Pattye Benson

Community Matters

Earned Income Tax

Lifetime healthcare benefits of Tredyffrin Township Police Association result in $40M unfunded liability — What’s the Solution?

I attended the public meeting this week to discuss the township’s proposed preliminary 2013 budget. About 10 residents attended plus township supervisors Michelle Kichline and Mike Heaberg (Heaberg is a member of the Finance Committee) and Acting Township Manager and Finance Director Tim Klarich.

Over the course of two hours, various topics were discussed with Klarich and the two supervisors, providing answers and background on numerous issues. The townships’ $40 M unfunded medical liability and the open issue on the labor agreement between the township and the police union, Tredyffrin Township Police Association (TTPA) were of particular interest to me. The ‘elephant in the room’ for the township’s 2013 budget and major obstacle (and the reason for the township’s $40M liability) is the ongoing arbitration with the police contract and their lifetime health benefits.

Since January 2012, the contract between TTPA and Tredyffrin Township has been in arbitration; the 3-year police contract expired the end of 2011. Kichline was quick to point out that both sides want an arbitration decision but unfortunately, for 10+ months, the process has been held captive, waiting for a ruling from independent arbitrator, Michael Zobrak from Aliquippa, PA. According to PA Department of Labor & Industry website, Zobrak’s fee is $1200 per diem (however, his page was last updated in 2007). Interesting to note, there is no requirement for the arbitrator to be an attorney — Zobrak’s education background includes BA, Geneva College and M.Ed, U of Pittsburgh.

According to Kichline and Klarich, Zobrak has held meetings with the attorneys representing the township and TTPA. It was unclear how many meetings have been held and/or how often. Although I am sure both sides hope that a resolution is forthcoming, there was nothing definitive stated as to when that might happen. For the record, I called Zobrak’s office and left a voice mail – I will update if I receive a response.

The biggest roadblock in collective bargaining contract disputes these days is health care benefits (in addition to salaries). Certainly health care benefits were an important component in the recently settled T/E teacher contract negotiations. Appreciating the current economic environment, the teachers agreed that their generous healthcare plan of the past was no longer possible, changes were made in their teacher’s contract accordingly. Considering the healthcare provisions of the former TESD contract, made it even more surprising to learn the details of the health care benefits of TTPA.

If some residents were bothered by the health care benefit package contained in the previous TTEA contract, I think they would be shocked at the level of TTPA health care coverage. Currently, all Tredyffrin police officers receive free full lifetime health care benefits for themselves and their families after 25 years of service to the township. At present 52 retired police officers and families, receive full free healthcare in Tredyffrin Township. In addition there are a number (not sure of the exact count) of currently employed police officers that are in the 25+ years of service who will receive this lifetime healthcar coverage under the conditions of the existing contract.

The lifetime healthcare benefits of TTPA constitute the township’s $40M unfunded liability. According to Kichline, the lifetime health care benefits afforded members of TTPA in their current contract, is not found in most other area municipal police contracts. Here was an interesting twist — I assumed that any change to the current health care benefit of TTPA would affect new hires only (similar to what is being discussed in Harrisburg as it relates to the pension situation, where changes would not affect those employees already in the system). It is possible (however, probably not likely) that the independent arbitrator could change the lifetime healthcare benefits to affect not only new hires, but also include TTPA members already receiving these benefits. As I have previously stated re the state pension, I support changing the benefits for new hires but not for those employees already in the system. I am of the same opinion that the same should hold true for members of TTPA. The healthcare benefits should only be changed for new police department hires – however that means the township still has the $40M unfunded liability ‘noose’ around its neck!

We spent much time during the meeting discussing the township’s $40M unfunded liability. In the proposed 2013 preliminary budget, Klarich has increased funding from $250K to $500K as a way to start to buy down this debt. A couple of the residents in attendance were advocating for a greater yearly contribution, say $2M annually, as a way of addressing the $40M debt.

Personally, I think there should be a degree of concern that this enormous liability of $40M could have an adverse effect on the township’s current AAA bond rating. On the other hand, is it reasonable to expect that Moody’s would view the township’s yearly $500K contribution favorably and continue to award the township with its gold star rating? Remember at $500K/year, it will take the township 80 years to reach that $40M mark.

Knowing that the township has an open issue on the TTPA labor agreement and the $40M unfunded liability, what is the answer? I get it that we all want to keep the highest level of service in our community and pay nothing additional for those services, but practically speaking that is not possible. Beginning in 2015, the state is requiring all municipalities to include their unfunded liability in its accounting.

There are few avenues available to the township to handle the staggering debt beyond an increase in our real estate taxes … except for the option to institute an Earned Income Tax. Unlike the School Board, the township supervisors would not need a voter referendum to institute this tax. The topic of EIT was brought up at the meeting, there appeared to be little interest in furthering the discussion. Although not seen as a favorable option by some, shouldn’t there be serious consideration given to an EIT?

How many Tredyffrin residents work in another jurisdiction that has an Earned Income Tax? If they do, the EIT dollars the Tredyffrin resident pays stays in that jurisdiction because our township does not have an EIT. There has always been much misunderstanding about who would pay an EIT but unearned income, such as Social Security, interest, dividends and pensions are exempt from the tax unlike an increase in property tax which affects all homeowners, whether they are on a fixed income or not. I have struggled to understand why it is that the supervisors are reticent to consider the option – especially considering that most of our neighbors have an EIT and many of our residents are already paying this tax. Millions of dollars leave Tredyffrin in EIT payments, helping to subsidize the budgets of neighbor’s budgets.

