HARRISBURG SCHOOL DISTRICT

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HARRISBURG SCHOOL DISTRICT

• Public Hearing
• ACT 1
• December 4, 2006

2
ACT 1 Tax Relief Act of 2006Two Major Aspects

• Done Deal Side
• Completely revised budget process, requirements,
  and time frames
• Property Tax Rate Increase Caps ( Back-end
  referendum process)
• Tax Installment program
• Property Tax and Rent Rebate Program changes
• Front-end Ballot question requirement

• Unknown Side / Tax Shift
• Tax Commission a Required public hearing
• Tax Commission formal recommendation
• School Board review and submit Ballot Question
• Voters decide. (May 15th, 2007 Front-end
  referendum)

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Tax Shift -TSCFour Mandatory Study Items

• Historic and present district revenue from
  current taxes.
• Percentage of total district revenue provided by
  current taxes.
• Age, income, employment, and property use
  characteristics of district tax base.
• Projected district revenue from current taxes,
  and from the possible new or additional Act 1 EIT
  or PIT at various levels.

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Commission Purpose

• Limited purpose Not entire Act 1 ( The Unknown
  Side)
• Study district tax structureimpact of changes
• Recommend referendum question for May 15, 2007
  primary electionNon - binding to School Board
• Referendum question voter decision on tax
  shifting
• Commission must recommend
• EIT or PIT tax base for income tax increase?
• What tax rate? ( Limited Range---Rounded to 1/10)
• Specific referendum question for ballot--Only One
  allowed!
• Voters decide to shift..or not shift a portion
  of property taxes to Income taxes ( 26 voted in
  May 2006)

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Tax Base Choice

• Earned Income Tax
• Is a tax on compensation and net profits
• Salaries / wages
• Commissions, Bonuses
• Fees / tips
• Net Profits from the operation of a business,
  profession or Farm
• It is the Capital Tax Collection Bureau form
  that you see on April 15th
• Note Neither will tax Social Security or
  retirement pensions

• Personal Income Tax
• Is a tax that covers all under EIT plus
• Interest / dividends
• Net gains disposition of property
• Net gains on rents / royalties / patents
• Income derived through estates / trusts
• Gambling and lottery winnings..
• i.e. The PA State Tax Return

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Slots and Gambling Fundsno bearing on the tax
shift ballot

• It arrives whenever it arrives2008? 2009?
• Key change - Homestead / Farmstead application
  Approval is required for homeowner access to
  Gambling and Tax shift funds. ( If not inNo
  reduction.)
• Harrisburg Gambling funds approx 288 _at_ 500m
  416 _at_ 750m 575 _at_ 1b

• Estimated Calculations to achieve Gambling
  Numbers
• Required Losses 2.941b
• Education Share 34
• Or 1,000,000,000.
• Divided by 9,358,168 PA Adults
• 314 loss per PA adult or
• 618 per household w/two adults

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Income Tax RatesWhat is required? What are they?

• Law requires a minimum ballot question and
  provides a max as well
• Rate is calculated based on dollars needed for
  potential homestead properties ( 8,690)
• Homestead owner / occupied dwelling approved
  by the county assessment office ( 65 approved to
  date)

• Initial calculations on our best data
• EIT range .30, .40, .60
• PIT range .60, .70, .80.
• Current Rates
• .50 EIT
• .50 Local Municipality
• 1.00 total for Harrisburg

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Putting These RatesIn Perspective

• Ind. Rate Pd vs Pd to HS
• .30 187 - 249
• .40 249 - 332
• .60 374 - 498

• District dollar value of shift
• 1,056,550 - 1,406,850
• 1,406,850 - 1,875,800
• 2,113,100 - 2,813,700

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Follow the Money.... examples at 1

• If the ballot question is approved at 0.3 EIT,
  that rate will be added to our existing 1.00
  for a total of 1.30. Those with earnings
  subject to that tax will pay an additional 1.
  That money eventually comes to the district (18
  to 20 months)
• 2,870,8794,630,451

• The district is required to front-load ( July
  1, 2007) the return of those funds back to the
  community using homestead exemption
  methodology. This is a reduction of a HS / FS
  propertys assessed value, equivalent to the
  dollar value of the tax reduction.

