I’m under the weather from a continuing virus, so I was unable to attend TESD’s education meeting this morning — which is not good. Right now the whole process of running a school district is being justifiably scrutinized because there is a strong public concern that we cannot afford to pay for the school system we have. While the Finance meeting is where we learn about the numbers, the Education committee meetings are where we learn about the programs. If we only look at the numbers, it’s absolutely the tail wagging the dog. So I will look forward to a review of this morning’s meeting and I hope someone will post it here or on Community Matters (post there anyway — there has been some concern I am trying to reroute traffic here — when in factI think what I have to say here is pretty boring and is only read by hard-core numbers people).
Ray Clarke posted an extensive commentary on this subject on the Benson blog recently, noting that school taxes have risen dramatically in relation to the income of our residents. “At some point soon that limit will be reached. After five years of 10% union total compensation increases and 2% inflation, the percentage of pre-tax income paid in school property taxes by a household earning $100,000 living in a median T/E house assessed at $252,000 will have risen from 4% to 6%, after ten years, to 9%” See Community Matters for the full text — Ray Clarke 1/11/10 on Continuing Budget Discussion for TE…
Mr. Clarke and I have discussed the nature of school funding on the blog and at the most recent school board finance meeting– and I posted data relating to the property tax revenue per enrolled student in several neighboring districts. TE’s property tax revenue per enrolled student (the rate the district must set annually) is lower than many/most neighboring districts except those with earned income taxes. That’s not to suggest (though it certainly does not disprove) that TE spends its income effectively compared to those districts — but it does illustrate a perspective I want us to consider.
I include info from these districts in response to another post who wanted PSSA scores included. I am focused on revenue sources, not spending. That’s the next piece once we identify what we can afford.
The local tax revenue from property taxes only per enrolled student is as follows:
Lower Merion 24,464.21
West Chester 12,497.04 plus EIT
U-CFSD 13,409.22 estimated on CC values
Central Bucks 9,675.55 plus EIT
Council Rock 10,767.00 plus EIT
Upper Merion 16,387.19
This most recent recession (I still think it’s more like a depression, but fortunately my background is in business, not economics so what do I know?) has badly damaged the incomes of many, many residents. Unemployment is up, cost of services is up, taxes are up, ….yada yada yada. Property values are no longer rising at the same steep level of the prior ten years, and could be called flat for the most part.
Before I go into the specific details that trouble me in TE, here’s some background on how values are determined and therefore why there is evidence to consider millage comparison between districts as a legitimate tool in the discussion.
First, I take you to the State Tax Equalization Board www.steb.state.pa.us
Here’s their job:
|CERTIFICATION OF MARKET VALUE|
|The primary function of the Board is to determine annually the aggregate market value of taxable real property in each political subdivision and school district throughout the Commonwealth of Pennsylvania. Legislative restrictions as stipulated in Section 7 (3) and Section 14 of Act 447, determine the computation procedure to be used in an odd or even year.The market values are certified annually to the Department of Education and the respective school districts on or before July 1 of each year. These market values are used by the Department of Education as one factor in a legislative formula for the distribution of the state subsidies to each school district.|
|COMMON LEVEL RATIO|
|This function of the Board is to establish a common level ratio of assessed value to market value for each county for the prior calendar year.
Act 267 of 1982 requires the State Tax Equalization Board to use statistically-acceptable techniques, to make the methodology for computing ratios public, and to certify the ratio of the chief assessor of each county each year.
The most recent (2008) common level ratio for several neighboring counties is as follows:
Now, if you are a taxing authority concerned with how accurate your assessments are, that’s not too good. The intended ratio for these four counties is 100.00 – it’s officially called “the predetermined ratio.” Not every county has full market value (100)as the goal, so automatically comparing millage rates can be misleading. You need to see the full range of numbers for the county/district.
As a taxpayer, however, the lower the number, the lower the ratio of assessed value to market value – and you are being taxed on a property whose market value is higher than the assessed value.At 53.0, Chester County is lower than Delaware by a wide margin and comparable to Montgomery. I’m not a statistician and won’t bother to work on the variability, but I will be content to say that the CLR is a statistically significant calculation certified annually, and it is what it is.
To understand how these numbers are used, I take you to this site for definitions: http://www.assesslaw.com/terminologyanddefinitions.html
The short answer here is that the CLR is the ratio you can and will be required to use when evaluating your market value assessment. (you use this ratio if it is more than 15% off the predetermined ratio). It does create apples to apples across the state because PA has uniformity in property assessments — i.e., it’s not about equipment or what is produced on the property. So the CLR equalizes values.
Now I take you to Testing the Fairness of your Assessment http://www.assesslaw.com/testingthefairness.html
All this stuff will hopefully lead you to accept the premise that the 3 counties and districts within them that I am using for comparison to TESD are comparable when looking at tax rates. It’s not about the amount you pay — it’s about the relative amount of your property market value that you pay.
Note: You can test your own assessment value by multiplying the fair market value of your property (which is obviously opinion absent any legal appraisal) by the CLR — that is the fair assessment for your property.