The proposed 2013 preliminary budget for includes a 5.5% tax increase in addition to a decrease in the police staff. Part of the rationale behind not replacing police staff is that any new hires will come in under the conditions of the last TTPA contract, which includes the lifetime healthcare benefit. If the arbitrator were to come back with a contract that removes the lifetime healthcare benefit, it would be financially better for the township to wait until after the new contract is signed before hiring new police staff.

Again, no one wants to pay additional taxes but how much longer will it be OK with Tredyffrin residents to see their services reduced in order to balance the township budget? What happens if the $40M unfunded liability jeopardizes township’s AAA bond rating? And what about capital improvements, ongoing maintenance and infrastructure needs of our community? With residential and commercial real estate transfer revenue way down, what is the funding solution for Tredyffrin … if it isn’t raising real estate taxes or instituting an EIT? What’s the answer?

What about the Tredyffrin Township resident who pays EIT to another municipality when it could be helping this community? How does that resident feel – below are comments from John Petersen, a resident who pays EIT to a neighboring municipality:

Ever since the Tax Study Commission Report of 2006 was released, I’ve called it an intellectually dishonest exercise. I said that and continue to say that because of the factors that were willfully ignored. The unfunded pension liability under discussion was one of those factors. Back then, the unfunded liability was estimated to be around $25MM. As predicted, in a short amount of time, that figure has doubled. I remember Bob Lamina prophetically saying at a BoS meeting that this issue was the most significant one facing the township and the township will have to face up to this impending reality.

I pay an EIT – as do thousands of Tredyffrin residents. I for one am tired of being disenfranchised by this government – a government run by the TTOP proletariat that refuses to discuss an EIT. Not that the points have to be enumerated again, I will do so here:

  • Many pay an EIT already
  • Surrounding governments plan their budgets around the fact that Tredyffrin DOES NOT levy an EIT (read as we subsidize other townships)
  • Had an EIT been levied years ago, part of the unfunded liability could have been paid off
  • An EIT is the only means of providing property tax relief
  • At least one large company (Shire) is leaving Tredyffrin for East Whiteland (that does levy an EIT)

Indeed, there are some who will be adversely affected. Those who live in and work in Tredyffrin. I believe that to be an extreme minority of people. Regardless, the realities of the situation are such where an EIT must be discussed.

I won’t bother getting into who one particular political organization has sucked the oxygen out of the room re: stifling the conversation or how the opposing party has succumbed to fear by adopting the same philosophy re: the EIT.

Bottom line – I pay tax dollars that could make their way to Tredyffrin. The local government is denying that right and in the process, disenfranchising those like me who already pay an EIT.

Maybe at long last, there can be an honest discussion.

PA School District’s Financial Problems … Taxpayers Draw the Short Straw

Pennsylvania State Education Association (PSEA) the state teachers union recently released a study, Sounding the Alarm, which looks at the financial crisis in school districts across the states. The paper examines how districts are being forced to cut educational programming to meet the demands of school budgets because of the public schools financial crisis.

The PSEA report identifies the following five key problems that have combined to create a financial crisis in the public schools.

1. State Budget Cuts. Unprecedented state funding cuts and the elimination of key funding programs have compounded underlying, systemic problems, particularly for lower-wealth districts.

2. Charter School Payments. Charter and cyber charter school laws result in a net increase in costs to school districts.

3. Declining Tax Bases and Rate Limits. Declining local property values and caps on property tax increases have eroded school districts’ tax bases and curtailed their ability to raise much-needed revenues.

4. Underlying Fiscal Weakness. School districts showing the greatest underlying financial weakness had fund balances averaging 1.27 percent of total expenditures. These districts tend to be relatively small, rely heavily on a single source of revenue, have a small amount of buffer within their budgets, and carry a heavy debt load. They range in type from urban school districts, to small districts in the coal regions and Monongahela Valley, to rural districts in the central and western parts of the state.

5. Pension Cost Increases. A decade-long “holiday” that allowed employers to avoid paying their share of retirement contributions, coupled with investment losses from 2008 and 2009, forced the current increase in employer payments.

In the Education section of today’s Philadelphia Inquirer, we learn that Philadelphia schools may not be opening in September due to a budget gap for 2012-13 of $218 million! The school district officials are hoping that the five unions operating in the Philadelphia public school system will ‘giveback’ $156 million to help next year’s budget. There is discussion of privatizing the custodial services; officials think they can raise another $50 million from maintenance, transportation and custodial cutbacks. Even if this wishful thinking translates into a reality for Philadelphia public schools, they figure they will still end up short by $94 million.

In the meantime, Mayor Nutter is trying to collect $90 million in taxes for the school district next year by shifting to AVI (Actual Value Initiative) system for property taxes. Nutter claims that the new system will more accurately indicate the increase in market value of properties in the city but includes two tax hikes to Philadelphia’s properties owners.

Whether it’s PSEA or Mayor Nutter in the city, why is it that the solutions have one thing in common – the burden falls to the taxpayer with increased property taxes. I’m really struggling to understand how taxpayers are going to survive the increases in the tax bills. We all want the quality of the school districts like T/E maintained, we get that our property values are tied directly to the desirability of the educational program but … if the residents can no longer afford to live in these communities, than what difference does it make?

