NASD may cut tax hike to 2.68 percent or less
As promised, the proposed tax hike for Northampton Area School District property owners will be cut. It's only a matter of how much.
The NASD school board will be asked at the 6:30 p.m. May 5 meeting to consider approving a 2014-15 district budget, calling for a 2.68 percent tax hike of 1.28 mills.
That increase may be reduced to a 2.47 percent hike of 1.18 mills.
Either is less than the 3.50 percent hike of 1.67 mills in the original board-approved proposed budget.
In their 20-minute PowerPoint presentation at Monday night's school board meeting, NASD Superintendent Joseph Kovalchik and NASD Business Administrator Terry Leh cited the district's recent debt refinancing windfall; a lower than expected Bethlehem Area Vocational Technical School (BAVTS) budget request and savings from teacher retirements as key factors in reducing NASD 2014-15 budget expenditures and, therefore, the tax hike.
Bond refinancing netted a $262,620.50 windfall. The BAVTS budget request was $83,000 less than anticipated. Six teachers are retiring. District retirement notification deadline was Feb. 1. Hiring new teachers at entry-level salaries will save $192,000. The 2014-15 budget calls for no new positions.
"These are the major changes. There were some minor ones," Leh said. The windfall, reduced BAVTS funding, plus the other items reduced 2014-15 budget expenditures by $517,000.
"That vote in May would not be the final vote," Kovalchik emphasized of next month's budget vote. Pennsylvania school districts must annually approve budgets by June 30. The NASD board next meets at 6:30 p.m. April 28.
The difference between the 1.28 mills and 1.18 mills would generate $105,000, to be applied to the 2014-15 budget contingency fund of $200,000.
This would provide an approximate $300,000 contingency fund which could be used for teacher hires should kindergarten enrollment spike over summer for the fall 2014 term, and-or for summer remediation classes for students who need to retake the Keystone exams, and-or for special education students. The Pennsylvania Department of Education (PDE) mandates remediation for students who must retake Keystones if they don't pass. Teachers might have to provide remediation during summer.
If there's a spike in kindergarten enrollment, two teachers may need to be hired. Salaries and benefits could use up the $200,000 now in the 2014 - '15 budget contingency fund.
"Are we going to need a teacher or two? We may not need any," Kovalchik said.
One mill in NASD equals approximately $1,059,000.
The PDE allows NASD an index of 2.5 percent for a tax hike. The district may raise taxes 2.5 percent, but no more without an exception.
NASD applied for and received a PDE exception for up to $691,045.
Kovalchik and Leh noted that the Northampton Area Middle School and Campus Renovation Project, with .37 mills budgeted annually, is not expected to be a budget item upon completion of the project. The district will need $400,000 less annually upon completion.
The district tax rate is now 47.71 mills. Based on the district average assessment of $57,503.79, a property owner pays on average $2,743.50 annually.
The first option, to be presented by the NASD administration May 5 for consideration by the school board, would be a 1.28 mills, or 2.68 percent, hike, for a proposed 48.99 mill tax rate, or $2,817.11 annually, which is an increase of $73.60 annually, $6.13 monthly or $1.42 weekly.
The second option would be a 1.18 mills, or 2.47 percent hike, for a proposed 48.89 mill tax rate, or $2,811.36 annually, which is an increase of $67.85 annually, $5.65 monthly or $1.30 weekly.
The third option is that school board members could push for a hike less than 2.47 percent.
School directors already backed a 1.67 mills, or 3.50 percent, hike, for a proposed 49.38 mill tax rate, or $2,839.53 annually, which is an increase of $96.03 annually, $8 monthly or $1.85 weekly.
The preliminary general fund NASD 2014-15 budget of $91,349,344, athletic fund of $173,569 and food service fund of $2,381,657 was approved unanimously 9-0 by the NASD school board at the Jan. 27 board meeting.
The school board also voted 8-1 to authorize the administration to request a referendum exception from PDE to permit the district to exceed its 2.5 percent tax hike cap. School board member Jean Rundle voted against the authorization.
Allowable PDE exceptions include construction costs and retirement contributions.
NASD is in the midst of an $80.7-million middle school and secondary campus renovation project.
School board member Dr. Michael Baird asked how the board could achieve a less than 2.47 percent hike.
"To get below 2.47 percent, you have to use unassigned funds and look at programs," Kovalchik answered.
To balance the 2014-15 budget, the district is using $1 million in unassigned funds.
Kovalchik and Leh pointed out that in recent years the administration has been using less and less in unassigned funds to balance the budget.
"At one point, we almost used $3 million," said Leh. "Last year, $1.2 million was used."
"We're trying to minimize use of the fund balance," said Kovalchik, who said that $1.6 million was used three years ago.
Kovalchik and Leh pointed out that using less and less of the unassigned fund balance boosted and helped maintain NASD's exemplary Moody's Aa3 credit rating.
"Through this middle school project, our fund balance has allowed us to get the rating and not have to use insurance [for bond refinancing]," Leh said. Not having to pay for bond insurance resulted in an additional $46,350 savings.
A big variable in budget deliberations is the PDE contribution.
"I've been here for five years and this is the quietest," Kovalchik said of the state budget with respect to PDE basic education funding of school districts.
"We are not even going to know until after the primary," said Leh, referring to the May 20 primary election.
Kovalchik and Leh listed 10 reasons for the tax hike, including increased health-care costs of $749,046; Pennsylvania Public School Employees' Retirement System increase of $1,793,466; middle school project of .37 mills; unfunded mandates, including Keystones remediation; special education level-funded for six years; Public Financial Management, Inc., district consultants, recommendation to seek a tax increase and PDE exception; unknown basic education funding; unforeseen staffing increases; reduction of $87,845 in federal funding; and unexpected special education student transportation and or staffing.
"The district needs revenue," Kovalchik said.
"If we get a Fed-Ex tomorrow," mused Baird, referring to the $175-million, 2.3-million-square-feet Fed-Ex Ground regional distribution center proposed for 253 acres that Lehigh-Northampton Airport Authority would sell for $9.6 million in Allen Township.
If approved, the first phase of the Fed-Ex hub could open as soon as next year, providing 800 jobs, $25-million in road improvements and generating added tax revenue for the NASD annual budget.