T/E School Board Passes 3.3% Tax Increase; Highest Percent Increase in the Area

The T/E School Board meeting on Thursday night was rather anticlimactic.  Most of us who have been following the budget process were not surprised by the 3.3% tax increase (1.7% Act 1 Index, 1.6% referendum exceptions) for the 2012-13 school year.  Based on the District’s average residential assessment of $252,601, this translates to an average increase of $155 per homeowner in their tax bill.

The Act 1 Index increase will produce projected revenue of $1.5 million and the exceptions increase projected revenue of $1,498,916. The total revenue produced by the 3.3% tax increase is $2,998,916.  The 2012-13 tax will be levied at the rate of 19.2628 mills, on the assessed valuation at a rate of $19.2628 per $1,000 assessment; an increase of .6154 mills from the 2011-12 tax rate.

How does TESD tax increase of 3.3% increase for 2012-13 school year stack up against neighboring school districts?  The following local school districts have approved their budgets for 2012-13 and  needed to include the following tax increases:

  • Radnor School District: 3.21% tax increase
  • Great Valley School District: 3% tax increase
  • Haverford School District: 2.73% tax increase
  • Lower Merion School District: 1.99% tax increase
  • West Chester School District: 1.7% tax increase
  • Downingtown Area School District: 1.7% tax increase
  • Phoenixville School District: 1.66% tax increase
  • Unionville-Chadds Ford School District: proposed 2.65% tax increase in Chester County and a 1.74% decrease in Delaware County (the difference comes changes in the gross property valuation of the two counties) to be approved at UCFSD meeting on Monday, June 18.

Following the final budget summary, discussion and resident commentary, the school board members were presented the opportunity to weigh-in on why they were voted for or against the 2012-13 budget.  The 2012-13 budget passed 7-2 with school board members Liz Mercogliano and Rich Brake providing the dissenting votes.  Brake provided a lengthy 30-minute oration, which offered historical details of what brings the District to this point and his reasoning for voting against the 2012-13 budget.

Ray Clarke also attended the school board meeting and offers his thoughts on last night’s School Board meeting. Thanks Ray!

Comments from Ray Clarke … 

1.  Karen Cruickshank reported that the tone in the TEEA negotiations is “increasingly positive”.  One small signal of this is the memorandum of understanding that removes the requirement for the district to pay for “advanced studies assistance”, in return for dropping the demotion idea for 2012/13.  Amazingly, this saves $360,000 – and it’s not even all the tuition that is paid!  (Payments are continuing for those on the lowest Bachelors steps).

 2.  The General Fund Balance debacle continues.  At its root is the fact that the Board treats this as a completely discretionary slush fund, with absolutely no rules about how it is to be used.  I believe that it is completely unacceptable for $30 million of taxpayer money be be treated so cavalierly.  Just one example: last year the “commitment” for PSERS “stabilization” was $15.4 million, this year it’s $3.6 million.  It’s not that the difference has been used to stabilize PSERS, it’s just that the number is a plug for when other things have been accounted for.  Ridiculous.  Why even have that item in the first place – we plan to raise taxes for it anyway.

Having said that, the changes in this year’s commitments do move us in the right direction.  $10.4 million will be moved into the Capital Fund, where it will be used for the one time expenses that we’ve discussed here are the appropriate uses for the Fund Balance.

Also worthy of mention is the commitment for the liability for vested employee services.  This went up by $0.8 million.  The actual payment was $0.3 million;  It’s interesting that the actual employment expense was therefore $0.5 million higher than was recognized in the operating statement, another problem deferred for future taxpayers.

3.  Which gets me to Dr Brake.  He treated us to a half hour analysis of the school district’s finances and the changes over the last decade or so, with desktop slides.  I encourage all to look for the video.  He voted against the tax increase, and argued for “an entirely new status quo” for the school employees.  Here are some notes I took with my commentary:

– The drop in revenues from assessment appeals offsets the increase from increasing the tax rate for the exceptions.  He used this to suggest we have reached taxing capacity.

– Special education is a “ticking time bomb” and the increased costs of autism “threaten public education”.  Relatedly, we heard in the Policy Committee how parents of non-residents, shopping for schools, want the right to come into classrooms to observe TE”s special education programs.