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HARRISBURG PROFILE(2000 CENSUS DATA)

• 19,420 Households
• 11,895 Households Occupied by Renters
• 7,525 Homeowners Eligible for Property Tax
  Relief

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HARRISBURG PROFILE(2000 CENSUS DATA)

• Homesteaders Earning gt 62,369 will pay more in
  EIT than reduction in RET
• Approximately 5,330 MAY Benefit
• Predicted that 75 of Households will Apply for
  Homestead Exemption
• Less than 4,000 Households will benefit the first
  year (decreases in subsequent years)

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HARRISBURG PROFILE

• IF MINIMUM ( 0.3 EIT )
• IS RECOMMENDED
• WHAT WOULD BE THE IMPACT ON

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Examples / Renters

• Non-wage earner Renter pays no earned income
  tax, receives no benefit from HomesteadNeutral
  impact
• Wage earner Renter pays .3 more in income
  tax, receives no Homestead benefitimpact is full
  .3 of increase.
• There is No Breakeven for renters, either pay,
  or do not pay.
• However, there are increased dollars for PTRR
  program for low income seniors.

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Example / Home Owner

• Non-Wage earner homeowner does not pay additional
  .3 income tax and receives the reduction value
  of the homestead exemption ( 280 - 498).
  All positive impact.
• Wage earner Homeowner pays the .3 additional tax
  AND receives the reduction value of the
  homestead exemption (280 - 498). They have a
  net impact with three results a gain, a
  break-even, or a net loss.
• In general, the break-even point is just under
  62,000 for HOUSEHOLD INCOME

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ExampleThe Real Estate Tax Bill

• Original taxable assessment.. 52,900
• Less Homestead exemption 13,225
• Net Taxable Assessment. 39,675
• 39,675 x .02123 842.30
• 52,900 x .02123 1,123.07
• 13225 x .02123 280.77

Only if qualified
Assessed Values less than the exemption pay
zero Property Tax
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Important Facts

• The Homestead exemption is for the home, not
  for individuals
• Breakeven approximation is for household
  income, assuming an approved homestead
• If the ballot question fails, for most property
  owners, there will be no tax relief in 2007.
• If the Ballot question is approved, there will be
  people who pay more in taxes, in essence, to fund
  the property tax relief.
• Low income seniors may indeed see significant
  property tax relief ( PTRR shift slot )
• There is no new school funding money with slot
  funds or tax shift.

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Referendum Question Option 1

• EIT question Do you favor imposing an
  additional __ earned income tax? The revenue
  generated from the increased tax rate will be
  used to reduce taxes on qualified residential
  properties by _______. The current earned
  income tax rate is 1.0.
• Comments
• In last sentence modify last sentence to
  address combined municipal / SD rate
• Use first year tax reduction amount?
• Will need Legal advice on alternatives
• Note Only one ballot question is allowed.

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Harrisburg School DistrictACT 1 Ballot Process
District Objectives

• Prepare and inform commission, board, staff, and
  community.
• Foster understanding of what this (tax shift
  question) is and what this is not. The district
  serves as a middleman in the process ( Gives
  away money / collects money).
• Prepare 2007-08 budget with appropriate
  contingencies. On May 16, 2007 well know if the
  tax shift question passed or failed.
• Implement the voter decision as effectively and
  efficiently as we can, and minimize district
  operational impact and / or costs.

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Commission Members

• Ms. Camille Erice,
• Chair
• Mr. Brad Furey
• Board of Control
• Mr. Robert Jackson

• Mr. James Pianka, Vice-Chair
• Ms. Marcia Gray
• Mr. William Gretton, Non-member Secretary

Thank you!!
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QUESTIONS???