Allegheny County Must Reassess

The State Supreme Court handed down its decision on the Onorato base year plan. The "base year" is simply a way to say that all property values will be frozen at a value of a specific year. In the case of Allegheny County, we have been frozen with a 2002 Base Year.

What the Supreme Court essentially said is that it is fine to use a base year, but because property values change over time, it is unfair to never reassess. If a county does not reassess then property taxes are not equal even perhaps among neighbors.

You can see the Post-Gazette article here.

Without saying what I think of the Onorato plan, I do believe him when he says that he does not want to raise the property taxes in Allegheny County. He has higher ambitions than to be a County Executive. He will do what he has to do to make sure he keeps that promise. As Onorato says in his article, he does have options. The Court did not order an immediate reassessment and even if it did, that doesn't mean that Onorato would be forced to have taxes paid on 100% of assessed value.

My expectation is that Onorato will either delay the reassessment until he is out of office or that, if he is forced to reassess, he will implement a base year with a percentage of assessed value to be taxed. This might mean higher assessed values overall, we simply would not be taxed at the county level at 100% of assesed value. I just think this issue is one that he will refuse to lose.

I came across an interesting article from 2002 that points out some differences in the way Allegheny County and Butler County do property taxes. You can view it here.

What does any of this mean for your local real estate tax? Nothing yet. Remember in 2000 that when the taxation rate changed (from 25% of assessed value to 100%), the District was forced to reduce the associated millage rate so that they would not receive a revenue windfall. I suspect something like that will take place again.

Thanks for reading.

James

Pension Liabilities in the News Again

You may have heard the story about a year ago regarding the City of Vallejo, California filing for bankruptcy protection due to ever increasing contractual obligations including employee contracts and pension costs. A judge recently held that this bankruptcy allowed the City to void its existing union contracts. Today, I woke up to find a story about Pacific Grove, California and its long walk down the same plank. As the article starts out, "Bankruptcy, its not just for banks and auto manufacturers anymore".

Local Government Agencies across California are going to be coming to the same realization that Pacific Grove and Vallejo did. The article goes on to say the following:

The city has been struggling with how to bring its pension costs to CalPERS under control in light of the economic recession. The state pension program relies on investment income to fund benefits and, when these funds fall short, cities and other public agencies enrolled in CalPERS must take up the slack.

That excerpt is why I bring this topic up here. School Districts across this state are looking out to 2012 when PSERS has its contribution rate spike. PSERS is very much the same as CalPERS (and most other pension plans for that matter). It relies heavily on investment earnings and income for payouts to retirees. I have heard directors across the state say that this increase will cripple their budget for years to come. A school district cannot have a 250% increase in an already large expense and not expect it to have serious consequences on the way it either a) educate the children or b) tax the community.

It is important for people all across Pennsylvania to contact their state representatives (Senator John Pippy and Representive Matt Smith) to tell them that they need to do everything they can to help school districts avoid the same fate as Vallejo and Pacific Grove.

Our District is poised to start planning for this pension spike this year. There are some options on the table. We are looking at a possible $1 million surplus from the 2008-2009 school year. We have the opportunity to set that money aside to even out the rise in taxes to pay for the 2012 pension increase. Instead of there being a 3 mill increase in 2012, there might be a 1.5 mill increase instead. Then the following year you would see the other 1.5 mill increase (or some other "stepped" schedule depending on what this Board does). Setting aside $1 million for this will not reduce the ultimate expense, it simply delays when it fully hits the taxpayers. The math is pretty simple. $1 million equals .5 mills. So setting aside this money will save the taxpayers in one year $100 on a $200,000 house.

I recommended to the Board that we use that money to fund projects that we know are going to happen in order to reduce millage for the next 25 years instead of manufacturing a stepped increase in taxes. We know we will be spending millions of dollars on a high school project on which we will be paying maybe 5% interest. Taking $1 million today and investing the money in the down payment on that project would reduce the eventual loan amount by $1 million and therefore reduce the millage rate in this district for the next 25 years. Over the life of a 25 year loan, this investment would save taxpayers over $1.86 million. After a 15% state reimbursement, that investment would save the district approximately $75,000/yr. While this is not a whole lot of money, its important to note that if the District keeps making fiscally responsible decisions like this then over the years the numbers start to add up.

I have made my point to the Board but will most likely be outvoted. I just wish we could stop looking at the near term results as opposed to the long-term effects of our decisions. The millage will be higher in 2014 under scenario 1 than it would be under the second scenario. That is a fact and is undisputed. The issue is whether or not the Board wants to implement a stepped increase for the pension liability rather than have a huge increase in taxes to pay for the rate spike. Nothing we do can reduce our eventual expense to PSERS. Without a change from our state government, we can only delay the inevitable expense.

Thanks for reading.

James

Recent Almanac Textbook Article

The Almanac has the following story:

Science textbook questioned

By Bob Williams
Staff Writer
bwilliams@thealmanac.net

At the recent Mt. Lebanon school board meeting, at least two directors were also curious about an item near the bottom of the agenda--a student textbook on the 2009-2010 recommended book list.

"Dire predictions: Understanding Global Warming--The Illustrated Guide to the Findings of the IPCC" by Michael E. Mann and Lee R. Kump was recommended for a high school environmental geoscience class. The IPCC is the Intergovernmental Panel on Climate Change.

By law, the school board is required to approve all student texts. There are seven books on the list. Board members Mark Hart and James Fraasch, however, questioned this book selection.

"Why is this on the list?" Hart asked. "And is there another book used in the class which shows the other side-that science is not in complete agreement about global warming?"