– All entities (governments/households, US/Europe, etc) have a “pathological addiction to spending beyond our means”.  [An OT comment: In a long run he’s right that this is unsustainable, but in the short run, national governments able to determine monetary policy can have a stabilizing role when consumers all of a sudden come to that unsustainable realization.  The problem in the US is that the political actors cannot agree on the long run plan to get the house in order, and in Europe, they have a completely crazy monetary union without a fiscal union].

– For TE routinely taxing to the max is unsustainable and not the solution.  I note that the agreed 3.3% tax increase this year, and the subsequent annual 3% increases in the 4 year projection model accumulate to an increased tax bill of $600 per year for the average residential assessment.  And there’s still a $4 million deficit in 2016/16.

– He is now going to pay more attention to the Fund Balance.  Good!

21 Comments

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  1. My measure of efficiency is not the tax increase nor the millage rate, but per student spending. Here are those same districts with the columns as Total Budget ($K), Enrollment and Spending per Student ($K)

    LM $212,800 7,342 $29.0
    Phnx $77,743 3,321 $23.4
    Rad $82,899 3,606 $23.0
    GV $76,800 4,029 $19.1
    UCF $71,109 4,101 $17.3
    TE $110,334 6,457 $17.1
    WC $201,793 11,827 $17.1
    Hav $94,200 5,635 $16.7
    Dtn $194,046 11,779 $16.5

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  2. WHen I have time, I’ll calculate the millage in each area. For those who complain about taxes rising, it’s important to know what they are rising from/to in context. Just use the TE rule of thumb that your school taxes approximate 1 – 1.2% of your home’s market value.

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  3. A couple of other observations.

    The current Fund Balance policy (under review that’s clearly needed) says that “the General Fund Balance should [should!] not be used as a revenue source to offset operating expense deficiency.” Yet the current budget has $1.157 million for just that purpose. This is justified by the claim that there is that amount of one time expenses in the operating budget. The Budget Overview memo notes an equipment budget of $744,585. Hmm.

    And for yet another year, the Board approves pricing for a whole range of contracted services without any presentation of the change in those prices and the likely impact, given reasonable expectations of usage. Where’s the rigor?

    I don’t have time for lots of analysis on TR’s point about percent of market value, and I apologize that what follows is not completely apples to apples. That said, I do note that in the last decade the average Tredyffrin home value has gone up 26% (per Zillow), while since 1998 the median TE tax bill has gone up 112% (per Dr Brake). Also per Dr Brake, spend per student is up 62% in his selected time period.

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  4. I don’t have time either Ray — but will make the time this week. Sorry for just dropping the info. But I have done the calculations and the taxes on your home are around 1% and have been for a long, long time. Now with this new notion of “exceptions” (when they have already escrowed for the purpose), I cannot vouch for that.

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    Ray Clarke Reply:

    Here’s another thought. At 2% of the assessed value and with a CLR factor of a little more than 50%, your 1% number would be right. However, if we trust Zillow’s 26% gain in the last decade and round up to 40% (?) to take us back another couple of years to the county reassessment in 1999, that would imply a CLR of 71%. That makes taxes over 1.4% of market value – way outside your range.

    It seems to me that the CLR is a big part of the revenue problem. Where do they get that number? It is hopelessly behind the times. If it actually equalized assessed values to 1999 levels, as intended, then there would be no gain from reassessment just because your property value has decreased. Funding would be kept stable – one of the merits of basing taxes on property values.

    Of course, on the way up, the CLR was also behind, so in the mid 2000’s properties were assessed way too high and the district got the benefit – and part of the fund balance surplus – then.

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    Andrea Reply:

    Ray
    I posted the numbers below. They don’t “get” the CLR — they compute it. Be careful of ZIllow — perhaps one of the poorer online sources of market value. The CLR is the legal number you use to validate your assessment.
    As the saying goes — it is what it is.
    One man’s trash is another man’s treasure. I think that’s what we all might conclude about home values and the taxes we pay. For people with kids in the schools, the taxes are a very good deal I assure you they have increased at a lower rate than private school or private university tuition.
    Said it before — when it involves non-market driven labor (which is what teacher contracts and benefits with no leverage is), the prices can and do skyrocket. But for this community, it’s still pretty major bang for your buck to support 1) your property’s value and 2) market demand. And if you have kids in the school, you dont’ pay taxes…you just barely subsidize a portion of an individual child’s education.

