Penn Hills School District officials pledge to keep property tax increase within state limits
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Penn Hills School District property owners will not see real estate tax hikes beyond 4.7% as a result of the upcoming school year’s budget.
District officials recently approved a resolution to keen any potential tax hike in their 2022-23 budget within the Act 1 index – a formula used by the state to restrict tax hikes.
In Penn Hills’ case, the index allows for a maximum millage increase from 30.0965 mills to 31.5110 mills, a 1.4145-mill increase.
The median property value in the district is $74,000.
District business manager Eileen Navish said a hike to the max would result in just under $105 more in real estate taxes for said property.
Board president Erin Vecchio said savings from bond refinancing would be able to minimize any tax hike, and the district cannot keep going to property owners and make up for problems she claimed are being caused by Harrisburg.
“I’m not going to raise taxes to the max,” Vecchio said. “It’s never going to happen with me. I’ll continue to go out and seek other funding to make sure the taxpayers don’t have to be burdened with what happened in the school district.”
The district had sought tax increases beyond state limits at least the past two years, but was able to keep tax hikes within state Department of Education confines due to increased state subsidies and help from state Sen. Jay Costa, D-Forest Hills.
Costa was able to deliver more than $6.6 million in grants to the district over the past several years.
Vecchio said Costa has pledged to help Penn Hills out again this year. It is unclear how much funding would be available.
Vecchio also recognized talks within the community about the state possibly taking over the district. That became a real possibility since the board balked at the financial recovery plan, particularly when it came to tax increases.
“They said this board would never have gotten out of the hole we were in,” Vecchio said. “Well, we did.”
Vecchio and other board members argued against financial plans that included real estate spikes, some nearing 8%.
As a result of the board’s actions, the district’s state-appointed chief recovery officer, Dan Matsook, was forced to create two amendments to the recovery plan, both of which were approved by the board and state Department of Education.
The board also attempted to oust Matsook in September 2019. The move was unsuccessful following push-back by the state.
A mid-year review of this school year, which was posted on the district’s website, showed administrators are preparing for a projected $1.7 million spike in debt service payments in the upcoming budget.
Navish said it is too early in the financial planning process to explain how that would be addressed.
“I am working with a lot of preliminary numbers,” Navish said. “At this point, I don’t know what the increase will be in state subsidy. An increase in state subsidy reduces shortfalls.”
Financial recovery
Navish said the district has made great strides in recent years in addressing its money troubles. One of the biggest turnarounds is with its fund balance, or savings account.
Penn Hills went from a negative $19 million fund balance in 2014-15 to having about $7.4 million in the bank as of last school year.
“The financial turnaround and recovery plan has helped the budgeting process,” Navis said. “Budgeted expenditures are more aligned with budgeted revenues.”
An audit report released in March showed Penn Hills saved more than $5 million in transportation, plant and custodial services and instruction costs the last fiscal year. Coupled with a near $3 million debt services adjustment with refinancing, the district dropped its deficit to a little more than $245,000.
Navish said the district received a little more than $1.15 million in federal Elementary and Secondary School Emergency Relief Fund monies last school year and is expected to have a total of about $18.13 million in ESSER funds into the 2023-24 school year.
The district plans to use some of those ESSER funds to pay for about 65 teacher salaries and benefits in order to free up general fund monies to pay for other expenditures such as facility upgrades and technology.
Navish said 20% of ESSER 3 funds, about $11.36 million over the next two school years, will cover eight reading specialists to accelerate K-3 students academically.
Matsook said the district had done a variety of adjustments to programming, as well as implemented more checks and balances with their finances prior to the pandemic.
However, pandemic-related savings and federal assistance sped up the financial turnaround exponentially.
“We’ve made significant progress, but we’re not out of the woods yet,” Matsook said. “This is a marathon, not a sprint. It’s the next three-year window that will probably determine how close they are to getting out of recovery.”
Among the criteria of getting out of financial recovery status is maintaining at least a 5% fund balance, which means about $5 million for Penn Hills.
Matsook said not seeking advances in state education subsidies or obtaining a tax anticipation note, both of which the district did not do the past two years, also go a long way toward recovery.
A TAN is a loan school districts and some municipalities get to have cash on hand until real estate tax revenue starts coming in.
Penn Hills is more than $150 million in debt largely due to the construction of a high school and elementary school. The district’s goal is to pay it all off by 2043.
More than $100 million in bond refinancing in late 2019 knocked off about $12 million in long-term debt and reduced annual payments.
Matsook cautioned the district about relying on state grants and other one-time funds to fill budget gaps.
“One thing that makes the most sense and signifies wellness when it comes to financial predictability is passing balanced annual budgets,” Matsook said. “If you don’t do that, you go backwards and all those old things start happening again. What’s going to happen when the one-time funds dry up?
“I have no prediction on when they’ll get out of recovery, but I’ll say they’ve made significant steps.”
Matsook noted two key changes by state legislators would have a significant impact on not only Penn Hills, but many public schools.
“If the state does not change its formula for charter school tuition and basic education subsidy, then residents can expect to see more tax increases down the road,” Matsook said. “My hope is that we can mitigate some of those increases along the way.”