by private tuition payments). The Supreme Court then remanded the case back to the Dauphin County Court of Common Pleas to decide whether Penn State qualified for local real estate tax immunity as a “purely public charity” under Article VIII, Section 2(a)(v) of the Pennsylvania Constitution and the five-part analysis test established by the Supreme Court in 1985 through Hospital Utilization Project v. Commonwealth, often referred to as the “HUP” test.
After that review, the Dauphin County court in 2000 ruled that neither Penn State University nor the Milton S. Hershey Medical Center qualify as purely public charities, because neither operate “entirely free from private profit motive.” At this point in our research, we believe that Penn State entered into “payment in lieu of taxes” or “PILOT” agreements with counties, municipalities and school districts across the state, paying taxes on only a fraction of the value of University land and buildings.
As cited in another property tax exemption case in 2013 (City of Philadelphia v. Cumberland County Board of Assessment Appeal), the Supreme Court’s rulings in Penn State I and Penn State II confirmed that the University’s status is “not etched in stone,” but rather subject to change in response to changed factual circumstances.
“Penn State has spent many decades carefully constructing a mixed status for the institution to internalize benefits and externalize costs, and to evade public accountability and compliance with laws that apply to public or nonprofit entities,” said Hoover. “We believe it’s vulnerable because of that complexity, which has created too many contradictions to be sustained for much longer in an era of increasing public interest in protection of critical natural resources and tightening public budgets.”
“We are thinking of our lawsuit as ‘Penn State III,’” explained Hoover. “It challenges Penn State’s property tax exemptions and PILOT agreements, through the lens of the University’s record of buying ecologically-sensitive farmland at artificially low prices (or accepting land donations), holding the land as tax-exempt while upzoning to increase its sales value, and then selling it for massive profit and risky development, exemplified by the Whitehall Road land deal.”
“For us, this suit attacks one of Penn State’s core weaknesses,” said Katherine Watt, NVEC Vice-President. “As a quasi-public, quasi-private corporation, it evades both public accountability through public elections of trustees, transparent, due-process decision procedures, and compliance with state Right to Know and ethics laws, and private corporate accountability through share issues, purchase and sale of shares by shareholders, and shareholder elections of governing directors.”
The case could have wide implications across the state for cash-strapped counties, municipalities and school districts, and – if the court rules Penn State is a fully private corporation subject to standard corporate property taxation – this could spur the creation of local trust funds from the tax revenues collected, to be used for proactive natural resource protection and for restoration projects after environmental damage has occurred.
Penn State’s opaque, profit-driven real estate transactions may also have federal implications under the 14th Amendment, if the university is found to be an agency acting under color of state law to deprive Pennsylvania citizens of enforceable environmental rights under Article I, Section 27 and the related local Community Bill of Rights adopted by State College citizens in 2011 and Ferguson Township voters in 2012, and/or deny other private property owners across the state the same access to “PILOT” agreements reducing their tax burdens to a small fraction of what they now pay.
Repost of David Hughes’ June 22, 2017 letter to Penn State President Eric Barron and the Board of Trustees.
In it, Hughes summarized the scientific basis for the water coalition’s opposition to development on the fragile karst recharge area above the Harter and Thomas wellfields.
This version, lightly edited for clarity and formatted as a PDF, also includes a couple of update footnotes and a list of additional studies not cited by Hughes, but supporting the same position.
Press release from Nittany Valley Water Coalition:
36 days later: The silence is deafening
On October 31, developer Toll Brothers submitted a Letter of Intent to Penn State expressing their desire to respect the State College community and build their student housing development on a less environmentally sensitive parcel of land on West College Avenue instead of Whitehall Road.
The response from Penn State – silence.
For almost three years the community has been asking Penn State not to sell this farmland along Whitehall Road near Blue Course Drive for development. The Nittany Valley Water Coalition (NVWC) and many others in the community object to a large student development in this location because of the risks to the local water supply and to the high quality of Slab Cabin Run, which is downslope from the development site.
Within the last two weeks, NVWC and other interested parties, through a professional mediator, requested that Penn State, Toll Brothers and Ferguson Township come to the table to negotiate a solution that would work for all parties.
Penn State alone declined because they “do not discuss real estate deals.”
NVWC and the other parties were willing to help expedite a land swap and discuss a more sustainable use for the Whitehall Road parcel. Penn State declared in writing to NVWC in early October that Penn State had no plans for the West College Avenue property, and Penn State led Toll Brothers to believe they would seriously consider an offer on this property.
But in reality Penn State was just buying time until the sale of the Whitehall Road parcel closes on Dec. 27.