Layer the state funding cuts with the teacher’s pension and health care benefit cuts and add in the community’s demand for excellence in the schools and you are left wondering how are the school districts supposed to balance their budgets? Answer seems simple … either decrease spending or increase revenue. Problem is that the school boards are finding themselves left with few options short of jeopardizing the quality of education, as they discuss options to increase revenue. One of the more unfavorable budget strategies left on the table is demotion of professional staff for economic reasons and increasing class size. Of course, there was another revenue source but that option was not taken to the voters — the Earned Income Tax. It was decided that it would not pass a voter referendum. While that is probably correct and an EIT would not have passed, I wonder how the community is going to feel about increasing property taxes and possible decreasing property values.

Like many people in this community, I too feel the frustration as we sit on the sidelines of the District’s budget discussions and watch for updates from the teacher negotiation talks. I have asked for transparency in the negotiation process but apparently, that is not to be … interesting to note however that in some parts of the country, teacher contract negotiations are held in the public. For instance, in Idaho the state law allows public attendance at all labor discussions.

Below is a comment for Community Matters from a resident that shares his/her frustration:

Comment from ‘Damage Control’

T/E Budget Crisis Solved!

Move to Haiti. Yes, you’re reading this correctly— move to Haiti. Students, teachers, administrators, board and taxpayers – move to Haiti! … where they use rags as soccer balls, bicycle rims for basketball nets, parking not an issue. Teachers get paid $5,000 per school year, administrators reap $7,000 and yes, like all the other districts, the superintendent makes $10 worth of stogies (not stoga’s). Best of all, UNICEF and the Salvation Army “underwrites” the entire school system!

School board, what nerve you have in asking non-profit organizations to help with a bailout. I am not a teacher nor do I have children in attendance. I’m just an old taxpayer who sees the “writing on the wall” with this school board and this particular cost savings “strategy” is one of the reasons that prompted me to write this piece.

How dare you! How dare you ask non-profits for a handout when you have $30 million in reserve! You say this reserve money is set aside for rainy day issues, sick day payments, retirement, etc.—Total BS and I don’t mean in a masters or PhD degree sense! How dare you ask these non-profits when your net worth far exceeds any amount these local non-profits could attain even if they all pull together!

Aretha Franklin sang about RESPECT, Rodney Dangerfield got more. You, the board, gave NO respect to Ms. Whittaker, the TEEA president at the last school board meeting. Granted, you announced and stressed at the meeting that only TE residents could speak—a.k.a.—allowed to be heard. Excuse me? Is Dr. Waters a resident? He speaks at school board meetings and he commutes from a different time zone!!! And, by the way, who pays for his gas—TE resident tax payers do! A TE resident voiced that the TEEA president be heard—you board, denied that request. By denying Ms. Whittaker the 1st amendment right of every American, you fired the “first shot” deep into the bowels of the TEEA ship.

Am I just blowing smoke? Don’t think so. Threats of cutting family coverage without ability to purchase such coverage, demoting top educated and experienced teachers, over-crowded classrooms, etc. will only bring together teachers, students, parents and the many news cameras and media to every school in this top-notch and one of the richest school districts in America come this September. Lines drawn, let the battle begin—what a shame! There will be no winners.

No EIT for Tredyffrin Easttown School District in 2012!

Based on Ray Clarke’s notes below from the Finance Committee and the School Board meeting on the Earned Income Tax, sounds like it was quite a night! First off, the big news to report — there will be no EIT voter referendum question on the April primary election ballot. The same two people, Kevin Mahoney and Anne Crowley, favored taking the EIT to the voters as they voted similarly in October 2010. Please read Ray’s comments and I would like to hear from others who attended the meeting last night.

A couple of fascinating school district meetings last night. Bottom Line: a motion to advise the townships of a possible intent to put an EIT on next year’s ballot was defeated 7:2 (Mahoney, Crowley).

My own take, but watch the action for yourselves….

The usual arguments were rehearsed by both Board members and audience, but the ones that I felt carried the day were that “now is not the time” and “we’re going to try really really hard to get Harrisburg to find another of your pockets to take the employee pensions from”. Dr Brake had a well-reasoned position that also made the point that the current political climate would not allow a thoughtful debate and the Board could avoid “roiling the community” further by not putting it to referendum now.

But that was not what kept this audience member awake. Just about every board member (campaigning or not) berated the political machine for the campaign tactics.

Dr Brake contrasted legitimate “contrast pieces” with “offensive” “making stuff up”. Then Republican operative Tom Colman launched a defense of the election tactics, and acknowledged that he had orchestrated a personal campaign against the Act 1 tax in 2007. That brought up Jenny Wessels to state that she had been miss-represented in the campaign and to commend the Board for their non-partisan approach. Then followed Debbie Bookstaber, in a long soliloquy berating her colleagues for their political statements. Must see TV!

A few interesting audience comments:

Ed Sweeney: strongly against an EIT and wants the tax policy to attract the “right people” (high income earners?)

Melody Price: a thoughtful appeal for a balanced approach that considers all potential solutions.

Unknown audience member: “three words – Taxed Enough Already” (that was helpful!)

Barbara Morosse: There is more expense for the district to cut, including through teacher salary structure changes.

Notable board member comments:

Rich Brake: wants to completely recalibrate the teachers’ contract, do away with the matrix.

Kevin Mahoney: a) lest anyone thinks that companies are not interested in property taxes, consider the multi-million dollar GSK assessment appeals, b) maybe school districts should be freed up from rules that limit investment options to be able to earn returns like UPenn endowment’s 15%

Betsy Fadem: Don’t think we can use the Fund Balance to balance the budget because the School Board has committed it….

Which brings me to the evening’s opening act, the Finance Committee. Four things to remark:

[1] The minutes that Pattye had puzzled over were corrected: the administration proposals for the $1.3 million funding restoration were not authorized by the last Finance Committee but referred back to the Education Committee.

