PA. SCHOOLS Property tax law confuses districts
The governor signed the new property tax law in July.
HARRISBURG (AP) -- Some Pennsylvania school districts are rushing to approve construction financing before a new law aimed at reducing property taxes takes effect, fearing that the cost of the borrowing will trigger tax increases requiring voter approval.
But a state official said last week that the haste is unnecessary because, even though the law takes effect Sept. 3, the new referendum requirement for property-tax increases that exceed the inflation rate won't kick in until 2006.
The law that Gov. Ed Rendell signed in July will enable school districts to reduce property taxes by as much as $1 billion a year, using revenue from newly authorized slot-machine gambling that is not expected to begin flowing before 2006.
In exchange for accepting the gambling proceeds, school boards would have to agree to hold future property-tax increases to no more than the inflation rate unless voters permit them to exceed it.
Confusion over deadline
School business managers in several districts said they have been under the impression that they must lock in their borrowing before Sept. 3 to avoid any construction-related budget increases that could force a referendum.
In suburban Pittsburgh, the Baldwin-Whitehall school board voted Aug. 2 to take out a $35 million line of credit to complete a financing plan for a 2 1/2-year, $60 million high-school renovation. The project, including a new gymnasium and a new roof, is slated to be completed by December 2007.
"Our concern was, what if it had to go to referendum, and it failed?" said Nicholas Morelli, school district business manager. "By that time, the project's already online."
Last week, the Department of Community and Economic Development issued a statement advising districts that they may continue to incur debt until mid-2006 without having to worry about the new restrictions on tax increases.
"It's important to note that this new act does kick in on Sept. 3, but there is some leeway for school districts," said Kate Philips, Rendell's spokeswoman.
Tim Allwein, spokesman for the Pennsylvania School Boards Association, said he believes "a fair number" of districts are accelerating their borrowing plans because of confusion over the new property-tax law. "Nonetheless, they have legitimate projects," he said.
One district's plans
Joseph Paradise, business manager for the Neshaminy School District in suburban Philadelphia, said districts are just beginning to grapple with the law. His own district's board has agreed to borrow as much $85 million to renovate Neshaminy High School, which is more than 50 years old.
The board is looking into a renovation project because voters rejected in April a proposal to borrow $100 million to build a new school, Paradise said.
"Whenever there is any new legislation, there is always a lot of confusion on the initial interpretation," he said. "We consulted with our bond counsel, and they felt the safest route would be to do something before Sept. 2. It's the intention of our school board to protect our options as much as they can."