SUMMARY INTRODUCTORY LETTER FOR FACT FINDING

The Board of School Directors of the Northwestern Lehigh School District wishes to thank the Association
for their work with the students in the Northwestern Lehigh School District. The Board recognizes the
Association’s desire to seek additional compensation and benefits for the membership.

As a Board we take great pride in our students and employees as well as the many positive accomplishments
of the District. We value the hard work of all our employees and are acutely aware of the many challenges
facing our District and public education in general.

The Board believes this economic recession combined with the lack of commercial growth and now lack of
residential growth in the District will make it very difficult for the District to keep pace with the county
average for all employee salaries now and in the future. The Board expects the District will probably
continue to have lower employee salaries than many of the other districts in Lehigh County that have much
stronger commercial property tax bases.

The following are some very specific concerns the Board is currently managing that have an impact on
increased compensation packages for employees:

Current economic recession is creating the following impact:

 Reduced growth in real estate value
 Sharp reductions of new properties in the District (Township Zoning Offices)
 Increased number of property assessment appeals the District has lost which decrease property tax income
 Financial hardship for community members making tax increases very challenging for residents:
o Unemployment – rate in Lehigh County is 9.2%, the highest in over 10 years (US Bureau of
Labor & Statistics as of June 2009)
o Less growth in EIT than expected and budgeted in 08/09. Expecting a base decrease in 09/10
as a result of unemployment and pay cuts (data from EIT office)
o Freezes/reductions in pay rates
o Increases in employee contributions towards health coverage
o Losses in 401(k) and other retirement plan investments and overall decline in interest earnings
o Increased costs of products as a result of the poor economy
o The Congressional Budget Office predicts that there will be no COLA for Social Security
retirement benefits until 2012 and then only a modest one. Our community’s retirees on
Social Security will not be receiving an increase to offset increasing costs.
Act 1 Limitations
 Board restricted by law in ability to increase property taxes
 Limitation set by two economic factors – ECI/SAWW and District’s MV/PI aid ratio
 Expect the ECI/SAWW to reflect the economic recession for the next two (2) years, possibly limiting the
Board to annual millage increases of 1.5 mills or less

Status of protected property in the District

There are 4,092 preferentially taxed parcels in Lehigh County as a result of Acts 319 and 515, and 2,046 or
50% of them are in Northwestern Lehigh. The taxable assessed value for these properties is approximately
38.5% of the total assessed value. The District receives no real estate tax revenues for the remaining 61.5%
of assessed value, which is equivalent to approximately $96 million. Additionally, the District receives no
subsidies to offset this loss in real estate taxes.
Cost Increases:
 Significant projected cost increases in retirement contributions associated with PSERS Fund losses
 Electric deregulation driving out 20%-30% cost increases in PPL electric bill, undetermined increases yet
with MetEd
 Cost increases for health care benefits of 2.5% for medical and 6% for dental in 09/10, with significant
projected increases for 10/11 based on industry trends
 Increased costs for workers’ compensation
 Spike in fuel costs in 08/09, and 09/10 costs will fluctuate with the market
 CLIU Special Education cost increases of $226,190
 LCTI cost increases due to increased enrollment of $71,883
 LCCC cost increases of $10,118
 Debt service payments as a result of needed construction - $307,654
 Cyber/Charter School increases due to increased enrollments of $111,162

It is our hope to reach an agreement with the Northwestern Lehigh Education Association as soon as possible
and we hope the Association can recognize the extreme nature of the financial challenges the School Board
and District are facing at this time.

Thank you.