For 127 days, before being evicted by Penn State, community members maintained a 24-hour occupation of the Whitehall Road site to object to a construction project that has a very real chance of affecting our water supply, as well as nearby century farms that are already experiencing extreme runoff and flooding during heavy rainfall.
Why has Penn State refused to negotiate?
Why won’t they make a complete and fact-based statement?
With the sale on Whitehall Road scheduled to close before the end of the year, it is clear that PSU intends to force Toll Brothers to complete a contract they entered into 5 years ago and no longer want due to very different available student housing circumstances and public opposition, while at the same time a better option is available.
The sound of silence is deafening from Old Main.
Thanksgiving: It is time for PSU to give to its neighbors
Penn State University sits within the community and is reliant upon the community. However, it is fair to say that it has less than ideal town-gown relationships.
For almost three years the community has asked Penn State not to sell farmland along Whitehall Road near Blue Course Drive for development.
The Nittany Valley Water Coalition (NVWC) objects to a large student development in this location because of the risks to the local water supply and the quality of Slab Cabin Run, which is downslope from the development site.
A conservation easement is being placed on other land in this area, and Penn State should preserve this parcel for the same reasons.
More than 5,000 signatures on petitions opposing this development, 1,000 yard signs around town, and more than $40,000 in donations for legal costs all speak to the community’s support to protect this farmland.
NVWC also protests on the grounds that any development on farmland threatens neighboring farms because of increased run-off and flooding and pressure on other farmers to sell. There is a great deal of research showing that development on farmland increases the likelihood that nearby farms will find it difficult to keep farming.
Now the developer, Toll Brothers, has submitted a letter of intent to Penn State to purchase and build on an alternate site on West College Avenue, across from the Waffle Shop, which presents far less environmental risk.
To date Penn State’s response has been to stonewall, hoping that the Whitehall Road sale will close in a few weeks with no decision made by Penn State on the offer from Toll Brothers on the alternate site.
Penn State –
You are a Land Grant University with a strategic plan that aims to be good stewards of our natural resources. It should not require the citizens to tell you the right thing to do here.
As a show of good faith, we ask that you immediately begin to work with Ferguson Township to rezone the West College Avenue site, which would allow Toll Brothers to purchase it, and put a hold on the closing of the West Whitehall Road parcel and the escrow deposit until negotiations with Toll Brothers over the West College Avenue parcel are complete.
This does not commit you to the sale but it would show that you are acting in good faith.
In this Thanksgiving week please give us, your neighbors, something to be thankful for.
Email sent to David Gray by Kelli Hoover this morning:
I sent these questions to [Director of Community Relations] Charima [Young] on Friday, November 17.
Both the Nittany Valley Water Coalition and Toll Brothers would like answers to these questions before Thanksgiving.
These questions are:
A. Does Penn State have a list of what is expected from Toll Brothers to enable a decision to sell the West College Ave. parcel in lieu of the West Whitehall Road parcel?
B. Was a timeline established for Toll Brothers to respond and if so, what is that timeline?
[Penn State Senior Director of News and Media Relations] Lisa Powers’ list in the Centre Daily Times on November 17 was that Penn State needs:
C. “Written feasibility studies.” More than one?
D. “Zoning inquiries or recommendations…to Penn State.” Does this mean you want in writing what Toll Brothers was told by Ferguson Township staff about how the West College Ave. parcel might be re-zoned to permit student housing and light commercial? I.e., mixed use? [Toll Brothers Campus Living Managing Director] Charles Elliott can provide this information since Toll Brothers has had at least two discussions about this with Ferguson Township staff.
E. “Overall analysis of the site.” What does this mean? This is pretty vague. Can you be more specific?
The information required from Toll Brothers needs to be clear, inclusive, and a timeline stipulated that would allow Penn State officials to review and make a decision about whether to take the offer to the Penn State Board of Trustees.
F. Who is the decision-maker about what is needed and whether or not to take this to the Board of Trustees?
G. Can you provide Penn State’s land purchase protocol/checklist that requires this list of written information Penn State needs from a buyer before they can enter a sales negotiation?
H. Would Penn State be willing to hold funds in escrow from Toll Brothers and postpone the close of the Whitehall Road contract while information and negotiations over the West College Ave. site continue? Richard Keyser, [Toll Brothers Vice President of Commercial Acquisition and Development] calls this “warehousing.”
I. We would still like information about the Penn State Real Estate Task Force, when it was created, who’s on it, and what their qualifications are.
