CLSD says land purchase not expected to drive property tax increase

5 min read874 views and 61 shares Posted November 13, 2019

Cornwall-Lebanon School District’s acquisition of 89.5 acres of South Lebanon Township farmland is not expected to drive a property tax increase, according to district officials.

Last week, LebTown caught up with CLSD superintendent Dr. Philip Domencic to learn more about the pending acquisition of 89.5 acres of farmland across from the Cedar Crest campus.

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Read More: CLSD poised to buy 89.5 acres of farmland across from Cedar Crest

In the room with Domencic during the conference call was Amy Rose Wissinger, community relations coordinator for CLSD.

The interview touched a number of topics, many of which were based on questions from our readers. We have tried to answer as many of them as possible.

First off, we wanted to answer the question we got asked the most: Will this acquisition lead to a tax increase? The short answer is, no, district officials do not expect the land purchase to drive a property tax increase. The slightly more complicated answer depends on the exact funding source of the acquisition, something called the Capital Reserve fund.

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Capital Reserve funds are a provision of the Pennsylvania Code that provides public entities with a way to underwrite capital improvements/investments and deferred maintenance.

According to the Pennsylvania Association of School Business Officials, the benefits of Capital Reserve funds are that transfers to them are transparent, and they enable strategies for long-term fiscal soundness, limiting the need for districts to take high-interest, short-term loans.

“This is a capital purchase, it’s not operating,” said Domencic.

“When we look at our budget, we don’t use Capital (Reserve) or (General) Fund balance to pay for operating,” said Domencic.

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Capital Reserve funds are used for projects that benefit the long-term preparation of the district. Capital Reserve funds are accrued with surpluses from the General Fund. In the 2017-2018 fiscal year (PDF), for example, $1,000,000 was invested in the Capital Reserve fund from the General Fund.

Examples of recent uses of the Capital Reserve fund include renovations at Union Canal Elementary School, with technology and audio/visual improvements being another common application.

“You can’t use those funds for operating,” said Domencic, “or you’re eventually going to run out of money.”

Domencic said that the biggest drivers right now of tax increases are healthcare, pension costs, and cyber charter schools.

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“They just totally dwarf this capital purchase in terms of size,” said Domencic.

Special education costs also increased significantly for the district last year.

“This is not going to be a budget driver for the district because of that difference between capital and operating,” said Domencic.

Although the land acquisition is not expected to drive a tax increase, history suggests that taxes will indeed go up, with CLSD having seen property tax increases each of the last 11 years, according to Lancaster Newspapers.

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CLSD tax increases over the last four years have also been anchored to the “Act 1 Index,” which is based on three main factors: changes in wages statewide, changes in school employee costs nationwide, and a given district’s relative wealth. Property tax increases within this threshold do not need a referendum to be passed.

Even if there is a tax increase though, the acquisition itself is not expected to be a major driver. Another mitigating factor of the land purchase’s overall impact on the school’s budget is that the Smith Farm property had been enrolled in the Clean & Green program, a preferential tax assessment program that bases the value of land on use values rather than fair market value. In other words, the tax assessments on the parcel were already light relative to its size.

Domencic noted that the administration tries to take a long-term planning perspective for everything it does, and emphasized that this long-term planning extends to budgeting and fiscal management.

Second off, we clarified what motivated the purchase. Domencic was clear: There is no pending plan to put the site to use. Domencic and Wissinger agreed that the purchase was prompted primarily by concern of the alternative, seeing something major developed on that lot.

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“[Seeing something major developed on that lot] was a real concern, and even if that is not something to happen in three years of five years, what about 10 years or 15 years down the road,” said Domencic. So that was a very real concern.

“I think that we’re obviously seeing a lot of that in Lebanon County. We’ve seen a significant amount of development, increase in traffic patterns has been a real challenge.”

“I’ve certainly seen that in the 23 years I’ve lived here. There have been a lot of changes, and I believe there will continue to be. It’s a great place to live, and that’s why I think there are a lot of people that want to reside here, and I think that makes it a really enticing place for development in the future.”

Read More: Lebanon was Pennsylvania’s fastest growing county last year

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Domencic noted that he’s heard a number of ideas from district constituents, but classified all being tossed around right now as “rumors.” There is no master plan for the site—no new high school planned for the lot, as one idea tossed around on social media suggested.

“We’ve really tried to maintain good quality facilities. We’ve put a lot into our infrastructure, our technology,” said Domencic.

“This really was about the opportunity for the future and the unknowns.”

In our interview with Domencic, we also asked about the current plan of leasing the farmland back to a local farmer. What exactly does “for now” mean? Domencic noted that farmland leases are typically multi-year. The exact terms of the lease have not yet been identified, but being a public entity, CLSD will need to put this lease out in the public.

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“If you talk to most farmers, they’ll tell you that leases are multi-year, and probably three to five years,” said Domencic. “There are a lot of reasons why you’d go shorter or longer from an economic standpoint, and there are a lot of reasons why a farmer would want to have a multi-year (lease)—soil and the cultivation of soil is one of the big factors here.

“I’ve learned a lot about farmland here,” said Domencic. “But it’s all very relevant to this situation.”

In response to a reader question about potential tie-ins to Cedar Crest’s agriculture program, Domencic said that it was a possibility but not something currently planned. He noted that the opportunity can be seen in many different ways depending on the person, but it is all speculative at this point.

“What we know right now is that this is an opportunity that presented itself. This property has not changed hands, from what we can tell, for eighty years. So it will not happen again, and it was an opportunity to preserve the integrity of our campus here,” said Domencic. “We have nearly 3,000 people every day that come here, so we have to think about that.”

“We have a lot of infrastructure here, a lot of programs, a lot of learning that goes on, a lot of property here. If anything happens, could that impact us? Absolutely. And we’re not planning on going anywhere. . . so that was a huge factor.”

“Possibilities for the future, yes there’s many, but the plan for now is that it will be leased.”

Domencic ended the interview by emphasizing that the district was not necessarily anticipating that the Smith Farm parcel be put up for sale, but once it was, he knew the administration had a decision to make.

“We saw the sign go up and then you have to ask yourself the question: What?,” he said. “You have a choice: You can say, ‘We’re going to do nothing,’ or you can take an action. Either way, you’re making a choice.”

“The district felt it was better to take this choice because this is something that will not happen again.”

Domencic noted that there aren’t apparent downsides to purchasing the property. “It’s still an asset,” he said. “There’s still value to it, and the value of what we purchased it for, we believe is a fair purchase price based on the information that we have.”

The purchase will go in front of the Board of School Directors at the Nov. 18 regular meeting for final ratification.

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