A 4% property tax increase Philadelphia approved June 18 to generate $50 million for city schools in the 2016 fiscal year is a credit positive for the struggling school district, but not large enough to be a long-term solution, according to Moody's Investors Service.
The Philadelphia School District, which is rated speculative-grade Ba3 with a negative outlook by Moody's, does not have authority to raise property taxes on its own.
Moody's analyst Dan Seymour noted in a June 26 report that the city had kept the district's property tax allocation flat for much of the decade, but the 2016 funding is still less than $105 million Philadelphia Mayor Michael Nutter had sought. The district estimated it needed around $90 million of incremental revenue to maintain services at current levels.
"The underfunding relative to the initial request highlights the district's perennial challenges to raise enough money to fund its core mandates," said Seymour. "The district will continue to struggle to regain structural balance and improve its core educational product."
In addition to the $105 million Mayor Nutter was asking for, Gov. Tom Wolf proposed $159 million in subsidies for the district, but it is unlikely the state legislature will approve the full request, according to Seymour.
After accounting for $90 million needed to break even, the district was eyeing using the additional money proposed by the governor and mayor, roughly $180 million, to enhance facilities and transform the state's worst performing schools, Seymour said.
