Disappointing News on Property Tax Revenue for 2016-17 – Budget Adjustment Needed
Last week, the District received the July 1 Assessor’s Office growth data for the 2016-17 tax year. The adopted District budget projected 8.67% property tax growth. The Assessor currently shows growth at 5.34%! A decrease in property tax revenue from 8.67% to 5.34% is approximately $5.2 million.
This was a surprise since the monthly Palo Alto Unified School District (PAUSD) trend data this year showed its typical upward trend and the growth was at 8.62% as of June 1, 2016. While we understand the information in the Assessor monthly reports is incomplete in the sense that it only includes gross real property values and does not include any exemptions, this is the only data provided by the Assessor’s Office for the following year and had provided a reasonable basis for estimates in past years. In the past three years, the July 1 assessment growth numbers have all come in higher than June numbers for both PAUSD and countywide.
We asked the Assessor’s Office and they explained that the drop in assessment growth from June 1 (8.62%) to July 1 (5.34%) for PAUSD is mainly due to the increase in exemption values of $1.2 billion compared to last year. Most of the increase in exemptions is from the expansion of Stanford Hospital.
The County Controller’s Office will compile the estimated property tax revenue for each agency with the July 1 assessment data. We will receive the first estimate for 2016-17 in late August. We anticipate the August estimate to be slightly below the 5.34% due to reserve for tax refunds.
Impact on Employee Contracts and Budget for 2016-17
The recently approved multi-year employee contracts provide a 4% increase on the salary schedule and a 1% off the salary schedule increase for 2016-17. The off schedule increase is contingent on property tax growth. The provision states that if property tax revenue is less than the amount budgeted in the Adopted Budget by 1.5% or more, the 1% off the salary schedule increase is eliminated. With the 1% off schedule payment eliminated, the estimated budget shortfall is reduced to $3.7 million.
We have preliminary considerations on how to resolve the $3.7 million shortfall without making program cuts in 2016-17:
Capturing unused growth teachers in the budget ($375,000)
Not making the transfer to the Basic Aid Reserve Fund ($919,000)
Using Bond Funds, as was done in the past, for computer refresh ($1,200,000)
Using unrestricted, undesignated fund balance ($1,200,000)
Impact on Employee Contracts and Budget for 2017-18
The multi-year employee contracts contain a provision for the district to opt out of the 3% salary increase for 2017-18 if property tax revenue for 2016-17 is less than 1.5% of the amount in the Adopted Budget.
2016-17 Adopted State Budget
Fiscal Services Manager Connie Ngo and I attended the State Budget Workshop this week. There were not many changes from the May Revision. There are new appropriations in the state budget to address college readiness, early childhood education (ECE), and teacher shortage issues. Of these new appropriations, PAUSD will receive funding from the College Readiness Block Grant which is intended to increase college preparation and college-going rates for English learners, foster youth and low income students. There is a minimum apportionment of $75,000 per District. PAUSD has approximately 350 eligible students and therefore is expected to receive $75,000.
Paly Athletic Center Progress
For the main gym, Vance Brown (VBI) is continuing exterior wall framing, roof curbs and deck sheathing at the parapets, and then wall framing on the basement level near the team rooms. Mechanical duct installation and in ground plumbing work is nearly complete in these areas. The next major activities in these areas of the building will be exterior sheathing and clay tile roof installation.
In the small gym area, VBI is installing roof decking on the large gabled roof area and has poured the last two slabs on deck areas on the main level. In the basement level, they have installed ductwork and plumbing in the locker room areas. Deck inserts and roof curb work will follow. A nice picture of the concrete pour on the deck is included.
Also included is a picture of workers in the lane that has an incredible amount of in/out student bike traffic during the year. We love the summer. The contractor is able to block almost all that entrance and not worry about blocking student traffic. By the way, we will be re-asphalting the lane prior to start of school.
Lastly, we did two tours this week (two Board members per tour and pictures). We continue to be impressed by progress and the prospect of this new facility for the benefit of our students and community.
The project punch list work continues, with most of the remaining items being warranty items related to the AV systems. Purchase orders have been processed for the remaining equipment and furnishings for the building as well as the drapery package for the stage area. Notwithstanding the above, the building is being occupied, and is ready to host school in the fall.
Gunn Paint Project Progress
The Gunn painting projects continues. Buildings J, G, E, and C are complete. The K complex is getting its second coat of color, the L building is being masked so it can be painted, and the two administration buildings are starting their first coat today. Buildings that remain to be done are the M building, Bow Gym, the field house, and press box.