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Impact Fees

House Bill 2564
Presented to the House Local Government Committee
By Fred Botterbusch, Second Vice-President,
Pennsylvania School Boards Association
August 22, 2006

INTRODUCTION
Good Morning, my name is Fred Botterbusch. I am the Second-Vice President of the Pennsylvania School Boards Association (PSBA) and a school board director in the Dallastown Area School District in York County . I would like to take this opportunity to thank Chairmen Herman and Lescovitz for the opportunity to present testimony on House Bill 2564 and make recommendations that we believe would improve the legislation.

GROWING SCHOOL DISTRICTS
A growing student population means that school districts must hire new teachers, purchase additional textbooks, desks and supplies, and renovate existing buildings or construct completely new school facilities. For example, my home school district has experienced an 8.9% increase in total student enrollment over the past two years alone, and each of our 7 facilities is over capacity. This situation has necessitated the need for a new intermediate school, grades 4 to 6, which is being built for 1800 students and is expected to receive 1500 students when it opens in the fall of 2008.These construction costs, as well as the additional expenses I previously mentioned, can total millions of dollars and must ultimately be borne by the property taxpayers in growing school districts. The enactment of Act 1 of the Special Session and its tax revenue restrictions will further complicate financial matters as growing school districts find themselves in the position cutting valuable educational programs to keep up with mandated costs and increasing expenses associated with a growing student population.

PSBA supports the intention of House Bill 2564 - that is giving school districts the opportunity to collect impact fees on new development within the district, so property taxpayers in growing school districts are not overly burdened . The association believes it is necessary for education stakeholders, local communities and the General Assembly to find alternative revenue sources for growing school districts. At this time, I would like to take the opportunity to raise several ideas that would improve the legislation.

IMPROVEMENTS

  1. School districts should be permitted to levy a supplemental realty transfer tax to offset expenses associated with a growing student enrollment and the counties' share of the tax, the collection fee, should increase accordingly. House Bill 2564 allows growth counties to levy a local supplemental realty transfer tax, however, counties are currently not permitted by statute to levy a realty transfer taxes. The realty transfer tax is currently levied and split between the Commonwealth, school districts and local municipalities. Counties are charged with collecting realty transfer taxes and receive a collection fee for their services . Therefore, PSBA recommends that school districts be authorized to levy a supplemental realty transfer tax to be collected in the same manner as the current tax with the counties' collection fee remaining as it currently exists.
  2. School district impact fees should only be levied on residential property . There is no need for school districts to impose impact fees on commercial or business property. The rapid construction of family dwelling units and developments without any consideration of the financial burden on school districts and taxpayers has caused growing school districts, such as Dallastown, to increase property tax rates. We have endeavored to keep our millage increases equal to the rate of inflation plus the cost of educating our additional students. However, these are taxes that all property owners must bear, and they fall disproportionately upon long time residents and business owners instead of new homeowners. The increase of commercial or business interests within school districts has no bearing on school property taxes. Therefore, homebuyers and developers should be responsible for offsetting the added expense to school districts - not businesses.
  3. Residential developers should notify school districts when they apply to municipalities for plat approval and should further provide districts with an independent impact study on proposed residential expansion. Making school districts aware of proposed residential construction and providing them with an independent impact study would allow district administrators and boards to financially plan ahead for an influx of students. This would give districts the opportunity to ease the financial burden on taxpayers by allowing districts to collect the necessary funds to cover increased operating costs over a longer period of time, rather than in a single tax levy.
  4. The legislation should not only include a threshold that looks at past growth of counties, but also current student enrollment trends of school districts. As written, the bill allows districts to levy impacts fee only if a county's growth threshold reached 0.75% over the prior three years. However, looking at past county trend data does not allow school officials to identify and respond to student demographic trends as they are occurring, nor does it allow a district located in a county with an overall projected decline in population, but increasing student enrollment to levy the impact fees. For example, Attachment A shows PDE's projected enrollment figures for the Dallastown Area School District . In my district, we enrolled approximately 500 new students from the 2001-02 school year to the 2005-06 school year. According to PDE's projections, we will enroll 6,704 students in 2015-16 up from 5,761 students in the 2005-06 school year. This represents a 16.4% increase in K-12 student enrollment from the 2005-06 school year. Given the sweeping changes that occur in fast-growing communities, districts need to be able to obtain impact fees for housing and growth trends before student enrollment increases in order to offset expenses and property tax increases. Attachment B illustrates the dilemma in Westmoreland County . Although the Penn State Data Center and PDE project that Westmoreland's overall population and student enrollment will decline, Franklin Regional School District 's projected enrollment is scheduled to increase. But based on the current formula in House Bill 2564, Franklin Regional School District would not be authorized to levy impact fees in order to offset potential property tax increases. PSBA suggests that the bill be amended to include an additional growth formula for school districts to levy impact fees on growth while it is occurring, i.e. projected student enrollment rather than historic county demographic information.
  5. School districts' impact fees should not be limited solely to construction costs reimbursements. Growing school districts incur costs beyond capital expenses. Enrollment growth increases a need for new staff, new computers, student desks, textbooks, laboratory equipment, and modulars. Accordingly, the bill should recognize these added school district costs for increased student enrollment and not limit school district impact fees to buildings.
  6. School districts should be exempt from designing, constructing and financing improvements to public roads as a condition for approval for school construction by governmental entities. Such conditional agreements have historically forced districts to go to the one stable source of revenue for financing - the property tax. Districts can no longer be expected to absorb the increasing costs of road improvements, school construction, increasing utility expenses, and other operating expenses associated with growing student enrollment, especially when municipalities have already exacted transportation impact fees on developers for the new homes. Municipal impact fees are charged to provide necessary road improvements to handle the influx of residents and the demand on the community services, including expansions of road systems to accommodate new schools. Requiring districts to finance road improvements places a cost on the district and its taxpayers, which was already paid to the municipalities by the developers and/or builder. F inancial responsibility of road improvements should remain with local municipalities.

CONCLUSION
York County is experiencing continued growth migration in both the northern and southern parts of the county. In Dallastown, student enrollment is increasing rapidly. According to PDE, Dallastown's K-12 student enrollment will increase 16.4% between 2005-06 and 2015-16. As a board director in a growing school district, I urge this committee to move quickly and report out House Bill 2564 with our suggested modifications, so growing school districts, like Dallastown, will not have cut worthwhile educational programs in order to finance this influx of new students. Thank you for your attention and I will be happy to answer any of your questions.