[2] A discussion of the Fund Balance commitments, which include $7.6 million of “vested employee services”, along of course with $15.4 million of “future retirement plan stabilization”. The accounting is much different to the GAAP I’m used to, but here’s my takeaway:

  • These amounts are based on arbitrary board policies
  • The PSERS commitment is based on the next five years, the employee services on almost but not quite the full lifetime liability
  • They are only commitments to the extent that it takes a Board vote to change them
  • Few if any other school districts have a commitment for vested employee services, and pay as they go.

So, “vested employee services” appears to be another way to sit on taxpayer money without fully revealing what the actual liability is, what the additions and payouts are from year-to-year, and where the funding for the liability comes from. And, in general, the PSERS liability is going straight up for the next 5 years, holds flat for the next 10, and then starts to decline. So would the policy mean that the district sequesters say $25 million of taxpayer money until that decline starts in 2025 or so?

I think that Mahoney committed the next Finance Committee to review the policy. At the very least it would be good to know exactly how all this works, and why it is that TE policies need to be different from other school districts.

[3] Groundwork laid for the ongoing property tax-to-the-max strategy: next year’s Act 1 Index estimated at 1.7%, Exceptions for PSERS and special education 1.7%, total property tax increase 3.4%, $2.9 million.

[4] The fourth thing was …… err ……. ooops …… oh yes:

The Finance Committee approved a contract with a marketing agency for selling promotional space on district property. The net annual revenue to the district is projected to be $160,000. The agency was the only one that responded to the district RFP. The contract states that the District has to approve all content, sponsors, advertisements; in the meeting it was stated that the Board approval is required.

If I think of any else, I’ll add it as a comment.

Decision Time – Will T/E School Board Directors Vote in Favor of an EIT Voter Referendum Question?

Monday night is a case where I would like to be in two places at once . . .

Tredyffrin’s township finances and the proposed 2012 budget is on the Board of Supervisors agenda at 7:30 PM while the T/E school directors will hold a Finance Committee meeting at 6:30 PM followed by a special school board meeting at 7:30 PM to discuss the EIT. (Both school district meetings will be held in Conestoga HS cafeteria). I will attend the Board of Supervisors meeting and I am counting on my friend Ray Clarke to attend the school district meetings.

In reviewing the agenda for the T/E Finance Committee meeting and the draft minutes from their October 17 meeting, I read the following:

Education Committee Recommendation:

At the prior Finance Committee meeting the Committee was informed that the State reinstated $1.3 million in funding that was not included in the District’s 2011-12 budget. In light of this information, the Committee authorized the Superintendent to restore education program cuts made in the 2011-12 budget. Dr. Richard Gusick presented the proposed reinstatements of budget cuts to the education program and explained that they were already reviewed by the Education The Finance Committee asked that the proposal to reinstate these budget cuts be presented at a future Board meeting.

I am confused. Although I was aware that the State had reinstated $1.3 million in funding to the T/E school district, I was not aware there was a decision as to whether (1) restore the district’s education programming cuts or (2) add the money to the fund balance.

According to these minutes, the Finance Committee (or Education Committee?) authorized the money go to restoring education program cuts. Restoring which programming cuts? Latin in the Middle School? Foreign language in the elementary school? Technology purchases? Specifically, which education program cuts did the committee authorize restored? In addition, are we to assume that the option of adding the $1.3 million to the district’s fund balance is off the table for consideration? These are questions for the school board directors at Monday’s meeting.

I also noted that the Finance Committee meeting minutes indicate that the school district will wait until 2012 to release a RFP for the outsourcing (if needed) of custodial services. It is not clear at this point if custodial outsourcing will be on the budget reduction strategy list.

Immediately following the Finance Committee meeting tomorrow night, the school board will hold a special meeting at 7:30 PM to consider notification to Tredyffrin and Easttown townships of the intent to levy an EIT. November 16 is the deadline for the School Board to provide the townships with notification so the board will be taking a vote at this special meeting. The school board will vote on whether to include EIT as a voter referendum question on the primary election ballot on April 24, 2012. For school districts to levy an EIT requires voter approval. The maximum that TESD could levy is 1%. If approved by voters, all residents, including renters, in Tredyffrin and Easttown Townships would be taxed at 1% on earned income. If an EIT were to be approved, the townships have the legal option to request one-half of the 1% collected by the school district.

Leading up to Election Day, we watched as EIT become the ‘buzz’ word of the local campaign season. Early on, the local Republican Party took a stand against an earned income tax and furthered the issue by labeling the Democrat candidates as EIT supporters. Feeling the pressure, all the Democratic school board candidates responded that ‘they’ were personally opposed to an earned income tax.

The politicizing of the EIT prior to the public presentation of TESD’s tax study group troubled me. The EIT became a political football between the local political parties and in my opinion, damaged the community’s ability to completely understand the EIT as presented by the tax study group. Not to mention the confusion that occurred at the polls on Election Day! Three different precinct judge of elections have reported to me that there were some confused voters — asking where the EIT question was on the ballot. Based on the campaign mailers and political signs, many in the community came to the polls on Election Day expecting to vote on the EIT issue.

Now that we are on the other side of the election, how can newly re-elected school board members Karen Cruikshank (D) and Jim Bruce (R) now vote in favor of taking the EIT issue to the voters. I do not know whether re-elected Easttown school board member Pete Motel (R) made a public statement one way or the other re the EIT. Based on the pre-election political hype of the EIT, the vote count of the school board members will be interesting. Will we see the school board members following the lead of their political parties?

