Glaxo Tax Disputes Could Cost Philly Area School Districts Millions

Glaxo Tax Disputes Could Cost School Districts Millions [the Philadelphia Inquirer]

From Philadelphia Inquirer (PA) (June 15, 2011)

June 15--In what may be the largest property-tax dispute in the region, Montgomery County's Spring-Ford and Upper Merion School Districts stand to lose millions of dollars a year in tax payments from the pharmaceutical giant GlaxoSmithKline.

The districts anticipate that between $2 million and $3.5 million a year in Glaxo tax payments will disappear when the cases are concluded.

They also are expecting the wallop of having to pay Glaxo tax refunds that so far add up to between $5.7 million and $10.3 million.

Both districts say the large amounts involved are contributing factors in cutbacks and higher taxes they are planning for next school year. Upper Merion will raise taxes 9.17 percent, and Spring Ford plans a 3.23 percent increase. Both also plan to cut dozens of teachers and staff.

Though the Glaxo appeal dwarfs those in virtually every other area school district, most have seen a flurry of successful challenges whittle away at the amount of money they receive in taxes, as businesses and homeowners ask county assessors and the courts to adjust property assessments lower in light of the changing real estate market.

In the West Chester Area School District, for example, recent appeals by three large shopping malls chopped away about $340,000 in tax revenue this year. Residential reassessments have hit Bucks County's Council Rock School District.

In 2007, Glaxo sued the two districts, saying that its property values were overassessed. A recession-related decline in the real estate market made the gap even wider. The company employs more than 5,000 people in the Philadelphia area, 4,000 of them in Montgomery County.

The districts agreed that Glaxo was overpaying; the question was how much. The districts say they owe $5.7 million in refunds for the last three years. The company says $10.3 million.

The Spring-Ford case is scheduled for trial in October, if no agreement is reached. No trial date has been set in the Upper Merion dispute. In the meantime Glaxo will continue to pay taxes at its current assessment, which totaled $4.6 million to the two districts this year.

Glaxo spokeswoman Sarah Alspach said, "We appreciate the economic challenges" facing the districts. "This is our community. We have been and continue to be open to reaching a resolution."

In Spring-Ford, where Glaxo is the second-highest taxpayer, anger at the company's stance, already simmering for several years, deepened when the company announced in March that it was donating $5 million to Philadelphia to help its children.

That generated a petition and a letter to Glaxo from the school board complaining that in pushing for such a sizable reassessment, the company was not taking into account the hardship it would cause.

At least partly due to the projected loss of tax revenues and the refund, Spring-Ford plans to raise taxes and cut about 75 staff members. It is putting $2 million aside next year to help defray the anticipated back-tax hit.

"This loss of revenue is devastating our community," the school board's letter to the company said. "We appeal to you to review this situation and extend your generosity to our community."

Alspach said that the tax appeal and the Philadelphia donation were unrelated. "The $5 million donation is a demonstration of our generosity," she said. "The tax-assessment case is a demonstration of every citizen's right to be taxed fairly."

In Upper Merion, where Glaxo is the third-largest taxpayer, the reassessment is a main factor, district officials say, leading to the tax increase, the second highest so far in the suburbs for next school year.

Even so, Upper Merion, which is rich in commercial property, would still have the lowest tax rate in Montgomery County.

The district is setting aside about $1.4 million in next year's budget in anticipation of back-tax payments it will have to make. And it is cutting back or eliminating the jobs of 34 staff, plus other cuts.

"This year, we are in the unfortunate situation of saying we need to raise your taxes to the limit, and we will still need to make cutbacks, largely because of the GlaxoSmithKline situation," said Upper Merion Superintendent Melissa Jamula.

Other districts are experiencing similar problems, though on a smaller scale.

The West Chester district lost $441,000 in commercial appeals this year, in addition to the shopping mall reassessments. Court cases are pending on further appeals by the owners of the Exton Square and Fairfield Plaza malls, and QVC, the television shopping channel, is in court asking for a tax reduction. The district is contesting their claims.

The reduction "adds to an already difficult situation," West Chester Superintendent James Scanlon said. "It makes the hole in our budget much bigger. . . . It gets harder and harder."

Montgomery County's North Penn School District lost about $1.4 million in revenue from commercial properties, business administrator Robert Schoch said. "We've got dozens of commercial properties in that figure," he said. That loss in revenue eats up about 1 percent out of of the 1.4 percent tax rate that the state set as a target for school districts this year, Schoch said.

In Bucks County's Council Rock School District, Superintendent Mark J. Klein, said, "We have lost almost $4 million in revenues over the last three years, almost all of it residential. We have very few commercial properties. We rely almost entirely on the value of residential real estate."

Contact staff writer Dan Hardy at 215-854-2612 or dhardy@phillynews.com.

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Posted: June 2011


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