Towamencin Municipal Authority.
If and when Towamencin Township Board of Supervisors vote to sell their sanitary sewer system, either choice would have minimal impact on North Penn School District, according to district Chief Financial Officer Steve Skrocki.
During the district finance committee meeting Tuesday night, Skrocki said the sewer system is run privately by the municipality and the township has received proposals for the sale of its system. Skrocki said he spoke with Scott Shearer of Public Financial Management, the consultant firm tasked with analyzing the sewer system on what impact the sale would have on the district, as residents and a few school board members have inquired about it.
Skrocki said the district has eight separate metered accounts with Towamencin Township, the largest being North Penn High School. The district spends $40,000 a year on total sewer fees, on an average year, he said.
“I guess in the grand scheme of things, since we talked about a $302 million budget for next year, the amount spent is – and I wouldn’t even classify this as a rounding error – it’s like 0.0000 something of our budget,” Skrocki said, adding that the $40,000 figure was even less during the pandemic when school buildings were pretty much closed.
Skrocki said he inflated the current $40,000 per year cost for sewer rental fees with the sale of the system, and with keeping the system in-house.
“I came up with two different numbers of what we would be paying in 10 years. The difference came out to be $22,000 between the two,” he said. “It’s pretty de minimis in terms of the impact on North Penn School District.”
He said that because the district’s starting point is so low at $40,000 per year, the overall impact over 10 years really ended up being negligible.
“A $22,000 difference over that 10-year period, we would pay more if the sewer system were sold and it’s primarily because we would not reap the benefits of the increased homestead exemption,” he said.
Skrocki said the town hall presentation by PFM in Towamencin Township last week revealed that, even if Towamencin does not sell the sewer, there is going to be a rate increase. Thus, Skrocki analyzed the potential rate increase if the system is sold.
“Regardless of what happens with the Towamencin sewer, our rates are going to rise. The question is when and the question is how much. But they are going to rise,” he said. “There was mention of infrastructure upgrades that are needed, so the question is, is Towamencin going to pay for those upgrades, or are they going to sell the system and let the private entity pay for those upgrades? A rate increase is guaranteed.”
Skrocki said PFM’s analysis also showcased how revenue generated from the sale can benefit the township. Check out more on the PFM presentation and the interested bidders here.
“The analysis included what that meant for real estate taxes (and) included a mention that the homestead exemption that’s provided by Towamencin could increase, and basically leave property taxes frozen for a 10-year period,” Skrocki said. “North Penn School District is not eligible for that homestead exemption, so I did not factor any impact of real estate taxes into (my) analysis.”
Skrocki said the district does pay real estate taxes – about $2,000 a year – on the cell tower parcel at the former WNPV site.
“That is a revenue-producing parcel. We pay a small tax. I did not factor that into equation,” Skrocki said. “We are not eligible on homestead, and we pay no other taxes on our properties because we are exempt, and even if we were eligible for an exemption, we pay less than $2,000 in property taxes a year.”
Skrocki said Towamencin’s analysis indicated there would be a 136 percent increase over a 10-year period, if the system were sold.
“The first two years would be frozen, the third year would increase by 44 percent and then there are other varying levels of increases over 10 years,” he said. “If the system is kept by Towamencin Township, then an increase over 10 years would be 79 percent.”
Skrocki said the PFM proposal had other items in it that could have a corollary impact on the district. For instance, the township could use proceeds of the sale for upgrades to parks and recreation.
“These items are enhancements to the community and North Penn School District is part of the community. I would like to think, in many cases, the center of the community. So, any kinds of improvements to things like parks and recreation does have an impact on the larger community which then indirectly impacts North Penn School District,” Skrocki said.
Skrocki reminded the committee that any rate increase would have to be approved by the Public Utility Commission. At present, Towamencin does not need any such approval because it is not a regulated utility. The same would apply if bidder Franconia Municipal Authority, for example, purchased the sewer system.
“A regulated utility needs an approval to raise rates. A municipality does not,” he said.
Committee Chairman, and school board Vice President Christian Fusco, who is a Towamencin Township resident, said the sewer system sale is a big topic of conversation, and that even a de minimis situation impacts the whole of the district, despite the fact that it is concentrated in Towamencin.
“I will editorialize for myself and myself only, we as a school board, when we were elected in 2017, looked at the financial benefits of privatizing our bus fleet. We were concerned about what that would mean for control over the fleet, our ability to make decisions relative to the day-to-day operation or even the execution of routes day-to-day,” Fusco said. “We certainly had concern about charter schools, the budgeting mechanism for those, the privatization related to vouchers.”
“One of the other reasons I did want to do the due diligence on this issue is because, as elected officials, we still are responsible for answering to the people we serve about things like rate increases, tax increases and giving the community the ability to have their say at the ballot box whether or not they appreciate the decisions that we’re making,” Fusco said. “I’ve always found it concerning regardless —and again, this is me and only me – when government entities turn that responsibility over to private entities, and then that accountability piece is lost.”
See also:
To Sell or Not to Sell: Towamencin Board to Decide Sanitary Sewer Fate in May
Towamencin Inches Closer To Possible Sewer Privatization With Feb. 11 Bid Deadline
Editorial: Selling the Sewer System Would Be Bad for Towamencin (and Elsewhere)
