Armstrong board considers selling delinquent tax claims
Armstrong School Board could sell off its delinquent real estate tax claims from 2013 in hopes of boosting its coffers for the 2014-15 school year.
During Monday's meeting, the board plans to decide whether it wants to sell the district's delinquent real estate tax claims to Municipal Revenue Services, of McKean, for a yet-to-be determined amount, according to Business Manager John Zenone.
The district would have to pay the company $141,000 upfront, and then 4.75 percent of the money it collects, Zenone said.
For example, if the district sold its outstanding real estate tax claims to Municipal Revenue Services for $2 million, it would pay $95,000, on top of the upfront costs, for a total of $236,000.
That's about 12 percent of the delinquent taxes owed.
“Even though they didn't give us an estimate, this could just give us a good boost in our budget,” Zenone said. “We may be taking an initial hit, but it's a jolt that's bringing money we would collect in the future to the present.”
About 11.6 percent, or just over 2,900 of Armstrong School District's 25,000 taxable properties, are delinquent. Those properties account for $2.7 million in revenue, according to Zenone.
Zenone said if the board moves forward with the sale, it would be the fourth consecutive year they made the agreement.
Last year, the district sold delinquent tax claims for about $2.7 million.
The sale eliminates delays in collecting the delinquent taxes, which are collected by the Armstrong County Tax Claims office, Zenone said.
Board president Joe Close said he is not in favor of the program, which essentially makes the district pay up front for money it is owed.
Before agreeing to sell the tax claims, Close requested officials see a final number and how the budget would be affected by the sale.
The board is moving toward raising real estate taxes for a third consecutive year in its $96.8 million preliminary budget.
The spending plan's $3.5 million deficit remains, even with a millage increase of at least 1.84 mills, which is within the state's Act 1 index rate of 3 percent.
Armstrong School District assesses 56.64 mills of real estate tax. The increase would bring the tax rate to 58.47 mills and raise nearly $1 million for the district.
Eventually, the district will want to move away from selling its outstanding real estate tax claims, according to Superintendent Stan Chapp. But with a flat-funded state budget and an uncertain federal funding, the sale may be essential for the 2014-15 budget, Chapp said.
“At this time, it's probably an inappropriate time to not do this,” Chapp said.
The board plans to pass a final budget by June 30.
Brad Pedersen is a staff writer for Trib Total Media. He can be reached at 724-543-1303, ext. 1337, or firstname.lastname@example.org.