Planet Princeton

The hidden costs of the referendum are the operating costs

Dear Editor:

What is so critical for taxpayers to understand is that the referendum is only a vote on the costs to be borrowed via bonds. The referendum does not cover the additional operating costs caused by operating a 5/6 School, Thanet, and the eventual Princeton High School expansion, and yet the referendum vote essentially locks in the addition of new costs to operate these buildings.

According to the user-friendly budget, which is on the Princeton Public Schools website, the most recent levy for operating costs was $76 million. This does not include the current bond repayments we are making, which is also part of the schools taxes charged this year to taxpayers. This just covers the costs of operating our schools.

Normally there is a 2% cap on operating costs, but school districts that can show some increases in enrollment and high health costs, are allowed to go higher. Those costs are called exemptions, and they are passed onto the taxpayer.

According to the user friendly budget, this year the levy was 4.2% higher than the previous year, presumably because of various exemptions. The previous year the increase was 3.9%. It’s pretty clear that we have been needing to maximize our annual levy by going above the 2% cap whenever we can, even before taking on the new operating expenses of the 5/6 School, Thanet and the Princeton High School expansion.

So if you take the average Princeton home again of $837,000, this year, the owners are paying about $9,000 in taxes just for the school levy (excluding bond repayment). If you assume compounding of say 4% with exemptions, in just 4 years your bill will have grown by about $1,100, and that doesn’t even consider any increase in taxes from repaying the bonds for the projects in the referendum. For those of you who are numbers people, the actual calculation is $7 billion x X = $76 million x $837,000X = say $9,000. ($7 billion is the current value of our taxable property per the Princeton Assessor’s Office).

If you go with just the 2% cap, with no exemptions – no increase in enrollment or health costs, you are still talking about an annual increase of $551 in 4 years – just for increases in current operating costs. This is compounded, each year the levy is 2% more than the total levy the year before.

So, now the big question, will future new revenues cover new operating costs? This is my biggest concern – will the new levy available to cover the operating costs of the 5/6 School, Thanet and eventually the expanded Princeton High School be enough to cover their operating costs? Since we are already spending the maximum amount we are raising under the 2% cap, how are we going to pay for the new operating costs of the 5/6 School, Thanet and Princeton High School?

In the frequently asked questions section on the Princeton Public Schools website there is a list of expenses for each of these pieces. There are a lot of assumptions involved and I have a lot of questions, but for the moment I’m taking them at face value, although I really think that Thanet’s projected first year expenses in particular are way too low.

These new expenses total $1.9 million for one year. Taking the levy that we are all paying currently of $76 million, 2% of that is about $1.5 million. That’s a $400,000 shortfall – the difference between 1.9 and 1.5.

This is a big problem.  By law, we can’t go above the 2% cap except to pay ourselves back for the costs of increased enrollment and health costs. So the problem is that 2% each year is used up already to cover current increases in our operating costs without the additional costs of the 5/6 School, Thanet, and the expanded Princeton High School.

The additional $1.5 million levy increase might be absorbed entirely by increases in our existing operating costs. It is possible that there could only be $0 available to pay the $1.9 million in new operating costs.

On top of that, next year we will be negotiating two new salary contracts. So bottom-line, this is the biggest problem we face, even bigger than the cost of the bonds – how are we going to pay for the additional operating costs year after year? Conceivably, if we construct the 5/6th School, we might not have enough funds to operate it, and have to close it right after it opens.

Kip Cherry
Dempsey Ave.

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