Fund Restriction Kills A Plan To Reduce Pottsgrove Taxes

POTTSTOWN PA – For its newest members, last Tuesday’s meeting (Dec. 3, 2013) of the Pottsgrove Board of School Directors seemed to have been a tutorial on what they can and can’t do, or undo, as officers of one of the area’s largest municipal “businesses,” as well as a launch pad for their deliberations over its coming spending plans and accompanying property tax rates.

Fund Restriction Kills A Plan To Reduce Pottsgrove Taxes

New Potsgrove school board members Rick Rabinowitz and Kelley Crist as they prepared for last Tuesday’s board meeting

The result: a proposal by newly-seated director Rick Rabinowitz, which would have used part of a cash surplus from the Pottsgrove School District 2012-2013 academic year to offset future expenses and possibly lower taxes, ended almost as soon as it was suggested. There were indications, though, that directors in coming months might fundamentally re-examine district finances.

Rabinowitz had hoped $450,000 in revenue Pottsgrove collected but did not spend during the past 12 months could benefit taxpayers next year. “I don’t think its unreasonable to presume that we’re in good enough financial shape to return that money,” he proclaimed, and asked his colleagues to allocate the amount – about half of a total $950,000 surplus – to the general fund.

The effect of the infusion, Rabinowitz anticipated, would be to reduce new taxes directors might otherwise levy to balance the 2014-2015 budget. “Anything we can do to reduce that gap would have a positive impact” on property owners’ wallets, he said.

Rabinowitz quickly learned from Business Manager David Nester, however, that an earlier decision by a differently constituted board to commit the $450,000 to Pottsgrove’s building and maintenance fund, its capital reserves, was irreversible.

Money placed into a capital reserve is considered “restricted” under state law, Nester explained, so the previous board’s allocation could not be legally undone. Rabinowitz was visibly disappointed; “I had hoped the board would go in another direction,” he said of his predecessors.

In the November elections, Rabinowitz, Matt Alexander and Kelley Crist ousted three members of the previous board which issued the capital fund decision. All three were sworn into office Tuesday and began their official duties.

It was Nester himself who encouraged the last board to make the capital reserves deposit. To enable borrowing for about $31 million in renovations and expansions at Pottsgrove High School without raising tax rates, he said, the district would consume all money available to service that debt for the next decade. Unless the board raised taxes, it would leave little-to-no room to borrow more money should repair needs arise in other buildings, Nester said.

Within the same decade or less, the business manager added, Lower Pottsgrove Elementary School and Pottsgrove Middle School will reach the end of 20-year life expectancies for major systems like heating and air conditioning, roofing and masonry. “We’re going to need these (capital reserve) funds just to renovate those buildings,” according to Nester.

However, the past capital reserve restriction did not bind the new board from independently deciding what happens with other surpluses, if any, in years ahead, Nester also noted. “You can change things moving forward,” he acknowledged.

Rabinowitz said he had several ideas for re-thinking next year’s budget but agreed to withhold them until the board’s January meeting, when 2014-2015 budget discussions get under way. Nester said he had spent the previous week crunching numbers to prepare for that presentation.

Board members Tuesday generally indicated they had no objections to their predecessors’ allocations of another $450,000 to be used for future teacher pension fund cost reductions, and $50,000 for physics laboratory equipment at the high school.

Pottsgrove’s current budget totals about $59 million, making it one of the area’s largest businesses measured either by revenue or employees. It planned for a $250,000 surplus in 2012-2013, but through savings and unexpected tax collections actually accumulated the $950,000. Surpluses also ended the 2010-2011 year, by $550,000; the 2009-2010 year, $500,000; and the 2007-2008 year, $1.3 million.

Coincidentally, last year’s surplus was confirmed in a final audit report issued by Herbein and Company that was unanimously accepted Tuesday by the board. Herbein representative Chris Turtell praised Nester’s staff for being “overall almost right on” in its figures and accounts, and the auditors gave the district “a clean report card,” he said.

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