A deal is quietly being negotiated that will allow construction to proceed on a large apartment complex just outside of Watertown.

The deal would clear the way for the Watertown city school board to approve a tax break for the project. The tax break is the key to the project being built.

The apartments - nearly 400 - would help feed a voracious appetite for housing in the Watertown area, an appetite brought on by the expansion of Fort Drum.

Adding to the urgency: the military's plans to cut troops and bases. Anything that makes Drum less desirable might make it more vulnerable. 

Everyone agrees the apartments are needed: at issue is the balance between taking care of Drum, the region's economic engine, and how far local governments and taxpayers can go in paying for needs created by Drum.

School board members and school officials fear the number of students they will have to educate will increase dramatically, with no way to pay for the increased cost.

The new deal doesn't solve that problem. But people with direct knowledge of the negotiations say that for the first time, the school district's concerns are being taken seriously.

Specifically, the deal taking shape includes at least three provisions to help the school district.

- For the first few years after the complex is built, the school district will receive more money than the original deal. It still won't be enough to cover the potential cost of more students, but it will give the district 'breathing room' in its budget.

The original terms of the deal would have given the school district $114,283 a year for 10 years. The new deal doesn't change the total amount of money the district would receive over 10 years, but puts more of it into the first few years.

- Because it's not clear how many more students will come from the new complex - and a somewhat smaller one on the other side of Arsenal Street - $50,000 will be provided for a study of the impact of the new apartments.

- A new group will be formed involving Watertown and other school districts, likely Indian River and Carthage. Purpose: to deal with the increased number of students and other education issues related to Fort Drum.

Officials caution there is no deal yet, the terms could still change, and school board members are still weighing the risk to the district's finances. 

The deal is being brokered by former state Senator and now head of the Development Authority of the North Country James Wright, Jefferson County Industrial Development Agency head Don Alexander and Jefferson County administrator Robert Hagemann.

The three men met privately with Watertown school officials in recent days, and as a result of those meetings, the broad outlines of the possible deal have emerged. Although the school board meets next week, a vote on the deal is not expected until the May meeting.

Wright, Alexander and Hagemann are making two points to school officials: for the future of Fort Drum, and the larger community, the apartments have to be built. And two, they understand the school district could end up spending a lot more money, at a time when budgets are very tight and there is a cap on how much taxes can be raised.

"They're trying to woo us," said a board member. "I think they realize this time around the board is serious."

Origins of the deal

To understand the deal being negotiated now, you have to understand the mechanics of how these deals are made, and the recent history of the deals in Watertown.

Technically, what's being negotiated is a 'payment in lieu of taxes' agreement. Such agreements mean a business agrees to set up shop in a given area, in exchange for a tax break, usually of 50 percent or more. Usually, the deal lasts 10 years or more. The idea is that the increased employment - or in the case of an apartment complex, the increased housing - is worth sacrificing some taxes.

(The jargon you hear and read is that the agreements are called PILOTs, for Payment In Lieu Of Taxes. It's a fancy way of saying 'tax break.')

The deal before the school board now would extend a tax break to Morgan Management, the company that proposes to build the 394 unit complex. 

This deal follows a similar deal struck in December of last year, in which the school board reluctantly agreed to a tax break for another apartment complex, one being built behind the Towne Center shopping plaza on Outer Arsenal Street.

For weeks leading up to that vote, school board members were publicly and privately lobbied to go along. 

Privately, school board members complained of being pressured to vote 'yes,'even as their worries about what it would cost the school district were waved away. For instance, a ceremonial 'ground breaking' was held for the project well before the school board voted.

"I didn't have anybody shaking their finger under my nose, but you understood the point they were making," said one board member.

But at the same time, they were worried that if they did not approve the project - and if Fort Drum was harmed - they would take much of the blame. And finally, on December 20, a divided board approved the deal. 

The debate exhausted and hurt some board members, who believed they were unfairly portrayed as anti-Drum. "We had the bad guy cap on us," said a board member.

Board members also vowed to themselves to be much tougher the next time. And in January, February and March, when the subject of the Morgan tax break would come up, it appeared there were not enough votes for it to pass.

Knowing that, Wright, Alexander and Hagemann have tried a different approach, one that is less public and less confrontational than the earlier deal.

"I think the school board needs to understand that we also understand how difficult this choice is," said an official with direct knowledge of the negotiations. "We've gotta solve this problem for Fort Drum, and we've just as hard got to solve the school problem."

"Something that's going to help us considerably is a local concerted effort," said a board member. "A very public display of support for the school would be very welcome."

And Wright, Alexander and Hagemann have attracted the attention of the Cuomo administration, which wants to know how big the school district's potential problem could be.

It's a good question.

The Pricetag

Watertown needs housing because Fort Drum needs housing, and with the military planning cuts, it's clear officials have little choice other than to approve all the apartment construction they can.

However, based solely on the dollars involved, it appears the Watertown school district stands to lose money - arguably, a lot of money.

To review, Morgan Management proposes a 394 unit apartment complex on county route 202, off Outer Arsenal Street.

Most of the apartments will be family sized, either two or three bedrooms. All the school age children who live there will be in the Watertown school district.

Of course, no one knows how many children will live there. 
 
But based on the original deal, the district could afford to educate fewer than three dozen children before starting to lose money.

Here's the math:

- Under the original proposed tax agreement, the school district would receive $114,283 a year for ten years.

- It costs the district $3,500 a year in 'local' money to educate an average student. (That's the cost over and above what the district gets in state aid each year.)

- Dividing $114,000 by 3500 produces a number a little over 32. In other words, 32 is the number of additional students the district could educate before spending more than the $114,000 annual payment.

How realistic is it that more, many more students, would come from the apartment complex? Here is one rough measure: The 'National Multi Housing Council,' which represents the apartment industry, calculates the average number of school age children in military apartments at 0.28 per apartment household.

Using that number, which is based on the most recent U.S. Census and which is the most conservative number available, a 394 unit complex would have about 110 school age children.

Just to give you some idea of how the bill could add up, 110 children minus the 32 children paid for by the $114,000 leaves 78 children.

78 children times $3500 equals $273,000. That's money the district would have to find somewhere else, every year.

"We'll take all we can get, but we're still going to be going into the hole here," a board member said.

Two important cautions: the Housing Council points out that every apartment complex is different, and you can't necessarily extrapolate from the 0.28 average what a given building will yield.

Also: the $3,500 number is a broad - and controversial - measure. Clearly, if one or two additional students enter a class, it doesn't cost the school district an additional $3500 for each of them. School officials say the costs kick in when large numbers of students are added, and more teachers must be hired and, perhaps, more classes built.

And adding students may bring other forms of state assistance to the school district.

Still, said a board member, "that's the rough number we use."

A note about our story, and how we got it

You've probably noticed no one is quoted by name in our story. That's because - as is typical in reporting on negotiations that are still going on, and where trust is important - no one wants to be identified as having confirmed the details.

The reporting was done over the last several weeks, and began when we tried to answer a surprisingly difficult question: is there a way to know how many children would live in an apartment complex that hasn't been built?

Our information came from officials with direct knowledge of the terms of the deal. We talked in detail with both sides.

- The story was written for the web by Scott Atkinson