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New Kensington-Arnold School Board seeks exception to 2.5% tax increase cap

| Friday, Jan. 25, 2013, 7:51 a.m.

The New Kensington-Arnold School Board will seek an exception that would allow the board to increase property taxes next school year above the state cap of 2.5 percent.

Board Vice President Jason Fularz said the board doesn't necessarily plan to raise taxes by the full 4.5 mills — or about 6 percent — proposed in the preliminary budget that was approved on Thursday.

But he said it's better for them to have the ability to increase taxes and decide later not to raise them as much, rather than to need to raise the taxes later on and not be able to.

Business Manager Jeff McVey said the proposed $33.68 million budget will be available for public review for 20 days before the board must approve it again on Feb. 20.

Because the board is seeking an exception for rising employee retirement costs, the district must file a preliminary budget with the state education department in February, McVey said.

If the exception is not granted, the board would need to seek voter approval in a ballot referendum to raise taxes above the 2.5 percent inflation index.

McVey and Superintendent John Pallone said district officials will continue to firm up budget numbers and try to cut costs by the time the board finalizes the budget in June.

Pallone said rising retirement contributions and salary and health care costs are driving the projected budget increase of more than $2 million from the current school year's budget.

Pallone said Gov. Tom Corbett has indicated he may present his budget proposal in February, about a month earlier than usual.

Once Corbett announces his proposals for education subsidies next school year, the district will have a better idea of how big a financial crunch it will be facing.

The district's current tax rate is 74.7 mills. One mill generates about $130,000 in tax revenue.

The preliminary budget was approved in a 6-0 vote; board President Bob Pallone and Directors Marilyn Claassen and Eric Doutt were absent.

Bond refinancing

The board is considering refinancing $6 million worth of bonds and possibly issuing up to $3.5 million in additional debt to take advantage of low interest rates.

The district's bond underwriter, Joseph Muscatello with investment banking firm Boenning & Scattergood, said the district could save about $635,000 if they refinance the 2008 bonds now.

Muscatello said he researched two options in case the board also decides to assume more debt:

• If they borrow $2 million, it will increase annual debt payments by about $68,000 and extend debt repayment by about 1 12 years.

• If they borrow $3.5 million, it will increase annual debt payments by about $100,000 and extend repayment by 2 12 years.

Muscatello said they don't always recommend assuming small amounts of debt, but he said it now can work in the district's favor due to the market conditions.

“Interest rates are so low,” he said.

Fularz said if the board assumes additional debt, it would be directed toward a variety of facility improvements that have been on the district's wish list.

McVey said many of those projects fall under the category of improving energy efficiency.

Chris Brewer, the district's bond counsel from the firm Dinsmore & Shohl, said the board's resolution indicated the combined refinancing and new bonds would not exceed $11.6 million.

He said that amount included a generous cushion because the amount of bond principal that the district will be scheduled to repay each year over the life of the bonds would fluctuate but must stay within the amount listed in the resolution.

Muscatello said the actual bonds, even if they include the new debt plus the refinancing, will total less than $10 million to ensure a favorable interest rate.

The board gave Muscatello and Brewer permission to begin the process, but the actual bond amount must be finalized next month and the board still can opt not to issue the bonds at all.

McVey estimated the district's total debt to be about $33 million. Muscatello said annual debt payments currently are about $2.1 million.

Liz Hayes is a staff writer for Trib Total Media. She can be reached at 724-226-4680 or

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