What will the high school really cost?

January 18, 2014 

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The State College Area School District’s State High project is a slam-dunk. There is 91 percent public approval, according to the school board’s opinion articles in the Centre Daily Times last weekend.

However, the board again evades the total tax burden. Before you vote on the May 20 referendum, understand the total tax numbers absent the hoopla.

Last summer, the State College school board asked voters how much tax increase they would approve for the State High project.

Half of “91 percent” answered 5 percent or less. According to the survey, 5 percent of respondents would support a $90 million high school.

Six months later, the cost is $115 million.

The district asks for an $85 million referendum and $30 million more weaned from the base budget.

In the survey, only 36 percent approved a 7.2 percent referendum tax increase. But the referendum question does not state the amount of the tax increase.

The board listened but did not hear.

Now the school board tours the community proselytizing for a more expensive high school, not a 5 percent tax-increase limit.

The $30 million more comes from expiring debt service (forget that tax reduction), most revenue growth, much of the district’s general reserves, reducing some essential services and limiting payroll growth to 1.9 percent (compared with 2.5 percent to 7 percent since 2006 ).

That is not likely.

As of the December finance reports, an $85 million debt would create a new tax of 2.75 mills for 30 years. The new tax is twice as much as the annual 1.14 mill increase for the entire base budget projected each year. Add 2.75 to 1.14.

Multiply 3.9 times your home’s assessed value and divide by 1,000 to see your total tax increase in dollars. The district’s online calculator does not show the total tax increase.

District finance reports show that exploding pension costs will be higher than the high school cost but fully included in the Act 1 limits. That is not probable.

The Public School Employees’ Retirement System is not a red herring; it is a red balance sheet.

The district is front-loading $8 million of $11 million designated pension reserve the first five years, thereby creating exceptional increases for taxpayers after five years. The strategy is to make the referendum look affordable in the short term.

We will pay more later.

A better solution is a $70 million referendum for 20, not 30 years; hence, a lower municipal bond rate, less annual debt service and a maximum 5 percent tax increase. It also would save about $50 million better paid for education or pension than bond interest.

The district’s bond credit rating (higher bond cost) of AA-minus — rather than AA or AAA — is a downgrade caused by the SWAP fiasco. We are still paying for that.

Our municipalities and school district share the same tax base. The county and every municipality in the school district held their 2014 budgets to zero tax increase.

How do municipalities do that? The answer is fiduciary responsibility and prudence.

By contrast, since 2004, SCASD has increased property taxes on average 3 percent each year. The district also receives the equivalent of 2 percent more from new property, transfer and earned income tax increases each year — for a total of 5 percent.

Now it asks for a new 7.2 percent increase from referendum as enrollment continues to decline.

A successful high school referendum may depend on the best value rather than the very best high school. It is the school board’s choice now; it is the voters’ choice on May 20.

To see comparative total tax tables, citations for this column and the PSERS enigma, visit StateCollegeWatchdog.com.

Don E. Gordon is a 30-yearresident of Patton Township. He comments regularly about school and tax issues in the CDT and on his website, www.statecollegewatchdog.com.

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