The Phoenix Reporter and Item (http://www.phoenixvillenews.com)

Phoenixville School District: Deadline meeting ends with passage of budget with 1.42 percent tax hike


By Frank Otto, fotto@pottsmerc.com

Monday, July 8, 2013

PHOENIXVILLE — Meeting with the rest of the Phoenixville Area School Board Sunday, the last day of June and last day to finalize a budget for 2013-14, President Joshua Gould addressed everyone.
“We have six-and-a-half hours to pass a budget by law,” he said. “We’re going to stay here and vote on it until we pass it.”
In a conflict of two viewpoints involving how much reserve the district needed and determining the risks involved, the board passed a $78,721,839 budget which carried a 1.42 percent tax hike.
The mill rate increased from 28.24 to 28.64, meaning a property assessed at the district median of $133,540 would see an annual tax increase of roughly $53.
“I wish we could have come up with a budget that has no tax increase. We all know times are tough,” Gould told The Mercury Tuesday. “But we’ve been able to keep the tax increases very low for the last three years without taking undue risks and while continuing to improve the quality of education for our students.”
Board member Irfan Khan saw things a different way, as he told The Mercury Wednesday.
“I’m not happy. I think that we have done the taxpayers a disservice by not taking the surpluses in the 2013 cycle and offsetting the 2013-14 budget cycle,” he said.
The main point of contention when it came to finalizing the budget at the special public meeting Sunday was whether eliminating an unassigned fund balance built into the 2013-14 fund balance was taking too much risk and/or damaging the district’s bond rating.
The baseline budget the board worked off of was one approved in May with a $79,021,839 line carried a 1.88 percent tax increase.
Khan championed an amendment eliminating the unassigned fund balance from the operating budget, roughly $1,004,079, as he had when the budget did not pass earlier June 7.
He cited surpluses of $3 million over the past five years and said the district kept its unassigned reserve balances at the maximum allowed by the state, 8 percent of the total fund balances, totaling $16 million, in 2012-13.
“I believe that $16 million is a sufficient reserve balance to mitigate risk,” Khan said. “I don’t see the reason we need to take $17 million, especially since we had a surplus for the 2012-13 cycle.”
Khan maintained that if his amendment went through, bringing the tax increase for 2013-14 close to zero, it would not affect programs within the district for the coming year, although Board Vice President Jan Potts had concerns about future budgets beyond 2013-14.
Gould opposed Khan draining the unassigned fund balance.
“I would love to get to zero and I’d love to find a way to do it,” he said. “In my opinion, this isn’t the way to do it. This is a matter of risk and how much risk we are willing to accept and I’m not willing to cut out the entire (reserve) account that’s budgeted.”
Superintendent Alan Fegley cautioned that tougher budgets will be coming, and making the tax increase so low for 2013-14 might adversely affect future budgets, especially since one reserve is already set to be utilized in 2014-15 to alleviate rising Public Service Employees Retirement Service rates.
“We never have this opportunity to share with the taxpayers,” countered board member David Ziev. “All that Mr. Khan is speaking to is not increasing the reserves...I agree that we still have the reserves and risk management that we need. This is very positive for the budget. I do not see it as a negative in the ensuing years.”
With the district set to go into $30 million of debt due to the need for new buildings, the district’s administration expressed some concern over what lowering the district’s reserves could do to their bond rating.
Comptroller Chris Gehris said the district didn’t keep a full reserve four years ago and whether it was connected or not, the district’s bond rating became lower than what it is currently.
Additionally, Fegley and the district’s Executive Director of Operations, Stan Johnson, said the unassigned fund balance is used for unforeseen budgetary issues, like hiring a new teacher or special education costs.
In 2012-13, roughly half of the reserve, $500,000, was put toward the technology budget.
Eventually, the board voted on Khan’s amendment to knock out the reserve, coming down 5-4 against it, with Gould, Potts, Kevin Pattinson, Kenneth Butera and Dan Cushing opposed and Khan, Paul Slaninka, Betsy Ruch and Ziev in favor.
Gould then proposed an amendment to reduce the reserve by $100,000, which Fegley said he was “okay with.”
“Given where we are, we think this is a reasonable reduction in our operating budget reserve,” Johnson said.
Gould’s amendment passed with only Pattinson opposed.
After several other amendments failed, the board eventually agreed to a $200,000 reduction, making the total reserve drop to #704,000.
Although Fegley said he was “uncomfortable” with that drop, Gould, Khan, Ruch, Slaninka and Ziev all voted in favor of it.
A vote was taken on the budget as it stood at that point but did not pass, 4-5, with Pattinson, Slaninka, Ruch, Khan and Ziev against it.
At Khan’s urging, the board took an executive session to discuss the possibility of tapping into a reserve set up to cover possible expenses if a contract were reached with some of the district’s bargaining units, including the teachers’ union, were reached in 2012-13, which they were not.
When they returned, no movement was made on those funds.
Pattinson proposed eliminating pay-to-participate fees for extra-curricular activities in the district.
“It’s not fair to single out a group of people and say, ‘They can pay it so they should have to pay for it,’” Pattinson said, arguing that it was essentially a double tax for some in the district.
Earlier, in a first vote that kept the fees in place, Ruch said it wasn’t fair for those without children to have to help foot the bill. Pattinson said the additional costs to the tax bills were miniscule.
In the second vote, pay-to-participate fees were eliminated 5-4, with Slaninka, Khan, Ruch and Ziev dissenting.
As it turned out, the additional cost per year to each tax bill with the elimination of pay-to-participate for a property at the district’s median assessment was $2.
With that amendment, the budget was settled with a 1.42 percent tax increase.
Khan tried to take an additional $200,000 out of the reserves but it failed.
Immediately following, Potts called for a vote on the budget, which passed 5-4. Gould, Potts, Pattinson, Cushing and Butera voted for the budget and Khan, Slaninka, Ruch and Ziev voted against it.
The meeting took just about three hours, three hours shy of the deadline to finish the budget.
Follow Frank Otto on Twitter @fottojourno.