North Penn School Board votes ahead near-record tax increase

Taxpayers, get ready: North Penn School Board has voted ahead a tax increase that’s one of the largest in recent memory, for the 2024-25 schoolyear.

Board members voted unanimously on Tuesday night to include a 4.49 percent tax hike in the upcoming budget, a $197 increase for the average taxpayer that district officials say is meant to make headway on a long to-do list.

“This is about more than the high school. This is about three middle schools without air conditioning. It’s about those three sister schools: Gwynedd Square, Walton Farm, and Bridle Path, that are 30 years old. It’s about a $194 million capital project plan,” said Superintendent Todd Bauer.

“I am concerned with us not taking in the big picture, and thinking about just the high school,” he said.

High Act 1 level

Since the start of the year, staff and the board’s finance committee have held a series of special finance committee meetings breaking down the 2024-25 budget requests for each department, and outlining the implications of a record-high Act 1 index, the state-set percentage at which taxes can be raised each year without a voter referendum.

The 5.3 percent Act 1 index rate set by the state for 2024-25 is the largest snice that act became law in 2006, and in April the board heard projections of how each percentage in tax increase would generate roughly $2.1 million in new revenue for the district, at a cost of roughly $44 to the average residential property owner for each percentage increase, based on an average assessed home value of $150,000.

Those talks continued on Tuesday night, with Bauer and district CFO Steve Skrocki outlining the projected $312 million in revenues and $322 million in projected expenses for 2024-25, of which roughly 77 percent of the budget goes to salaries and benefits for employees.

That category is slated to increase by roughly $6.8 million in the upcoming year, along with roughly $460,000 in added costs for charter schools, just under $600,000 in contracted transportation costs, and a $2 million transfer to capital reserves for planned renovations to North Penn High School.

Investment income

The budget is also buoyed by a sharp increase in interest earnings due in part to high interest rates set and maintained by the Federal Reserve, Skrocki told the committee, and subject to drop if and when interest rates are cut.

“Our last couple of budget years, and this upcoming budget year, to a large degree, are being propped up by investment earnings. We are nearing investment income to the tune of, we’re probably going to reach over $9 million this year. These are numbers we haven’t seen in 20 years,” Skrocki said.

“In the 2021-22 schoolyear, investment income was around $750,000. We’re going to hit $9 million by the end of this fiscal year. So that’s $8 million-plus dollars added to the budget; you talk about money falling from the sky, this is money falling from the sky. My word of caution is: the party’s gonna end at some point. As quickly as that $9 million was earned, probably within two or three years that $9 million is going to be gone, or maybe $7 million or $8 million is going to be gone, and we’re going to revert back to around $1.5 million to $3 million” annually, he said.

Starting deficit

Even with that windfall, the first draft budget presented in April began with a roughly $9.3 million deficit prior to any tax increase, and the board saw and discussed several possible hikes and the corresponding revenue they would bring in, and the impact on the average taxpayer.

Raising taxes by 4 percent would bring the district roughly $8.4 million in new revenue, leave a projected deficit of roughly $850,000, and cost the average taxpayer $176 more than their current bill, while a hike of 4.49 percent would increase those numbers to $9.5 million in new revenue, a $186,700 projected surplus, and a $197 increase for the average taxpayer.

“When we did our 32-year projections, as part of incurring debt for the high school project, we looked at those projections, and tax rates, and expenditures and revenues over a 32-year period. And the projection we had done, 17 or 18 months ago, suggested a tax increase somewhere around 4.5 percent, to deliver a balanced budget,” Skrocki said.

Finance committee chairman Christian Fusco asked if that would be the largest increase in recent history, and Skrocki said it would, larger than the 4.09 percent increase for the current fiscal year and a 4.4 percent increase in 2008-09, and the last larger increase was an 8.95 percent hike in 2001-02 prior to Act 1.

Fusco answered that the January defeat of a voter referendum seeking permission to exceed Act 1 to expand the high school sent a message to the board.

“When we did go to the community, to ask for revenue to build a ninth grade center, the community pretty definitively rejected that request,” Fusco said.

“Knowing that we still have this very large (high school) project ahead of us, and that we very much still need the community buy-in, to come along with us, I do worry a little bit about the optics of, after that failed vote, having the largest tax increase levied on this community in the history of the index,” he said.

Finding the level

Several board members then debated whether to vote ahead a tax increase at that level, or lower, for a preliminary budget approval when the board meets on May 16 ahead of final budget adoption in June. Fusco said he’d be more comfortable with “something that doesn’t break a record,” and board member Al Roesch said the high school is not the only large expense he’s considering.

“It’s probably going to take 10 years to do the high school project. We’re probably also going to have to do at least two other building projects, in that ten-year period of time,” he said.

Fusco added that the failure of the referendum meant all three district middle schools would likely need major renovations, and board President Tina Stoll added the long-term capital plan of smaller equipment repairs and upgrades needed across the district’s remaining schools. Board member Jonathan Kassa said he recalled asking after he was first elected to the board, how much a smaller tax increase every year would have produced in new revenue as it compounds over time.

“That’s why, after 20 or 30 years of prior board leadership kicking the can down the road, and not funding the proper strategic repairs and renovations for the district’s future, it’s because there was a lack of foresight,” he said.

Board member Tim MacBain asked about the long-term projections regarding the high school borrowing: “I am hesitant to make your numbers a little off in the first year,” and asked Skrocki if a 4.25 percent increase could be prepared instead of the staff recommendation of 4.49 percent.

“That’s my biggest concern, because long after we’re gone, those are the numbers that are baked in,” MacBain said.

Roesch replied by noting that any increase in the current year would be built on in subsequent years, and said he saw a lower increase as “underfunding the schools, and doing the same thing that prior school boards had done.”

“When we adjust those numbers by .1 percent, over 32 years, it’s significant. We’re talking tens of millions of dollars over that amount of time,” Bauer said.

Stoll added another consideration, noting that the 77 percent of the annual budget that goes to salaries could be impacted by future union contract negotiations.

“We’re also looking to retain and attract staff, and to do that, we need to pay them well. We might have some larger salary increases coming in the future, so we can attract that staff, and keep that staff. That’s going to cost money as well,” she said.

Roesch reiterated other items on the to-do list: possible expansions to the North Montco Technical Career Center adjacent to the high school, added resources for behavioral health, changes to school meals including free breakfasts or lunch, and/or tax incentives for emergency responders: “All these things that we want to do, they cost money.”

Stoll the made a motion for the increase to be 4.49 percent for the 2024-25 budget, and the rest of the board voted it ahead unanimously, before the board fielded a public comment from resident Jason Lanier questioning the spending increases and cost estimates for the high school, and reminding the board that the money would come from taxpayers.

North Penn’s school board next meets at 7 p.m. on May 16 and the board finance committee next meets at 6 p.m. on May 21; for more information visit www.NPenn.org.

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