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March 8, 2007

North East School District Public Hearing Proposed 2007 Primary Referendum Question Required by Act 1 of 2006. March 8, 2007. SUMMARY OF ACT 1 THE TAXPAYER RELIEF ACT. Provides for significant increases in the state’s Property Tax and Rent Rebate Program.

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March 8, 2007

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  1. North East School DistrictPublic HearingProposed 2007 Primary Referendum Question Required by Act 1 of 2006 March 8, 2007

  2. SUMMARY OF ACT 1THE TAXPAYER RELIEF ACT • Provides for significant increases in the state’s Property Tax and Rent Rebate Program. • Creates a cap on the amount school district’s can increase property taxes. Increases over this cap must meet certain exceptions or must be approved by voters. • Creates a new budget process to accommodate the exception and referendum process.

  3. SUMMARY OF ACT 1THE TAXPAYER RELIEF ACT • Allocates a portion of slot revenues to school districts to further fund a reduction in homeowner real estate taxes. • Provides taxpayers with the option of paying their property taxes on an installment basis. • Requires school districts to place a ballot question on the May 2007 primary asking voters if the are in favor of reducing homeowner real estate taxes in exchange for an increase in income taxes.

  4. TAX SHIFT TIMELINE 09/07/06 – Tax Study Commission Members appointed by School Board 11/16/06 –Tax Study Commissions recommendation presented to School Board 01/18/07 – School Board accepts recommendation of Tax Study Commission 03/08/07 –School Board holds a public hearing and approves final ballot question 05/15/07 – Primary Election Day 06/30/07 – Deadline for school districts to calculate actual Homestead/Farmstead Exemption if tax shift is approved by voters at the May 15th primary 07/01/07 – Effective date of any new tax approved by voters at the May 15th primary

  5. WHAT DECISIONS NEEDED TO BE MADE REGARDING THE BALLOT QUESTION • What type of income tax should fund the tax shift? An Earned Income Tax or a Personal Income Tax. • How much of a tax shift should be made?

  6. LOCAL TAX STUDY COMMISSIONCOMPOSITION OF MEMBERS • Consists of seven residents of the North East School District. • Reflects the socioeconomic, age, and occupational diversity of the district. • Appointed by the North East Board of School Directors.

  7. LOCAL TAX STUDY COMMISSIONPROPOSED RECOMMENDATION • The Tax Study Commission recommended the minimum Homestead/Farmstead Exemption be funded using an increase in the earned income tax rate. • This recommendation was approved by the School Board on January 18, 2007.

  8. WHY THE SCHOOL BOARD IS PROPOSING AN EARNED INCOME TAX INSTEAD OF A PERSONAL INCOME TAX • PA Department of Revenue just recently issued regulations for administering a personal income tax. • If adopted, the district will have a different tax base from that of the Township and Borough. Residents would have to file two local income tax return. • There is currently no system in place to collect a local personal income tax.

  9. WHY THE SCHOOL BOARD IS PROPOSING FUNDING OF THE MINIMUM HOMESTEAD/FARMSTEAD EXEMPTION • The number of residents who will benefit from this tax shift is estimated at 50% to 60%. • It is estimated that there are 3,212 eligible homestead properties. As of August 30, 2006, only 2,281 properties have been approved by Erie County. • Gaming revenue will eventually provide additional revenue to fund the Homestead/Farmstead Exemption.

  10. PROPOSED BALLOT QUESTION The proposed ballot question would read as follows: Do you favor imposing an additional .6% earned income tax? The revenue generated from the increased tax rate will be used to reduce taxes on qualified residential properties by $331. The current earned income tax rate is .5%.

  11. HOW PROPERTY TAXES WILL BE REDUCED • All eligible Homesteads/Farmsteads will receive the same amount of property tax reduction, regardless of assessed value. • Property owners must apply to the Erie County Assessment Office for a Homestead/Farmstead Exemption. • The County is responsible for determining eligibility and approving applications. • The application deadline is March 1st.

  12. WHAT IS A HOMESTEAD? • Owner occupied dwelling (no business properties). • Dwelling is used primarily as the domicile (permanent home of owner). • A person who owns multiple property can only have one homestead.

  13. WHAT IS A FARMSTEAD? • All buildings and structures on a farm not less than ten contiguous acres in an area that is used primarily to produce or store any farm products produced on the farm for the purpose of commercial agricultural production. • Must be a domicile (permanent home of owner). • A property can receive both a homestead and a farmstead exclusion and still be eligible for Clean & Green.

  14. SAMPLE REAL ESTATE TAX BILLWITH HOMESTEAD / FARMSTEAD EXCLUSION

  15. NORTH EAST SCHOOL DISTRICTHOMESTEAD / FARMSTEAD DATA

  16. YEAR ONE VARIABLES • How many properties will be eligible for an exclusion. • 2,281 properties are currently eligible • 3,212 properties are potentially eligible • The actual properties eligible for an exclusion in 2007-08 will be certified by Erie County on May 1, 2007. • How much additional EIT revenue will the district collect in the first year. • Currently estimated at 60% to 80%. • Approximately 85% of district residents work outside the district. • Employers of residents working outside of the district are not required to withhold the additional .6%.

  17. HOW WILL THESE VARIABLES IMPACT PROPERTY TAX REDUCTION 2007 HOMESTEAD CALCULATION Additional EIT Revenue Collected / Eligible Properties = Property Tax Reduction per Eligible Property Estimated Range of Property Tax Reduction: $190 to $350 2008 & AFTER HOMESTEAD CALCULATION Additional EIT Revenue Generated in Year 1 / Eligible Properties = Property Tax Reduction per Eligible Property Estimated Range of Property Tax Reduction: $331 to $430

  18. NET TAX IMPACT OF A .6% INCREASE IN EITNET (INCREASE) DECREASE IN ANNUAL TAXES

  19. QUESTIONS & COMMENTS

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