If the school board members vote in favor of an EIT voter referendum question on the April primary ballot, do many of us really think that the residents would vote in favor of this new tax. During the school board budget cut strategy meetings, there were residents asking for tax increases vs. further educational programming cuts.

Faced with the possibility of further programming cuts in the next school district budget, would there be sufficient support from voters for an EIT?

Is EIT the answer for T/E School District — Tax Study Group Presents their Pros & Cons

Election Day is Tuesday and based on campaign mailers, signs and general rhetoric that we were voting on the Earned Income Tax. The EIT is not an issue for us on Election Day, at least not this election.

Much of this campaign discussion on the EIT stems from T/E School Board decision to form a Tax Study Group as part of their budget development process. The goal of the committee of eight volunteers, including Michael Abele, Michael Benning, Rita Borzillo, Marie Falcone, William Mullin, Terri Smith, Andrew Snyder and Edward Stevens, was to study the effect that an EIT would have on the residents and the school district and provide the pros and cons.

The Tax Study Group held 5 public workshop meetings and presented their findings yesterday at two public meetings. Based on the Tax Study Group’s findings, the school board will make a decision whether to include the EIT question on the April 2012 ballot. If the EIT question is placed on the primary election ballot in April, community members will hopefully be able to make an informed decision.

Although I was not able to attend the EIT meeting due to a prior commitment, it is my understanding that both were well attended. I am on record as saying that I believe the process for a fair and open discussion of the Earned Income Tax has been tainted by the last few weeks of campaign politics from school board candidates. Serious economic issues are going to continue to affect our school district and cause many challenges to the school board facing the 2012-13 budget and teacher negotiations.

If you were unable to attend either of yesterday’s public meetings by the Tax Study Group, the EIT presentation will be aired on TETV, Comcast Channel 14 and Verizon Channel 20 at 9 PM daily from November 4 through November 14.

Ray Clarke attended yesterday’s Tax Study Group and offers his candid remarks from the presentation:

The Tax Study Group matinee played to a packed house – probably a hundred or more residents in attendance. I whole-heartedly encourage anyone interested in the fiscal and educational future of T/E to attend the evening performance. Of the 30 slides, two thirds are devoted to background – really important to place the discussion in its proper context. The pros and cons of the EIT were fairly presented, although not weighted nor compared directly to alternatives (it was not the TSG mandate to do that). The audience seemed engaged throughout, and the questions at the end added much to the discussion.

The elephant in the room: what will be the attitude of the Townships? Will they take 50% of any money the voters may want to apply to their children’s education? Easttown and Tredyffrin may be very different, and I think we all need to have a very long memory about campaign promises made by Tredyffrin Supervisors. (The $30 million TESD fund balance did not go unremarked as a short-term support).

A lot of hard work and thought went into the research and analysis, and in developing a communication that is accessible to everyone. Shows how important the process was and what a travesty it is to try to short-change it. Hopefully many voters will be able to see the evening performance or the video and draw their own conclusions.

Tax Study Group to Present EIT Findings . . . Will Yellow Signs by Republican Candidates Influence Residents?

As part of the budget process for the T/E School District, a Tax Study Group composed of community volunteers was formed to determine the impact of an earned income tax (EIT) on residents and the school district. The goal of the group was to identify the pros and cons of an EIT for residents and then present their findings in a public presentation to the community. The Tax Study Group will offer its findings on Thursday, November 3 at 1 PM at the T/E Administration office, 940 W. Valley Rd, Suite 1700, Wayne and again at 7 PM at the Valley Forge Middle School, 105 W. Walker Road, Wayne. Please plan to attend so that you can make an informed decision on EIT (in the event it is on the Primary Election ballot in April 2012.

I have expressed my disappointment that the Republican candidates (school board and supervisor) took an advance stand against an earned income tax prior to the presentation of the Tax Study Group. In fairness to the process, and to the volunteer’s time of those serving on the study group, why not wait until after the presentation of the EIT before publicly declaring that you are against it. The severity of our school district’s economic situation requires that all options be explored – the presentation by the Tax Study Group on the earned income tax is one of those options.

An ‘As I See It’ article written by John Petersen, resident of Paoli appeared in the Main Line Suburban newspaper a couple of weeks ago. The article was written shortly after the first bright yellow, ‘no EIT’ signs began appearing in the township. Because the article was not included on Main Line Media’s online site, I could not provide a link on Community Matters.

It is with permission from the author, that I include the article below:

As I See It: Those little yellow GOP signs: proof the GOP does not respect you

If you have been driving around Tredyffrin (since this is not a walking township), you may have noticed a new type of yellow growth sprouting up all over the place. Naturalists have classified it as Fungi Reipublicae. In fact, these yellow growths are actually a new version of the yellow GOP signs that we saw in 2007. These signs come in two flavors: “No Earned Income Tax” and “Top Ranked Schools.” Both cite that you should “Vote Republican”. Let’s break down the claims.

No Earned Income Tax

This sign would have you think that there is an active question in front of the voters and that if you vote Republican, you will be saved from the evils of an Earned Income Tax. Let’s set aside the fact that many already pay an EIT for a moment and instead, concentrate on the straw man argument that Tredyffrin GOP is perpetuating. In fact, there is an earned income tax study committee that has been commissioned by the school board. That committee was first suggested by Republican school board member Kevin Mahoney. To review, there is no active tax question in front of the voters and the only group that is studying the feasibility of an EIT in Tredyffrin was suggested by a Republican.

