property tax & referendum adams/franklin ernest w. werstler, jr. business manager/board...
TRANSCRIPT
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Property Tax & Referendum
Adams/FranklinErnest W. Werstler, Jr.
Business Manager/Board SecretaryExeter Township School District
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the Good, the Bad the Good, the Bad and the Uglyand the Ugly
Perspectives for Perspectives for
May Decision MakingMay Decision Making
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What’s It All About, Alfie?
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Factors 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.
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Building Blocks of Act 72
Expansion of gaming – Slots
Tax shift – Property to Income
Tax Control – Limits on tax increases
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Opting 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
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Method 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
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Method 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
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Method 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
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If 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.
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To 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
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To 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.
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Information for Boards:
History Repeats
Have your tax increases beenabove the index???
What If Act 72 had been in force: PASBO has index for last 7 years
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AveragAveragee
SchoolSchool SAWWSAWW ECEC SAWWSAWW
YearYear IndexIndex IndexIndex & ECI& ECI
1997-1997-9898
1998-1998-9999
3.8%3.8% 2.1%2.1% 3.0%3.0%
1999-1999-0000
4.2%4.2% 2.2%2.2% 3.2%3.2%
2000-2000-0101
4.8%4.8% 2.8%2.8% 3.8%3.8%
2001-2001-0202
3.6%3.6% 3.4%3.4% 3.5%3.5%
2002-2002-0303
4.0%4.0% 3.0%3.0% 3.5%3.5%
2003-2003-0404
2.7%2.7% 3.1%3.1% 2.9%2.9%
2004-2004-0505
2.3%2.3% 4.2%4.2% 3.3%3.3%
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Prior School 0.75Statewide Year Market Added to Allowable Millage Over(Under)
School Ave Weekly Employment Average of Value/Income Prior year Millage Rate Allowable District Rate AllowableYear Wage Index Cost Index SAWW & ECI Aid Ratio Ratio Increase Millage Millage Increase Percentage
1997-1998 0.4047 15.331998-1999 3.80% 2.10% 3.00% 0.4297 1.1547 3.46% 15.86 15.33 0.00% 0.001999-2000 4.20% 2.20% 3.20% 0.4259 1.1797 3.78% 15.91 15.93 3.91% 0.022000-2001 4.80% 2.80% 3.80% 0.4388 1.1759 4.47% 16.64 16.40 2.95% (0.24)2001-2002 3.60% 3.40% 3.50% 0.4602 1.1888 4.16% 17.08 17.15 4.57% 0.072002-2003 4.00% 3.00% 3.50% 0.4605 1.2102 4.24% 17.88 17.70 3.21% (0.18)2003-2004 2.70% 3.10% 2.90% 0.4771 1.2105 3.51% 18.32 18.60 5.08% 0.282004-2005 2.30% 4.20% 3.30% 0.4788 1.2271 4.05% 19.35 20.50 10.22% 1.15
Per Act 72
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Amount Value Of Removed toOne Mill Meet Index
1997-19981998-19991999-2000 1,009,561 $21,4902000-2001 1,043,2762001-2002 1,083,798 $73,2962002-2003 1,110,5832003-2004 1,170,030 $326,0292004-2005 1,206,815 $1,383,982
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But wait there’s more:
Act 72 may force boards to increase taxes every year.
The index is an annual cap on spending increases,
Therefore: If you don’t use it, you lose it; cap is not cumulative.
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However, if tax increase was always to max allowed:
Allowable Amount Millage District Over Removed toIf Max Millage Allowable Meet Index
15.333.46% 15.86 15.333.78% 16.46 15.934.47% 17.20 16.404.16% 17.91 17.154.24% 18.67 17.703.51% 19.32 18.604.05% 20.11 20.50 0.39 473,876$
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Information 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?
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PASBO 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
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Act 72 Worksheet With an EIT Input Table
• 11 Values required to be input• 9 Tables self-calculate• Allows input values to be manipulated
Input Table
Line Data Item Value
1 Current EIT Revenue $ 1,000,000.00
2 Current EIT Rate (district share of Act 511 levy) 0.50%
3 Estimated Act 72 EIT Rate Collection % (Full Collection Minus Lag) 75.00%
4 Median Assessed Value $ 100,000.00
5 Total Homestead Eligible Properties 1,000
6 Total Farmstead Eligible Properties 1
7 Estimated State Gaming Money (See PDE Table by SD) $ 200,000
8 Estimated Sterling Act Credit Dollars $ 2,000
9 Current Real Estate Millage Rate (mills) 40.00
10 Taxable Compensation + Net Profit (Earned Income Tax Base) $ 200,000,000
11 Taxable Personal Income Base $ 230,000,000
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Data 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.
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Data Sources
Total homestead (Farmstead) eligible properties – Number approved by your county assessment office.
Estimated State Gaming Money – PDE table, new amounts @ $500M & $1B
Estimated Sterling Tax Credits – EIT tax returns Or Sterling Act wage Data File on PDE web site
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Data 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
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0.1% EIT raises how much?
Table 1, Estimate of EI/NP from .1%
line 6 will show the estimated increase in EIT collection 1st year.
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How 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)
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What 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
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Actual 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
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EIT 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
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Well, 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
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November 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.
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Act 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 %
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What is the impact on the community?
Renters Higher earned income tax, no tax relief
Owners with income Higher earned income tax, reduction in property tax
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
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Who 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.
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And the last word: DEBT Moody’s 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.