"I'd like to see what other materials are used in this class," Fraasch said. "If you research Michael Mann, you will find there is not complete agreement about his theories."

Superintendent John Allison said this text is one of three used as supplemental material in the class. The others are "Keeping Things Whole" by Chrispin Tickell, and "Environmental Science" by Kaufmann & Cleveland, Allison said.

"The students source different points of view, including some from the Internet, with a goal of formulating their own concepts," Allison said. "These books are not the entire curriculum.

The district utilizes a book selection process, Allison said. Books are requested by teachers. The submissions are evaluated by a review committee made up of teachers. The recommendations are then submitted to the administration, which reviews them and passes the list on to the school board for approval. Once the list is presented to the board, it is open to public inspection for 30 days before final approval by the board.

In1999, Mann, a University of Virginia Climatology Professor wrote a paper which featured a 1,000-year study of temperature change. The scientific community dubbed it a "hockey stick graph," because Mann's diagram showed a sharp increase in temperatures from 1900 to 2000. Vice-President Al Gore referenced Mann's work in his movie "An Inconvenient Truth."

Since that time, however, other scientists have disputed Mann's initial findings on global warming.

Hart said that science is not in agreement about global warming, and he supports balance texts from authors who challenge global warming theories.

I was quoted correctly here. I simply want to ensure that we are doing our best to turn our quality critical thinkers. I would not be doing my job as a school board member if I did not question whether both sides to this argument are being presented to our students.

I would never ask that we NOT allow our students to read the IPCC report, quite the contrary. Its simply that if they read this report it ought to be balanced with research that would show that man-made global warming theories are the topic of intense scientific debate at the moment. If we only present one side of this argument then it becomes a politically charged issue.

I am not going to debate the topic of global warming with anyone. Someone who is a believer can send me a thousand links to articles that proves the existence of man-made global warming. Others who do not believe can link up to a thousand articles that show that global warming is a natural occurrence. Nobody wins those arguments. The fact is, there is debate about the causes and effects of climate change and our students ought to be learning about this topic from more than one angle. That is all I am trying to do.

Thanks for reading.

James

Board Meeting on Monday April 6th

I want to give a heads on on the meeting date for April. Because of the way Pennsylvania law deals with timelines and passing of school budgets, the Board needs to have its discussion and voting meetings on the 1st and 2nd Monday of April.

On Monday's agenda you can see that we again will be talking about the budget. See my initial impressions in my last post here. I am sure we will talk more about any staff changes that can contribute to lessening the millage impact of this budget.

There was an interesting article in The Almanac about the Board addressing a five year budget plan. The last two years I had requested this long term planning as a tool for the Board to use to see the impact that decisions made today have on the future millage in our budget. Here is an excerpt:

Klein gave board members a five-year forecast which projects trends in expenses though the 2014-2015 school year. Given a 3-4 percent increase in salaries each year, an 8% increase in medical, no changes in county assessments, $117 million debt on the new high school and changes in PSERS, the district's millage rate would go from 23.81 in 2008-2009 to 37.13 in 2014-2015

Ms. Klein does make the point that this is a just a forecast and the numbers will no doubt change. The "worst case scenario" budget would result in a 55% increase in real estate taxes in Mt Lebanon. However, that worst case scenario budget is only referred to as a worst case for PSERS, not high school construction costs, salary increases, health care increases, etc. And to be perfectly honest, PSERS banking on an 8% rate of return on their investments going forward makes it so this actually isn't a worst case scenario at all. On the brighter side, given the rise in the stock markets the last month, the PSERS contribution rate may be all the way back down to where it was in December. This would still be a 250% increase the contribution rate.

The Board will also be discussing what to do with a projected surplus from the 2008-2009 budget. Once we get more accurate and final numbers from the Earned Income Tax part of our budget for this year we should have a better idea about what this number might be. Today it stands at around $1 million. Last year we had a surplus that was due largely to liened taxes being collected and a reassessment of the Galleria. This year our surplus is due more to the efforts of the Superintendent restraining spending during the school year. The question of what to do with our surplus will undoubtedly come up. I think everyone on the Board wants to put this money towards some future expense. The discussion will most likely revolve around what expense it should be. I am hopeful that we will put it towards something that will reduce future millage.

Of additional note, there is a discussion item on the agenda dealing with expanding the District's lunch program to all the elementary school's. While this item clearly does not get the attention of passing budgets or Graduation Competency Exams, it is still an important change in the way we do business.

We are chock full of meetings the next two months. Below is the schedule:

April 13, 2009 – 7:00 p.m. Focus on Instruction - Math
Mt. Lebanon High School Library

April 13, 2009 – 7:30 p.m. Regular Meeting
Mt. Lebanon High School Library

April 14, 2009 – 7:30 p.m. Policy Committee Meeting
Conference Room B, Mt. Lebanon High School

April 16, 2009 – 7:00 p.m. Audit & Finance Committee Meeting
Conference Room B, Mt. Lebanon High School

May 5, 2009 – 7:30 p.m. Policy Committee Meeting
Conference Room B, Mt. Lebanon High School

May 11, 2009 – 7:30 p.m. Discussion Meeting
Mt. Lebanon High School Library

May 14, 2009 – 7:00 p.m. Audit & Finance Committee Meeting
Mt. Lebanon High School Library

May 18, 2009 – 7:00 p.m. Focus on Instruction – Distance Learning
Mt. Lebanon High School Library

May 18, 2009 – 7:30 p.m. Regular Meeting
Mt. Lebanon High School Library