Top Ranked Schools

It’s true, T/E Schools are quite good. The Tredyffrin Republican Committee would have you believe that Republicans, and Republicans alone are responsible for our “top ranked schools.” In fact, there are a number of Democrats on the school board. I guess they have nothing to do with the successes. Fine, let’s give all the credit to the Republicans. But if we do that, let’s examine the whole cloth. Of Lower Merion, Radnor and T/E, is T/E the best? In terms of facilities, absolutely not. While T/E has retrofitted old buildings, both Lower Merion and Radnor have made a commitment to invest in infrastructure, the type that is required for children to get a top-notch public education in the 21st century. As for test scores, college acceptance, etc – Lower Merion and Radnor are at least as good as T/E.

How about labor relations? T/E is definitely not at the top of the class there? How about fiscal responsibility? T/E is about 9 Million in the hole. You know all of the sweetheart deals for teachers the Republicans are complaining about? Guess what, it’s the Republican led school board that has consistently given the unions what they wanted. At the same time, they are not keen on paying for it. Those same Republicans have consistently raised our property taxes year after year. And yet they are the same people who claim to be protecting us from the evils of an earned income tax.

Any organization that would try and sell the political rhetoric that we see in these yellow signs clearly does not respect their customer. The Republicans believe that we are all too stupid and too quick to fall into the fear trap. The Republicans are banking on the fact that we will believe the scare tactics that the other side is just out to tax and spend our money. Seems to me, the Tredyffrin Republicans have done a good job of that on their own already. They don’t need help from anybody! And never forget, the Tredyffrin Republicans is the party of Bob Lamina, and Paul Olson. If that is not enough reason to give the Tredyffrin Republicans a vote of no confidence, I don’t know what is.

John Petersen
Paoli, PA

 

T/E School District’s Tax Study Group Kicks Off Earned Income Tax Process

The T/E School District held its first meeting of the newly created Tax Study Group. Thank you to Ray Clarke for attending and providing Community Matters with his personal observations and comments. I spoke at length with Ray in regards to the meeting. Based on our conversation and Ray’s notes below, it looks like the Tax Study Group could use the assistance of a tax attorney. If there is someone living in Tredyffrin or Easttown with that expertise, perhaps they could offer their assistance in the school district’s EIT project.

Below are Ray Clarke’s comments from the Tax Study Group meeting:

The kick-off meeting for the TESD Tax Study Group (TSG) was held on Thursday. It was a long meeting, focused on bringing the TSG up to speed on basic district financial and demographic information. The TSG clearly has a long way to go, but at the end some organization emerged that leaves me hopeful for the outcome. I think it will be important that they formalize a way to get direct community input. Some observations:

  • The TSG was supported by Art McDonnell and the same consultant from the PSBA that worked on the 2006 exercise. A majority of the Board was in the audience, plus Tredyffrin Supervisor Mike Heaberg and about half a dozen community members.
  • The core of the meeting was a presentation of basic district data by the consultant. Hopefully the large binder will be a good reference, but more focus might have helped. Also, much of the data was dated and there were a disappointing number of mistakes – one important one alertly caught by Ed Stevens of the TSG. But, good info on the district’s personal income and assessed values, both trends and distribution, which will definitely be important factors in the analysis.
  • My selection of good TE rules of thumb and factoids for armchair analysts (it was stated that the materials will be available on the TESD web site):

– $2.3 billion of personal income

– $5 billion of property assessment, distributed according to the 80/20 rule.

– Median household income for Tredyffrin ~$100,000, for Easttown ~$130,000

– 25% of the TE population under 18;

– 16% over 65 (both percentages higher in Eastown and lower in Tredyffrin).

– Huge bubble in earned and personal income in 2007 – up more than 30% over the previous year.

  • TSG organization: William Mullin emerged as the organizing force.
  • No meeting on September 29th; other meetings will last from 7 to 9:30pm. Possible final presentation to the community on November 3.
  • The objective of the TSG was reinforced many times: to present a set of Pros and Cons to the Board for consideration. In my opinion the TSG will provide the greatest service if it ensures that the set is driven by data and analysis, not anecdote.
  • One important area for up-to-date, authoritative data: what will be the impact of an EIT on Philadelphia workers? Can TE levy an EIT on those wages, or otherwise get any benefit (gaming revenues?). Under what conditions, and what are the (quantified) odds of those conditions applying? This will have an important impact on the possible revenues and the number of residents affected.