J. Most importantly, we are requesting a meeting of yourself [representing Penn State], and representatives from Toll Brothers, Nittany Valley Water Coalition and Ferguson Township, using an agreed-upon mediator, to work out a solution that all parties can accept. Lara Fowler, who is an expert mediator, is willing to serve this role. She will be contacting you as well.
Toll Brothers makes offer to Penn State for an alternative site to Whitehall Road for student housing
Nittany Valley Water Coalition (NVWC) held a follow-up meeting on November 14th with Toll Brothers’ representative Richard Keyser, Vice-President of Apartment Living, to discuss their recent review of PSU-owned land that would serve as an alternative site for a student housing project currently slated for Whitehall Road.
On October 31, Toll Brothers submitted a formal Letter of Intent expressing interest in purchasing a 19-acre parcel on West College Avenue in front of the Blue Course golf course and across the road from the Waffle Shop as the alternative site. In prior meetings with NVWC, Toll Brothers expressed interest in the W. College location due to its proximity to campus, downtown, and student amenities. There is also strong community support for this property as an alternative site for the planned development.
Since August, Toll Brothers has been conducting due diligence research and design planning to determine the feasibility of this site for a mixed-use development, a combination of student housing and commercial use. Most new and proposed developments in the region have some type of mixed-use component, which is also consistent with regional planning directives and has support by the larger community.
Mr. Keyser emphasized that Toll Brothers wants to work with the community and hopes to engage in the development process and land sale with the cooperation of Ferguson Township and Penn State as quickly as possible.
However, in a follow-up meeting with a representative from Penn State, Charima Young, she cited a poorly defined “process that must be followed” that could delay or thwart any desired “land swap” even though Kurt Kissinger, Associate Vice- President for Business & Finance has previously stated in writing to the NVWC that Penn State has no plans for the West College site. According to Toll Brothers and Penn State, price is not at issue. Mr. Keyser stated that Toll Brothers wants the W. College site, not Whitehall, so the impediment to this “land swap” is a timing issue exacerbated by Penn State.
Ms. Young informed us that there is now a task force of Board of Trustees members who are charged with reviewing and making decisions on all Penn State land holdings to determine best use of these properties. She did not know when this task force was established but that question is relevant to consideration of the sale of the W. College parcel to Toll Brothers in lieu of the Whitehall parcels.
Putting this decision into the hands of a task force is a stalling tactic. PSU told the public many times that they were just the seller of land, and it was not their concern what is done with it after the sale. What changed? It appears that Penn State’s objective is to run out the clock forcing Toll Brothers to take possession of the land on Whitehall via the existing sales agreement, which is due to close in the next few weeks.
However, Toll Brothers could walk away; besides losing their funds in escrow, it is not clear that Penn State could force Toll Brothers to pay the remaining balance. Instead, they could purchase and build on any number of parcels available in the region.
The community supports Toll Brothers building student housing on West College Ave., not on Whitehall Road. upslope of Slab Cabin Run and the Thomas-Harter wells.
Although Penn State contracted with local farmers for winter wheat to be planted on the Whtehall Road site, no such planting has taken place. Therefore the risk to the Whitehall Road site for imminent development remains.
For additional information, contact:
Kelli Hoover at firstname.lastname@example.org, 814-883-4854, or visit nittanyvalley-eco.org
From Kelli Hoover
The Nittany Valley Water Coalition is going to take Penn State at its word that the land we occupied for 127 days to protect it from development will be farmed for winter wheat under a lease agreement, but we will also keep a close eye on the site in case Penn State was lying and we need to remobilize quickly.
It is also possible that Penn State and/or Toll Brothers might terminate the farmer’s lease early, so vigilance is needed.
The timing of this lease agreement is not a coincidence given that the same grower was kicked off this land five years ago by Penn State when the university entered into negotiations with Toll Brothers to purchase the land.
So this 44 acres sat fallow for five years until the goals of the Nittany Valley Water Coalition occupation garnered so much public support that Penn State was feeling the pressure to do the right thing.
We’re going to continue participating in the land swap discussions with Toll Brothers and Penn State. Charles Elliott of Toll Brothers indicated last week that they need a few more weeks to complete their land use design proposal.
And we’re going to take a breather to regroup and reassess for two or three weeks until there’s new information on the farming plan or the land swap.
Time will tell and we will be watching.
Today we were finally forced to leave our occupation site after 127 valiant days. We had been keeping stuff on the neighboring church but we knew that wouldn’t last and they were gracious in their hospitality.
We are glad we will be replaced with winter wheat. And we are waiting patiently for the decision by the Toll Brothers on the other site on West College/Blue Course.