By Eric Holmberg | PublicSource | Aug. 25, 2016
A nice home in a good school district. If that comes with high property taxes, well, it’s just part of the deal, right?
What if it didn’t have to be?
Over the past decade, some Pittsburgh-area school districts have raised property taxes every year, blaming rising pension costs, while others have tried to weather the storm with as few hikes as possible.
A school board’s budgeting philosophy could result in a homeowner paying thousands more in property taxes than a similarly-priced house in another school district.
That disparity has far-reaching consequences for long-time residents, young families and newcomers looking for a nice home in a quality school district.
Prospective homebuyers might not only want to know whether property taxes are low, but also whether the school district is willing or able to keep them low.
Take two area school districts: Mars and South Fayette. Both spent roughly $350,000 on pensions, after the state’s reimbursement, in the 2008-09 school year. That increased to about $1.8 million in the 2014-15 school year. That’s where the similarities end.
The Mars Area School District in Butler County hasn’t increased property taxes for nine straight years. South Fayette Township School District — which is also regarded as one of the state’s best school districts and has Allegheny County’s fastest growing enrollment — has raised its property tax rate every year since the 2006-07 school year. In total, the property tax rate has gone up more than 45 percent. In 2012, they blamed pensions.
Rising pensions costs put pressure on area school districts
For many local school districts, they’re paying millions more into the school pension system than they were a few years ago. Some have been able to absorb those costs without repeatedly raising taxes while others have raised taxes and barely kept pace with rising costs.
In the past decade, property taxes in Allegheny County’s wealthiest school districts have increased moderate amounts — 7 to 13 percent — in some and upward of 20 to 45 percent in others.
Our analysis focuses on 25 of Allegheny County’s 43 school districts that are near or above the state’s median household income of about $53,000.
As PublicSource reported last week, wealthier school districts statewide were far more likely to raise property taxes when compared to poorer districts.
They raised taxes, in part, because they could. Poorer school districts couldn’t raise much money from property taxes, even if they wanted to.
It helps to live in a growing school district
Residential communities north of Pittsburgh, near Cranberry Township and Wexford, have been growing for years. New homes, townhomes and businesses add to the property tax base that the local school districts collect. This growth is the reason Mars Area School District has been able to collect roughly $700,000 more in property taxes each year while its pension costs have risen an average of 430,000 annually over the past six years.
Not all school districts are that lucky, and it’s unlikely the trend will stay the same for Mars. The district will have to pay $2.8 million for pensions in the 2016-17 school year.
“Fortunately, the school board understands that we’re a growing district and that we should live within our means,” said Jill Swaney, the district’s business manager.
She said the district has reduced the number of teachers and administrative and support staff. It was also one of the first school districts to start charging participation fees for sports and other activities years ago.
In neighboring Pine-Richland School District, they will owe more than $4.9 million in retirement contributions this year compared to $550,000 in the 2008-09 school year.
Pine-Richland has raised property taxes three times, totaling an increase of nearly 16 percent in the past decade. It too had been largely sustained by residential growth from 2003 to 2010, but school enrollment has begun to level off.
One factor was the 2008-09 recession, which hit the district particularly hard. It increased taxes and cut expenses in the 2010-11 school year to make ends meet, according to business manager Dana Kirk. Before that, she said the district hadn’t raised taxes for six years.
The recession caused the district to change its mindset. The school didn’t replace employees who retired and launched cost-saving initiatives. Reducing its energy costs was one of them.
“We did a lot of other smaller cuts — delayed capital projects, delayed textbooks, curriculum, other things,” Kirk said.
The district has levied two smaller tax increases since then, in part, to deal with pensions. The district set aside $477,000 for pensions as part of one of those smaller tax increases in 2012-13. It still has $192,000 left in that account and can tap into $5.3 million from another reserve fund.
Established communities have a hard time finding new revenue
School districts with stable enrollment and housing that was built out decades ago face a much different challenge to pay for pensions.
David Hall, the North Hills School District business manager, has been with the district since 1991. He’s seen the entire pension crisis play out. His district contributed $782,000 to pensions in the 2008-09 school year and will pay $5.8 million this year.
The district has increased property taxes eight times in the past nine years, and pension costs account for almost every penny earned from new property taxes.
With no extra money for other expenses, the district has had to make cuts.
It closed three elementary schools to save money. It staggered school start times to cut down on the number of buses it needed.
The district set aside $7.5 million to pay for increasing pension costs and is expected to use that money through the 2023-24 school year. It used $567,000 from its pension reserve last year and expects to use $1.1 million this year.
The Chartiers Valley School District is another local school district that has not seen growth in enrollment, but has managed to keep property taxes low. They’ve only increased property taxes once in the past decade and have an increase for the upcoming school year because of pensions.
However, the $850,000 the district expects to raise from the tax increase won’t even pay for its $1.2 million pension cost increase.
That’s part of the reason the district’s director of finance, Nick Morelli, says this school year will be important. The district will find out whether it can remain on solid financial footing or whether the years of rare tax increases are behind them.
Adding stress to the budget is an $88 million project to build a new middle school and renovate the high school.
“We’re cognizant of the fact that in our community, not everybody sends kids to school. The board is cognizant of those folks,” Morelli said. “We’ve got to realize we’ve got people on fixed income.”
Morelli said the district has not replaced administrative staff who have retired and has been able to collect more delinquent tax bills. They’ve actually been able to make money each year by controlling expenses.
“We’re not going out spending money like drunken sailors,” he said.
Other school districts are struggling to survive
Brentwood Borough held off from property taxes hikes as long as possible. Property taxes were flat for seven years.
“The board did not want to raise taxes,” business manager Jennifer Pesanka said. “We had one of the highest tax rates in Allegheny County.”
The district has raised property taxes each year since 2013-14, yet has been unable to balance its budget.
Brentwood paid $138,000 in 2008-09 toward pension costs and they will pay nearly $800,000 this year.
With enrollments flat and costs rising, the district has put off key long-term investments.
“In my opinion, we are a time bomb waiting to happen,” Pesanka said. She said school roofs, as well as heating and air conditioning units, have outlived their warranty. And both are expensive to replace, should they fail.
The school district cut programs without many students, such as French, and furloughed teachers prior to the 2015-16 school year. The district now offers Spanish and German as foreign languages. There’s no librarian in the middle school-high school anymore.
“There’s nowhere else for us to cut our budget,” Pesanka said.
The district is projecting a $587,000 deficit for the new school year.
While all of these school districts, including Brentwood, each have a median household income above $50,000, they have dealt with pension increases and the unique challenges in their districts differently.
It’s only fair to compare wealthy districts to each other. The comparison doesn’t work against districts that can’t bring in substantial amounts of money by raising property taxes.
Those include area school districts like Duquesne and Wilkinsburg. They have been caught in a downward spiral of declining enrollment and property tax income. They’ve had to close schools and take other drastic steps, such as enter the state’s financial recovery plan, just to stay open.
Penn Hills School District is in deep debt, in part, because it took out nearly $135 million in bonds in 2009.
The district spent $58 million to build a new high school while enrollments had been falling for more than a decade. It had to take out a $12 million emergency loan last year and then nearly $20 million in bonds to pay for day-to-day expenses.