TESD Finance Committee Notes, Including EIT Tax Study Group Members

As I was attending the Board of Supervisors meeting last night, I imposed on friend Ray Clarke to attend the Finance Committee meeting. Ray graciously attended and submitted his notes from the meeting for our review. I was pleased to see that the District released the information on the custodial outsourcing bid process. It is important for the integrity and transparency of the process, that the public receive the information – and I thank the school board members for providing it.
As Ray details, the 9 members of the EIT Tax Study Group have been chosen and were announced at the Finance Committee meeting. The members of the group include Michael Abele, Michael Benning, Rita Borzillo, Marie Falcone, William Mullin, Terri Smith, Andrew Snyder, Edward Stevens and Lauren Walsh. I am sure that you join me in thanking these community members for agreeing to serve on the tax study group.
As always, thank you for your notes from the meeting Ray — we are all most appreciative!
TESD Finance Committee Notes – Ray Clarke
Some important topics discussed at the Finance committee meeting:
1. This year’s projection. Revenues and expense roughly equal, without the budgeted $1.3 million from the Fund Balance. Helped of course by the PSERS rate reduction and internal programs more than offsetting revenue reduction. Somehow the district again manages to extract more money from taxpayers than is needed, and that will be especially true next year, with the just approved budget set for all worst contingencies. (Included is a just-received $225,000 bill from Blue Cross for 2009 expenses – a hazard of self-insurance [previously T/E was with the County consortium] that speaks to the need for long run funding, see later).
2. Fund Balance commitments. Regulations require the commitment of the fund balance for specific purposes. Previous designations seem to have been much looser and Finance Chair Mahoney is requiring a thorough analysis of the policy in the new context. The previous policy was to designate 5 years of PSERS increases vs the current year for “PSERS stabilization”. Which arithmetically means that the fund balance can only be accessed for stabilization when the cost starts to diminish (out in 2025 or so). Alternatively, should the balance be used when the increase is in fact ramping up, to mitigate the increase? Alternatively, should we not in fact assume that the state will have to come up with alternative funding anyway, and so return T/E’s money to the local property taxpayer? There is not enough money for the full five-year increase, as it is now anyway. Plus there is a need for a mechanism to smooth out health care costs in self-funded situation. An important issue.
3. Custodial out-sourcing. There were four bidders, all of which invested considerable time in their bids. The lowest bidder was Aramark, with a “base bid” of $1.3 million which was at least $500,000 below the others. The Administration concluded that the total cost would have been about $1.7 million, which they compared to the projected in-house cost of $2.6 million. If I have it right, the TENIG overtime changes and salary increase waiver (all TENIG members, not just custodians) closes $450,000 of the $900,000 gap. Of course, in future years as TENIG rates increase and PSERS rates escalate, the cost comparison for the out-sourcing solution will become more compelling. Hopefully all sides will continue to work on a satisfactory long run solution.
4. EIT study group. Members announced: Michael Abele, Michael Benning, Rita Borzillo, Marie Falcone, William Mullin, Terri Smith, Andrew Snyder, Edward Stevens, Lauren Walsh. As Pattye has reported, the selection process was based entirely on the demographics. Each applicant assigned a random number (1 to 186 total applicants), then the administration started from number 1 and filled up the various categories (6 T/3 E, 4 EIT/ 5 No EIT, 1 retired, 2-3 with school-aged children, 1 business owner, I renter, plus loose “as many age brackets as possible”, and “both genders”. Apparently they had to get down to #150 to fill all the categories. The essays only used to exclude those who had written “grossly inappropriate remarks” (none of those!). The group will meet six consecutive Thursdays starting the Thursday after Labor Day, and hold two “information sessions” for the public. A consultant from the PSBA will provide “information and data”. All meetings will be open to the public and hopefully will be used to solicit ideas for analysis and issues relevant to the Board’s decision on a referendum.

What Does the EIT Tax Study Group and Sidewalks at St. Davids Have in Common?

Tredyffrin Township’s Board of Supervisors meeting is tonight, 7:30 PM at the township building. The T/E School Board’s Finance Committee meeting is also tonight, 7:30 PM at the school administration building. Looking at the agendas for both meetings, there are topics of interest.

According to the agenda for the Finance Committee meeting, the nine members of the EIT Tax Study Group are to be named at tonight’s meeting. There were at least 150 applications received from residents by the June 15 deadline. The selection criteria for members of the tax study group was agreed upon by school board members attending last week’s Public Information committee meeting. It is the intention of the school board that those residents chosen to serve on the tax study group will represent a cross-section of Easttown and Tredyffrin residents.

In addition to the EIT Tax Study Group on tonight’s agenda, I noted with interested that the Finance Committee will present the custodial outsourcing bid results. It is understood that the recently passed 2011-12 school budget includes continued custodial service provided by the non-instructional union, TENIG. For public information, it is important that the school district release the results of the custodial outsourcing bid process. Going forward, it may not be economically possible for TESD to continue to retain TENIG for custodial services and the bid results will offer a starting point for future contract considerations. I am glad that the school board decided to release the outsourcing bid results.

The long-awaited public hearing on the proposed sidewalk amendment and sidewalk fund ordinance was scheduled for tonight’s Board of Supervisors meeting. The homepage of the township’s website still lists the sidewalk public hearing; however, the public hearing is off tonight’s agenda and has been postponed until July 18. I am not sure why the public hearing has been postponed . . . the 2010 sidewalk subcommittee presented their results to the supervisors several months ago, the planning commissioners have completed their proposed sidewalk ordinance, and the supervisors have received the Planning Commission’s sidewalk ordinance recommendations. So why postpone the public hearing?

Any discussion of sidewalks in Tredyffrin brings up the elephant in the room . . . and that would be the sidewalks at St. Davids Golf Club (actually it’s not a sidewalk, but a walkway!). How many years ago was the original land development agreement signed between Tredyffrin Township and St. Davids signed? Answer: 6 years; the agreement was signed in 2005. How many times did St. Davids Golf Club go the Planning Commission seeking relief from building the sidewalks and how many times was their request denied? I think the answer is 4 requests and 4 times denied.

In December 2009, the Board of Supervisors voted to name a yearlong sidewalk subcommittee to review the sidewalks, trails and paths throughout the township and to make recommendations for where they should be in the township. After a year of meetings, the subcommittee presented their report earlier this year; and the sidewalk at St. Davids Golf Club was included on their list. Next, the supervisors instructed the planning commissioners to review the sidewalk ordinance and make a recommendation for an amendment to include a ‘Sidewalk Fund.’ The Planning Commission complied – the work is now completed and their recommended ordinance amendment now rests with the supervisors.