Assessments are done by county. SO, consider a house that sells for $500,000 in Tredyffrin township (fair market value). If it was assessed correctly, the assessment value would be .53 x 500,000 or $265,000 .
The same sale price in Radnor (Delaware Co) would be assessed at 306,500; Lower Merion and Upper Merion (Montgomery county) at $270,000; Bucks County at $48,500. I refer you to my next posting for the information on taxes relating to these assessed values. I invite your comments in the meantime.
Buy a house for $500,000 What else do you pay?
I am a numbers person and have been for as long as I was associated with the school board. Earlier I posted the revenue per student in several neighboring districts — but that left a gaping hole in the information because some expressed the reality that commercial/residential mix affects enrollment numbers so tax revenue per student could be misleading. We agreed to disagree. But I do have some other figures to contribute here to keep the discussion focused on what seems to be the consensus primary issue: Yes, we can find some ways to reduce costs in the district, and I wholeheartedly agree that the salary schedule has lost its way under the direction of a local union that takes its marching orders from Harrisburg — but I truly believe that TESD cannot and should not attempt to redesign its curriculum and the program of studies to respond to this. We need to look at the truly BIG picture of living in this community — and our local effort to producing the educational program which clearly plays a role in property values in this community.
Here’s some information on property values and taxes that gives you (hopefully) a clearer understanding of our level of taxes for schools:
Let’s buy a $500,000 house — in any of several neighboring districts. When we buy that house in Tredyffrin, the school district gets 1/2 % and the township gets 1% (most townships, including Easttown, only get 1/2 %). That income is the epitome of variable revenues — it only comes in when properties change hands.
Now — the State Tax Equalization board annually reviews assessed values relating to market values in every tax community (county based for the most part) and standarizes the values statistically. They produce a ratio known as the CLR – common level ratio — that reflects the percentage that your equitably assessed value is of the market value. Assessment appeals use this number in decision making.
Without bogging down here, you can go to the steb website to see these CLRs. They are done by county. Chester County’s CLR is 53. 0 Delaware County is 61.3 Montgomery County is 54.0 and Bucks County is 9.7 . In each case, the predetermined ratio for these jurisdictions is 100 — which means they would like to think assessments are at full value. The CLR fixes that annually to be sure new properties are assessed correctly.
So, our house that has a fair market value (sells for) $500,000 in the above four counties would be assessed as follows: (fair market value x CLR%)
TE, Great Valley, Unionville — $265,000
Radnor – $306,500
Lower Merion, Upper Merion $270,000
Council Rock, Central Bucks – $48,500
Knowing these assessed values on our $500,000 purchase house, (make it new construction for the sake of understanding how the assessed value is reached), school taxes on this house based on this fair assessment would be as follows:
TE – 17.47 mills – $4,629.55
GV – 18.22 mills $4,828.30
Radnor – 20.2731 mills $6,213.71
Lower Merion 21.4015 mills $5,778.41
West Chester 17.85 mills $4,730.25 plus EIT
Council Rock 107.96 mills $5,236.06 plus EIT
Upper Merion 15.24 mills $4,114.80
The mills I use come from the most recent (2009) county tax roles. If you find an error, please advise as I am relying on the information publicly available.
So — you can ignore any effort at comparing revenue and mills and revenue per student. These figures are the school property taxes paid by a resident in a $500,000 market value house across these districts. If you bought your house a long time ago, thedifficult fact is that the economy may have given you lots of equity, but not necessarily income to support your property’s value. You made a good investment but you may not be able to keep it unless you are willing to tap into your equity.
TE can and will make cuts, but families moving here are investing in homes here to send kids to our schoolsare thinking about educating kids today and into the future. You have been rewarded for the district’s achievements in the value of your home. We need to find a balance between income (which has nothing to do with the way we tax for schools locally) and the value of your property. The issues of teacher compensation are a state wide issue — collective bargaining when combined with the power to strike (and teachers do not lose one dollar of income if they strike) does not serve an ideal purpose. PA has the highest percentages of teachers strikes in the country. Many states do not allow teachers to shut down an education system.
So, let us continue.I apologize for being long-winded, but it’s a fairly complicated topic and deserves more than sounds bites. In 3 terms on the school board, the only budget hearing that ever had a crowd was when we discussed the options of an income tax — presuming that income reflects more reliably a resident’s ability to afford schools — and we all know how those studies end up. NO MORE TAXES is a general rant — how we generate those taxes isn’t even open for debate because the immediate presumption was always to fear any additional source of revenue (income) because it would open another pocket to governmental seizure. Maybe now with all the comments about what people can afford, there will be some discussion about using income as ONE of the ways we determine how to fund our schools.
More on the sources and options later. In the meantime, TESD is going quietly about changing programs to fix budget problems. My kids are graduated — one lifer from our schools even went to Harvard without any athletic ability — so I don’t want to see the system taken apart on the altar of fiscal conservativism. I don’t think our schools are expensive — though I do believe the teachers will need to pay for health care in future contracts. Until they do, they will never understand that they are health care consumers — not benefit recipients.
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Posted in Commentary, Facts and Figures
Tagged assessment, budget, CLR, Common Level Ratio, market, taxes