The Nittany Valley Water Coalition intends to sue Penn State if it closes on the $13.5 million Whitehall Road land sale with Toll Brothers.
The coalition — which is in the process of incorporating as a nonprofit under the name Nittany Valley Environmental Coalition — notified the university of its intention last week to file suit in the new year if the 2012 sale contract closes.
The student housing development that Toll Brothers is slated to build on more than 40 acres of land along West Whitehall Road in Ferguson Township — The Cottages at State College — has been challenged in court and protested by community members.
The coalition set up tents and occupied the site for 124 days over the summer and has been in talks with Penn State, who owns the property, and Toll Brothers to propose alternative sites that would, in the coalition’s opinion, be better suited for development.
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The group contends that sourcewater would be at risk if the Whitehall land were to be developed. Toll Brothers and Penn State have said that the risks have been mitigated.
One of the sites proposed as an alternative is along West College Avenue. Toll Brothers — after spending time and money to evaluate the site — indicated, in October, an interest in the 19-acre parcel through an unsigned letter of intent to Penn State.
“Penn State remains in a binding sales agreement for the Whitehall Road property with Toll Brothers,” an emailed statement from Penn State on Monday said. “This agreement is the result of a complex process of requirements and approvals — including meeting numerous water, environmental, zoning and traffic regulations — that have involved a number of entities over the course of more than 12 years, including the township, state and the university’s board of trustees.”
Penn State has not held any formal discussions or negotiations with Toll Brothers on the West College parcel, the statement said.
Toll Brothers didn’t respond to a request for comment by press deadline Monday, but Charles Elliott, campus living managing director, told the CDT in November: “Until the site has the same zoning, we really can’t call it an alternative site. But we’re very much willing to keep the discussions going to say: ‘Could it become an alternative site? Yes.’ ”
The “land swap” doesn’t seem to be moving forward, and the coalition doesn’t believe that Penn State has responded appropriately to Toll Brothers’ letter of intent, which is part of the impetus for preparing a lawsuit, Terry Melton, a coalition member, said.
The coalition remains willing to negotiate with Penn State and Toll Brothers.
“It hurts us (that) we have to be in this situation,” David Stone, a water coalition member, said. “I don’t understand, I really don’t understand … I think (Penn State thinks) that somehow this all goes away if they can just dump this land on Toll Brothers. … These are good people there. I hate to see them miscalculate this way.”
But the lawsuit would be about much more than just this one land sale. The coalition hopes, if it comes to it, that through the lawsuit the courts will be able to answer one question definitively: Is Penn State public or private for the purpose of real estate transactions?
The coalition argues that if Penn State is public, then it’s subject to heeding the Environmental Rights Amendment to the Pennsylvania Constitution, as well as the environmental bill of rights passed in Ferguson Township in 2012 and the community bill of rights passed in State College borough in 2011 (both by referendum).
And if it’s private, “then they need to be paying a hell of a lot more taxes than they are right now,” said Kelli Hoover, president of the coalition.
Penn State operates as a public-private hybrid. It’s a state-related university, like Lincoln, Temple and Pitt, and as such receives a small portion of its funding from the state government. At the same time, it’s not subject to disclosure under Pennsylvania’s Right to Know Law like public entities are.
Penn State is also exempt from real estate taxation — such as property taxes — as an instrumentality of the state, said Mark Kellerman, chief tax assessor for Centre County.
But, he said, the university has agreed to make payments in lieu of taxes on properties it leases to third parties — and those payments are an equal amount to the real estate tax that would be collected on the assessed value of the land.
Those agreements are set with Benner, College, Ferguson and Patton townships, State College borough, Bellefonte and State College area school districts and Centre County government, Kellerman said.
Penn State property that is not leased to a third party is not covered under those agreements, he said.
Sometimes Penn State pays the realty transfer tax on properties, and sometimes it claims the exemption as an instrumentality of the state, said Joseph Davidson, Centre County’s recorder of deeds.
The buyer and seller can negotiate the realty transfer tax, but ultimately the buyer is responsible to pay, he said, adding that Penn State can claim an exemption as buyer or seller.
Ferguson Township has a 2.75 percent realty transfer tax that’s split between the state (1 percent), the township (1.25 percent) and the State College Area School District (0.50 percent).
The Whitehall Road property is not currently on the tax roll, Davidson said.
Penn State spokeswoman Lisa Powers said in an email in September that the university considers that property to be private, particularly because it’s under contract to be sold.
“The main reason that ... the lawsuit is not intended to be a direct challenge to the transaction is because we’ve been advised that Penn State would probably demand … a security bond,” said Katherine Watt, coalition vice president.
And the coalition can’t put down a $13.5 million bond to get an injunction to prevent the sale from happening, Hoover said.
That’s why, Watt said, the coalition will wait to file the suit until the sale goes through and focus it on the public/private issue.
The coalition said it would take a few weeks to draw up and file the lawsuit.
Watt said the main case that the coalition will look to build on is Pennsylvania Environmental Defense Foundation v. Commonwealth.
The state Supreme Court’s decision on the case came in June and reversed 40 years of precedent, she said.
In the majority opinion, it was written that the commonwealth must act as a trustee of public natural resources, not as a proprietor.
“We feel that it’s real important for the courts to rule on how Penn State makes decisions in the context of this new Supreme Court precedent and in the context of the charter bill of rights,” Stone said.