This takes us down ‘Memory Lane’ but brings us back to the starting point, which is where do we stand on the sidewalk at St. Davids Golf Club? To be clear, the existing land development agreement between the township and St. Davids is separate and apart from any proposed township sidewalk amendment ordinance. For the last eighteen months, the St. Davids sidewalk has remained an open issue and I believe that the time has come for the township to enforce their land development agreement with St. Davids.

Here’s hoping that the Board of Supervisors agree and that the St. Davids sidewalk issue can be put to rest, once and for all . . . at tonight’s meeting. The township’s elected officials need to enforce the 6-year old land development agreement with St. Davids and require the construction of the walkway.

TESD’s EIT Tax Study Group . . . You Have until Midnight Tonight to Apply!

I attended the TESD Public Information Committee meeting yesterday . . . primarily to fully understand the selection process for committee members and the mission of the Earned Income Tax (EIT) Tax Study Group.

Several months ago, the T/E school board decided to create a citizen tax study group and sent postcards to Tredyffrin and Easttown township residents asking those interested to fill out an application and submit it to the school district – tonight at midnight, June 15 is the deadline.

According to the application, “This citizen group will study the effects that an Earned Income Tax (EIT) would have on the School District and its residents. Following its study, the Tax Study Group members will present the pros and cons of an EIT to the School Board and the community. Tax Study Group members must be willing to be introduced publicly as the Tax Study Group and be willing to present information at one or two televised meetings. The Tax Study Group will meet up to eight times in September and October 2011.”

The EIT tax study group application contains 19 questions ranging from age, gender to level of education, profession, whether or not you currently pay an EIT and two important questions (in my opinion) Why do you wish to be a member of the Tax Study Group? and what particular expertise could you bring to the Tax Study Group?

Part of the Public Information Committee meeting agenda was to look at the selection process of the nine members that would form this tax study group. At the meeting, the school board members began constructing the process. As a means of distancing themselves personally from the members that were to be chosen, it was determined that it would be a blind, random choice based on specific criteria. For the sake of anonymity and fairness, the school board members would not know the names and addresses of the applicants.

I sat and listened as the five board members attending the meeting (Debbie Bookstaber, Karen Cruickshank, Kevin Buraks, Anne Crowley and Betsy Fadem) prepared their list of criteria in order of priority. Their order of priority of criteria for selection on the tax study group is:

1. 3 members of the group to be Easttown Residents; 6 members of the group to be Tredyffrin residents.
2. There should be a mix of people who (a) currently pay an EIT elsewhere; (b) those who are residents and work in the district and for which an EIT would be a new tax and (c) those residents that are retired and therefore would not be paying an EIT. It was suggested to include 4 members that currently pay an EIT and to include 5 members for whom an EIT would be a new tax.
3. 2-3 members should have school age children in T/E
4. Age of applicant
5. Gender of applicant
6. Renters
7. Business background

There were only 3 audience members at this meeting (1 Easttown resident and 2 Tredyffrin residents) and I sat rather impatiently listening to their criteria; not quite believing that what I viewed as the most important baseline criteria was not mentioned. As they were completing their list of criteria, I reminded them that at the school board meeting when this was originally discussed, it was agreed that the tax study group would be ‘apolitical’. I mentioned that the application had not addressed the poltical issue but recalled that Kevin Mahoney specifically suggested that current school board members and township supervisors as well as candidates for the school board and township supervisors be excluded from the group. I asked how those specific would be excluded if the names were not to be known in the selection.

To their credit, the board members immediately placed that at the top of the criteria and assured me that staff would pull any of those applications. Seeking further clarification, I asked about ‘former’ school board members or ‘former’ township supervisors – were their applications suitable. Yes. What about applicants with connections to the local political parties, were their applications suitable. The answer was yes. This suggests that Democratic or Republican committee people (or those individuals closely associated with local political campaigns) are suitable applicants for the tax study group. Attempting to further explain this study group needs to be apolitical, I suggested that when the 9 members of the group are known, the public will recogonize if these individuals are in the category of ‘political’. I have attended enough school board, finance and budget meetings to know that if 25 residents show up to any of these meetings, that is a lot of interest. Therefore, when I learned yesterday, they have received 150 applications, I do not think it is a stretch to assume that there may be some politics going on. I want this to be a very positive and informational experience for the community; not a tax study group that is tainted with politics. I am hoping that this Community Matters post will give the board time to reflect before the members of the tax study group are chosen.

The other troubling aspect of the criteria selection was that the 2 questions at the end of the application – Why do you wish to be a member and what particular expertise could you bring to the group were overlooked and may be all but forgotten in the selection process. It is important to have qualified people as members of this tax study group. We live in a community that is rich with residents with skills, background and expertise, so shouldn’t that be a major factor in the selection? In addition, ‘why’ someone wants to participate is also very telling and should be factored in the choice.

As for the actual process of the selection – it is my understanding that the decision will be made at the Finance Committee meeting on Monday, June 20. The residents chosen for the tax study group will be called and asked of their willingness to participate. All applicants will be put in to individual groups and the names randomly chosen. They feel that renters are needed in the mix and to date, there is not a single renter among the 150 applications. If you are a numbers person, happen to be a renter and want a seat at the tax study table, the odds are in your favor.

I hope that the EIT Tax Study Group selection process goes well and that residents are offering to participate for the right reason. I suggest the process be documented prior to the selection of the members; otherwise, residents are going to look at the school board members if there is a problem.

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