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    Ray Clarke Reply:

    Sorry for using colloquial language. To restate my point: the CLR calculation does not accurately fulfill its “underlying premise …….. to equalize homes assessed initially in 1998 (or whenever reassessment occurred) and those built and assessed today.” (http://www.appraisaltrend.com/taxassessmentappealsinpennsylvania)

    Keith Knauss Reply:

    Here is the CLR history if interested.
    http://www.steb.state.pa.us/Commonmain.asp?OptionCounty=CHESTER&OptionYear=All&submit1=Go

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    Andrea Reply:

    To understand the “CLR” as certified by the State Tax Equalization Board: “This function of the Board is to establish a common level ratio of assessed value to market value for each county for the prior calendar year.
    Act 267 of 1982 requires the State Tax Equalization Board to use statistically-acceptable techniques, to make the methodology for computing ratios public, and to certify the ratio of the chief assessor of each county each year.”

    Before someone gets confused, the real estate valuation factor used above is the mathematical reciprocal of the CLR. Likewise data from the STEB calculated for 2010 is applicable to documents submitted from July 1, 2011 through June 30 2012.

    Hey — it’s government :)

  5. I did that calculation before.

    Terms below: Using a house assessed at $300,000
    * Year – year of data
    * CLR – Common Level Ratio for Chester County (assessed value times CLR equals market value — these are the numbers used to challenge assessments)
    * SCHOOL TAX — the TESD tax levied on the house assessed at $300,000
    * % OF VALUE: School taxes are a percent of market value based on assessment and CLR data.

    Year: CLR Mkt Value School Tax % OF Value
    2004 1.35 $405,000 $4,475.87 1.105%

    2005 1.47 $441,000 $4,539.36 1.029%

    2006 1.65 $495,000 $4,719.00 0.953%

    2007 1.82 $546,000 $4,877.71 0.893%

    2008 1.93 $579,000 $5,091.26 0.879%

    2009 1.93 $579,000 $5,241.32 0.905%

    2010 1.89 $567,000 $5,390.66 0.951%

    2011 1.81 $543,000 $5,594.22 1.030%

    2012 1.79 $537,000 $5,778.84 1.076%

    Here is the critical issue: IF your house value does not track on this path, you should be doing an assessment appeal. That’s on you. The CLR is the number used in assessment hearings. It is set specifically for that pu rpose.

    Now — if I have made a math error, I apologize. None of us gets paid to do this…..but unless there is something dramatically wrong, I think you can see why there is pain around here….because the values have dropped since 2008 — and many people felt comfortable living in homes that had artifically become “more expensive”. But the reality is that taxes are pretty stable as a percent of market value. And as I have droned on before — how much of your market value do you attribute to the schools? A lot more than 1% would venture. And yes — you pay a premium for your house to be in these schools, and you support that investment with 1% of the value going to school taxes.

    That’s the math.

    As to the rigor — Ray I empathize with your perspective. But here’s the deal: there are 9 board members who have other lives besides sitting at the board table. They are 100% free volunteers. And they have the skills they have — I have said many times we do a very poor job of vetting skills when we vet candidates. Interest and devotion are important, but not adequate. So the district hires professionals to do things — the pricing for a whole range of contracted services is thoroughly vetted by people who work for the district going over bids and options. There is a purchasing department that does an analysis that goes to the board. In some cases, there are not bids required — but you do pay a certain amount for services that you can trust. I imagine none of us always hired the cheapest plumber?

    That said: the willingness to change professional services would be based on some real need to make a change, as the not just comfort level but reality of accurate communicaiton is important.

    I’ll use an example from the 80s. There was a group of architects that were hired to evaluate Conestoga and its systems. The report was before my time, but it was known as the “Wagner” report. Well — once it was in writing, it became almost doctrinal. “The Wagner Report” said this….we better do it. It said that — we better do it. In fact, Wagner was not part of any team at the district and no one was qualified to vet the report. WHen I came on the board, I had a background in construction and we added our hero, Phil Hooper, who was an architect. Together we changed the process by which we sought building audits — and while some people on this blog and in public get woefully worn out by the constant referral to Daley and Jalboot, they are very competetent and very reliable sources of information that have built relationshps with district members and board and whose advice the district trusts. The Wagner Report was a building audit without regard to cost, to priority, to budget, to practicality. Wagner did absolutely what the previous board had contracted them to do, but I’m sure we can all relate to someone coming through our home and telling us all the upgrades we needed — without regard to whether we “needed” them.

