Northampton Area School District Board of Education was ready to strike up the band when it learned of a windfall savings of more than $1 million from the successful refinancing of two of its bonds. While the Big “N” Band didn’t perform, band members, officials and band parents were honored by school directors at the Jan. 23 meeting for Northampton Area High School’s marching band’s two-years-straight state championship. (See next week’s edition of the Northampton Press for a feature on the band and its achievement.)

Dozens of band supporters turned out in the high school cafeteria where the board meeting was moved to accommodate the crowd.

Meanwhile, school directors voted unanimously 9-0 to approve the NASD 2017-18 preliminary budget, which calls for a 3.47-percent tax hike. Millage is to increase 1.78 mills, from 51.24 mills to 53.02 mills.

Based on 2016’s average property assessment in NASD of $58,094, the average annual tax bill would be $3,080.14 for the 2017-18 school year, up from the $2,976.74 average annual tax bill for the 2016-17 school year. The tax hike will result in taxpayers paying on average $103.41 more annually, $8.62 more monthly and $1.99 more weekly.

School directors learned from Jamie Doyle, managing director, PFM, district financial consultant, the 2017-18 budget will benefit from an infusion of about $190,000 from refinancing savings of $1,065,780. A similar annual savings is expected in the next six years with the savings lessening in the eighth and ninth years of the bonds.

That’s a savings of 5.45 percent, a “historic benchmark,” Doyle said, and nearly triple the 2-percent minimum requirement. PNC Capital Markets was the successful bidder during a Jan. 18 Internet auction with 48 bids from six underwriters.

Doyle said NASD saved $39,000 by not having to purchase bond insurance because of its excellent Moody’s Investor Service Aa3 credit rating, which is Prime-1, defined as having the best ability to repay short-term debt.

“It’s no easy feat in these times,” Doyle said.

Doyle said long-term rates are below average even after “the June 2016 Brexit vote and election results. We recovered about half of that knee-jerk reaction.”

There’s a “pent-up demand” for bonds by public entities such as NASD that have good credit ratings, according to Doyle.

“This is the last time you’ll be able to refinance the bonds,” Doyle told school board and administration officials.

School directors voted 7-0, with two directors absent at the Nov. 21, 2016, meeting, to approve issuing $24 million in general obligation bonds, series of 2017, to refund NASD’s general obligation bonds, series of 2011 and series A of 2011. Settlement for issuance of the bonds is planned for Feb. 22.

“PFM and I were very happy with the process and with the results,” Doyle said.

“We’ll be saving almost $200,000 in next year’s budget,” school board President David Gogel said.

The 2017-18 preliminary budget, first presented at the Jan. 9 school board meeting, has expenditures of $102,814,673, revenues of $97,102,316 and a deficit of $5,712,357.

Also approved by the board Jan. 23 was the athletic fund, $212,034, and food service fund, $2,413,955.

The preliminary budget was available for public inspection at least 20 days prior to adoption. Notice of the board’s intent to adopt the preliminary budget was given at least 10 days, also required by law. A copy of the 2017-18 budget is available on the NASD website, nasdschools.org.

To offset the revenue shortfall, in addition to the millage increase, $875,000 would be taken from the committed fund balance and $2,920,000 from the unassigned fund balance.

The school board also voted 9-0 to approve the administration to apply to the Pennsylvania Department of Education (PDE) for exceptions from the 2017-18 state-mandated index for NASD of a 3.1-percent tax increase ceiling. This would allow the district to raise taxes more than 3.1 percent. As noted, the budget calls for a 3.47-percent tax hike.

NASD Superintendent of Schools Joseph Kovalchik said he, NASD Business Administrator Terry Leh and administration officials will work toward reducing the proposed 2017-18 tax hike.

Kovalchik said that in the seven years he’s been presenting the budget with Leh, even though the school board approved applying for exceptions, it was never implemented by the administration.

The board also authorized the administration to advertise its plans to seek approval from PDE for exceptions. School Director Roy Maranki was the only board member to vote “no” on seeking exceptions.

“This is the first step in a long, arduous process,” Kovalchik said.

NASD must annually approve its final budget by June 30.

The process could be even more arduous, and even the exceptions could be an exception if bills to eliminate school property tax are approved by the Pennsylvania legislature.

Senate Bill and House Bill 76 is projected to raise more than $11 billion. Under the bill, state personal income tax would increase from 3.07 percent to 4.34 percent, state sales and use tax would increase from 6 percent to 7 percent, and the sales tax base would be expanded for more goods and services.

“We’re not sure where the state is headed,” Kovalchik said.

Under the so-called Property Tax Independence Act, school districts would receive funding directly from the state, dollar for dollar at the same level.

The bill is said to “completely eliminate” the taxing ability of local school boards. The exception would be a local EIT or personal income tax for new school construction, subject to a no-exception taxpayer referendum.

“Basically, the state is going to control the school board,” school Director Dr. Michael Baird said.

The proposal failed to pass by one vote in the state Senate in 2015. A similar bill failed in the state House in 2013.

NASD expects to receive approximately 30 percent, or $30.7 million, of its 2017-18 budget from the state. About 65 percent, or $54 million, is funded by property taxes.