Title: Property Tax
1Property Tax Referendum
- Adams/Franklin
- Ernest W. Werstler, Jr.
- Business Manager/Board Secretary
- Exeter Township School District
2the Good, the Bad and the Ugly
- Perspectives for
- May Decision Making
3Whats It All About, Alfie?
4Factors Leading to Act 72
- Growing and disproportionate reliance on local
real estate tax. - Options for school districts to raise local
revenue limited by statute. - Perception that real estate tax
- is not fair.
- Perception that school districts are not
conservative financially.
5Building Blocks of Act 72
- Expansion of gaming Slots
- Tax shift Property to Income
- Tax Control Limits on tax increases
6Opting into Act 72
- School boards must pass a resolution by May 30,
2005, to participate in property tax relief - If no action by May 30, 2005, school district
will not be part of property tax relief - No second chance, no possible voter opt in by
referendum
7Method 1 to Opt into Act 72
- Board resolution to enact a .1 Local Earned
Income tax (EIT) - Local EIT will take effect once state-funded
property tax relief begins - All revenue from this .1 to be used for local
property tax relief
8Method 2 to Opt into Act 72
- Board resolution to put a question on November
2005 ballot - Voters can decide to go even further than 0.1
EIT (or switch to PIT) all new revenue for
property tax relief - If referendum does not pass, board must levy a
.1 EIT and is in Act 72
9Method 3 to Opt into Act 72
- Available only to districts that do not currently
have an EIT - Board resolution to put a question on the
November 2007 ballot - Proposed EIT rate plus state funding must provide
for at least 50 of maximum amount allowed. - If referendum does not pass, board must levy a
.1 EIT and is in Act 72
10If In ... WHAT???
- Budget restrictions unlike any other governmental
unit in Pennsylvania. - Future tax rate increases higher than index, must
obtain an exception or voter approval. - Early budget preparation.
- Property tax reduction for approved Homestead
properties. - Higher local income tax rates.
11To opt in or not to opt inthat is the question
- THE GOOD
- Provide property tax relief to residential
property owners - Provides an new tax source to school districts
12To opt in or not to opt inthat is the question
- IF IN (the bad?)
- Budget restrictions apply for 2006-07 fiscal
year. - If property tax rate increase is over the index
will have to apply for exception or voter
approval at primary election.
13Information for Boards
- History Repeats
- Have your tax increases been
- above the index???
- What If Act 72 had been in force
- PASBO has index for last 7 years
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17But wait theres more
- Act 72 may force boards to increase taxes every
year. - The index is an annual cap on spending increases,
- Therefore If you dont use it, you lose it cap
is not cumulative.
18However, if tax increase was always to max
allowed
19Information for Boards
- ACT 72
- What does it mean?
- How much of a reduction?
- Who are the winners or losers?
- Switch to PIT, does that help or hurt?
20PASBO Act 72 Worksheet
- PASBO web site, click on Act 72 Information,
click on Act 72 Worksheet. - Template to calculate key information required to
address Act 72 - Templates (2 distinct templates)
- School Districts WITH an EIT
- School Districts WITHOUT an EIT
- Easy to use Input 11 items for input table
21Act 72 Worksheet With an EIT Input Table
- 11 Values required to be input
- 9 Tables self-calculate
- Allows input values to be manipulated
22Data Sources
- Current EIT Revenue Budget or AFR
- Estimated Act 72 EIT Collection - Drag,
remember the Drag, Cash Flow - Median Assessed Value Median is not average.
Median is the value in an ordered set of values
below and above which there is an equal number of
values or if no one middle number is the
arithmetic mean of the two middle numbers.
23Data Sources
- Total homestead (Farmstead) eligible properties
Number approved by your county assessment office. - Estimated State Gaming Money PDE table, new
amounts _at_ 500M 1B - Estimated Sterling Tax Credits EIT tax returns
Or Sterling Act wage Data File on PDE web site
24Data Sources
- Current Real Estate Millage Rate mills xx.xx
- Taxable compensation Net Profits EIT Base for
line 1 - Taxable Personal Income Base PA Dept of Revenue
2002 Personal income Statistics by School District
250.1 EIT raises how much?
- Table 1, Estimate of EI/NP from .1
- line 6 will show the estimated increase in EIT
collection 1st year.
26How much of a reduction?
- Table 5 Homestead/Farmstead Exclusion
- Line 3 Dollar tax Bill reduction per eligible
property - Line 5 Homestead/Farmstead exclusion
(assessment deduction)
27What is the maximum minimum assessment
exclusion?
- Table 3, Median Assessed Value Maximum and
Minimum Exclusion - Line 3 the maximum allowable assessed value
exclusion - Line 6 the minimum allowable assessed value
exclusion
28Actual property tax reduction per property if go
to max or min
- Table 6
- Line 3 - the maximum dollar value of exclusion
per eligible property - Line 6 the minimum dollar value of exclusion
per eligible property
29EIT Rate to support min or max?
- Table 7 EIT rate for maximum
- Line 5 the additional rate for max
- Line 6 the total EIT rate to fund max
- Table 8 EIT rate for minimum
- Line 5 the additional rate for minimum
- Line 6 the total EIT rate to fund minimum
30Well, if we convert to a PIT what would the rate
be?
- Table 9 Estimates of Conversion to PIT
- Line 4 The total PIT rate to fund maximum
exclusion - Line 5 The total PIT rate to fund minimum
exclusion
31November 2007
- If opt in, Section 322 (c) (1) requires a
November 2007 referendum asking the voters if
they would like more property tax reduction by
approving a larger EIT or converting to a PIT - Worksheet gives you the numbers your need for the
wording.
32Act 72 Worksheet
- Recap
- Provides numbers to address the basics
information of Act 72 - Ability to change input values (ease in
calculating what if . . .) - Median Assessed Value
- Total Eligible Homestead/Farmstead Properties
- State Gaming Sterling Credit Dollars
- Additional EIT collection
33 What is the impact on the
community?
Renters
Higher earned income tax, no tax relief
Higher earned income tax, reduction in property
tax
Owners with income
Owners without income
No income tax increase, reduction in property tax
Changes if personal income tax is enacted
Owners without Exclusions
Higher income tax, no reduction in property tax
Employees/Business Owners
Calculation of EIT for personnel from different
municipalities, no property tax relief at all
Gamblers
Wins, losses and rehabilitation costs
34Who wins and who loses?
- PASBO web site, click on Act 72, click on January
2005 workshop handouts and click on Individual
taxpayer analysis - Format for who will win and who will lose, you
can set income level and information can be
obtained from worksheets.
35And the last word DEBT
- Moodys March 2005 statement debt issued by PA
school districts under Act 72 Property tax
constraints will be treated as LIMITED TAX DEBT. - Debt will be rated one notch lower that debt
secured by an unlimited tax pledge.