    Now — I will openly admit that Phil Hooper’s sudden illness and passing was a GREAT loss for this district. Many will never understand just how critical he was to the facilities plans. But in his absence, the board has marched on and made the best decisions they could. Pete Motel is a Dermatologist….and he justifiably turns to experts for advice. That’s not to say that we all agree with the strategic direction the district has taken, but the tactical issues are legitimate.

    So — long answer to “where’s the rigor?” I completely agree that this board plays games with the watching public. It’s one of the reasons that I stopped attending meetings — it’s too hard for me not to jump up and challenge something :) They do appear to treat the Fund Balance as a slush fund. The fact is, about half of it was acquired through a bond, so I imagine bond counsel is involved in this new policy development, because you can’t just do what you want. And I had encouraged the board to be honest about the escrow for PSERS and not take the exception this year — but they chose another path.

    Kevin and I have said here before — support the program AND scrutinize it. Scrutiny is cheap. No one ever knows as much as they think — and asking the questions needs to be done in a way to engage and educate the public.

    Okay — this is why I don’t post often. I was on this board for 3 terms and used to say I needed to move a bus stop to draw a crowd. Numbers can be used to prove or disprove almost any hypothesis about schools. We know teachers make more every year. Dr. Brake’s numbers may or may not reflect enrollment increases and capital spending. The reality is — we get a pretty big bang for our buck around here, and I’m not defending this board in any way. I’m saying this is $100M business — without a bottom line to measure economic efficiencies. There is absolutely no pay-back for any single employee. So we have a program in place that applied when the budget was $30M. But now it’s on TV and on the internet, and parents can track their children’s grades by day, and taxpayers can compare date from 100s of districts.

    Bottom line for me: What you paid for your house, what it’s worth, and whether the taxes are fair in relation to what your home is worth. I cannot comment on whether you overpaid, are over -assessed, or bought it 40 years ago when your mortgage was smaller than your tax bill is today. What equity you have in your house of 40 years should probably cover your tax bill for about 100 years.

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  6. Are we comparing apples to apples? I don’t believe the budget increase numbers are inflation-adjusted, and according to the BLS it takes $1.41 now to buy what $1 bought in 1998. So we’d need to have seen a 40% increase in per student spending just to keep up with inflation – not 65%, but not insubstantial either. Also, this doesn’t affect per student spending, but the overall budget reflects inflation plus an increase in enrollment of about 25%.

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  7. Looking forward…………What is being done to hold the line on future tax increases? Are we just supposed to sit here and take it like good sports?

    It is great to hear that things are so peaceful with the teachers union negotiations…..or is it?

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  8. Raising taxes does not work and is not the answer. Guaranteed pensions and free health care have to become things of the past. Teachers have to begin to understand that people in the private sector don’t get raises every year, gold standard health care, tuition reimbursement, three months off in the summer, free dental, etc. etc. Warren Kampf’s bill proposes to change pensions from a current defined benefit system to a defined contribution system. Finally, someone is stepping in to represent the tax payer. Thank-you Mr. Kampf.

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  9. The headline “highest increase” is attention grabbing, but I have to add some perspective by pointing out that for many years te always had lower tax increases than the other districts. We are still among the lowest school tax rates in the state, something like 480 out of 501.

    Ironically, te is suffering more for having kept tax rates lower in the past, because we did not always take the maximum allowable and thus did not build the “base” under act 1.

    Relatively speaking, te is still one of the best deals around. The connection to support of property values has been mentioned and is a point well taken. Having said that, I think we should always remember that this is about the kids. We need to do what is right for the kids. Certainly adjustments need to be made, but the value of quality public schools should motivate us to preserve the program – good public schools are essential for the long-term health of this community and the nation as well.

    Also, as someone pointed out, it does not tell the whole story to simply point out that taxes have gone up by a particular percentage over a particular period of time. What was the rate of inflation? How much enrollment growth occurred? What was the impact of legislation and unfunded mandates? What new demands and expectations were placed on the schools by society?

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    Township Reader Reply:

    It seems to me that these responses are just lamenting the reality that TEs tax burden is simply not unfair. It is not cheap to own a home in a nice community with good schools. Real estate values are largely influenced by LOCATION. Our taxes as social contract support good schools…some would say great schools. Based on the CLR, if you bought a house in a good location in this area, and paid $300K in1997, the house should be “worth” $525K . If it’s not, then your taxes don’t feel fair.

    But we need to be back on topic– the pay and benefits process as we have known it for 20 years has to change. We accept that we need defined contribution for pensions. We need to pursue that for benefits as well. Some school district needs to show leadership and lead the way to this new vision of compensation where the EMPLOYEES understand that salary, benefits, PSERS, FICA are all part of a compensation package. The cost of the package–each part collectively matters — can not be viewed as just the salary matrix and how much of the health care premium they pay. It’s not about what they GET…it is about what we spend on them.

    And the reason all that matters is because IF we accept that we want to maintain great schools, the program is as important (if not more important) than the teachers. We have great teachers, but they are part of a program, and their salary is not dependent on individual quality.

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  10. Some who post refer to the school district as a 100m dollar business. That would make the children the clients and yes we should always remember that this is about the children. Even though we still are among the group with one of the lowest school tax rates in the state, our childrens’ programs and services are being cut or eliminated. Before this should happen, we should look at underlying structural expenses, like ballooning pension funds and gold standard health care benefits for school employees to make up for the shortcomings in the budget instead of putting much of the burden on the children and the taxpayers.

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    Township Reader Reply:

    Ready
    You are only too correct, but unfortunately the system is set up so that the taxpayers are the client — and there is no question that those with kids in the school have a vested interest in the success of the programs. When times are good, taxpayers are only too willing to fulfill the social contract of supporting education. Unfortunately, the laws are set up so that taxpayers have the final say — either in approving/disapproving referendum on tax increases, EITs or even board elections.

    But your point and that of others is on target — no one minds paying their fair share, if the people we hire are being paid their fair share. Compensation controls are gone…and they need to come back.

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  11. Reader
    I agree………. It should not be about what they get………it should be about what we spend on them based on what we can spend on them given the difficuties of the current economic situation. Public sector pay and benefits need to reflect private sector pay and benefits. The people still fortunate enough to have jobs, face reduced or frozen wages and significant increases in their health benefit contributions. They walk into work everyday wondering if they will be next in the unemployment line. And they work nights and weekends and some don’t see their families for weeks due to travel and extra work requirements. They’re not happy about it but they understand, and are grateful to have a job.

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  12. I have been following these posts for a while. A few things I have noticed:
    Comments are made by the same people over and over again; sometimes using different handles to keep the conversation going (Andrea).
    Where is the community conversation? What does the lack of engagement say about our values concerning public education?
    Though Andrea dominates this board, I greatly respect her knowledge and the way she makes comparisons. It is interesting that our taxes in relation to our home values are less (slightly) today then it was in the first year of her analysis.
    And, that is with increased enrollment (re: more of those damn costly teachers), more expensive benefits (across the board), skyrocketing special education costs, that unsustainable contract (I know huge cuts have been made), and that larger than life fund balance (Andrea, do you know what it was during the first year of your comparison?)
    Another point that stood out to me from the tax study was the approximate value of personal wealth in the district (4.3 BILLION). The ballooning pension problem is real and it scares me but if we can’t handle it, what are the 99 percent less wealthy school districts going to do?

    Ray, I also respect your analysis and insight but I think Andrea is right on point about the value of our homes in relation to the taxes we pay. Where would you move and find the same outstanding schools and bang for the buck taxes?
    Communities are known by the schools they keep. So, I ask the COMMUNITY: What kind of schools do you want to keep?

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  13. I am a new post-er.

    There are many things that a good community is known for and the schools it keeps is on the list.

    Successful communities need members who are at the very least informed about what is going on. This is a great community to live in and I want to keep excellent schools.

    Counsel Rock School District in Bucks County just closed a deal with their teachers union they say reflects the tough economic times. Counsel Rock is a wealthy community, just like TE, and the deal was closed in less than 5 months because the school employees recognize what a great situation they are in and they understand that high unemployment and lower wages and increased health care contributions by the tax payers make it unaffordable to sustain increases in their contract. Their health care contribution went from 11% to 16% in the new contract.

    The tide may be turning in favor of the tax payer. The governor in Wisconsin survived the recall and Christy in New Jersey is making major reform to public employees pensions, benefits and even the bargaining process.

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  14. tide may be turning… I hope you are right but with the te negotiations going to the Labor Board, and as pattye said this seems to be the route teachers unions like to take. I wonder how “neutral” these boards are. I am fearful that anything that has to do with the “state” will be in the bag for the unions. Maybe if someone has info to the contrary they can present it. After all, while maybe not the Labor Board, but the state is what got us into this pension/tax fix a while ago.

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