NORRISTOWN AREA SCHOOL DISTRICT

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NORRISTOWN AREA SCHOOL DISTRICT

• Act 72Homeowners Tax Relief Act
• Overview Discussion
• February 22, 2005

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NORRISTOWN AREA SCHOOL DISTRICT

• Tonight is the first public meeting on Act 72
• Please take the handouts and feel free to take
  notes. It is an extremely confusing and
  complicated topic.
• At the end of this meeting, you can write down
  your questions, or you can email them into the
  District.
• On March 21st, we will host our second public
  meeting on this topic. Atty. Chuck Sweet will
  provide a more in-depth review of the legal
  implications of Act 72.
• Answers to all the questions that we receive will
  be distributed at that meeting. They will also be
  posted on our website.
• Tonight, our goal is to introduce Act 72 its
  implications to you..

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NORRISTOWN AREA SCHOOL DISTRICT

• Background Information
• Great need for tax reform legislation in
  Pennsylvania
• Real estate taxes in some communities are very
  high while in others very low
• Many factors affect local tax levy
• The result, however, is that there is a
  significant discrepancy in the amount of money
  that can be spent (on a per student basis) among
  PA School Districts
• We agree something needed to be done to correct
  this situation

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NORRISTOWN AREA SCHOOL DISTRICT

• July 3, 2004
• Act 72 or Homeowners Tax Relief Act is passed in
  Pennsylvania
• After months of review, research, legal analysis
  and interpretation
• We can now present to you Act 72
• Although the intent of our legislators may have
  been good, the legislation that we are faced with
  is extremely complex and controversial.

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NORRISTOWN AREA SCHOOL DISTRICT

• Overview
• A series of things must happen in order for NASD
  homeowners to see property tax relief
• You must file an application with Montgomery
  County Assessment Office.
• Your application must be approved by the
  Assessment Office.
• NASD School Board must opt-in to participate
  and levy an additional .10 EIT by May 30, 2005
• State gaming money must be available

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NORRISTOWN AREA SCHOOL DISTRICT

• Act 72 creates a statewide property tax reduction
  program
• Districts that choose to participate in this
  program will receive a share of new state revenue
  which will be generated by new gaming revenue

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NORRISTOWN AREA SCHOOL DISTRICT

• If District chooses to participate, it must
  increase the local earned income tax that is
  levied by .10
• This EIT rate can be increased later through a
  front end referenda, or voter approval. It is
  estimated that this rate can be raised as high as
  3.1. (Current EIT rate .5)
• Additionally, our EIT could be changed to a PIT
  Personal Income Tax if we opt-in. Interest
  dividends would then be taxable.
• This could have a negative impact on the senior
  citizens in our community.
• Interest dividends are not currently taxable
  for EIT purposes.

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NORRISTOWN AREA SCHOOL DISTRICT

• New Gaming Funds (Slot )
• New Increased EIT (or PIT)
• Funds Available For RE Tax Relief
• Notice the Tax Shift from Real Estate Taxes to
  Earned Income Taxes
• This will impact each resident differently if
  implementedwill depend on personal financial
  situation.

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NORRISTOWN AREA SCHOOL DISTRICT

• Renters Business Owners will face higher taxes
  see no relief of any type.
• High Rental Community exists in NASD. The needs
  of this community are not addressed by Act 72.
  Their tax situation is actually worsened if NASD
  opts-in.
• People living in these homes will be forced to
  pay higher earned income tax rates
• People who own these properties get no relief on
  their property tax bill. To qualify for the tax
  relief under Act 72, the property must be owner
  occupied.

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NORRISTOWN AREA SCHOOL DISTRICT

• Business Owners will also be negatively impacted
  by Act 72.
• No reduction in the property taxes paid.
• Will see increased payment of EIT
• Great efforts are underway to attract new
  businesses to the greater Norristown community.
• Opting-in could actually deter business from
  moving into NASD.
• Business owners face the same high tax millage
  rates as residents.
• Property tax relief is needed for all NASD
  property owners not just for owner-occupied
  homesteads or farmsteads.

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NORRISTOWN AREA SCHOOL DISTRICT

• By now, you are probably asking yourself a few
  questions
• If NASD opts in, how will property owners see
  this relief ?
• Will rebate checks be sent to homeowners?
• How much RE tax relief can I expect to receive?

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NORRISTOWN AREA SCHOOL DISTRICT

• Here are some answers
• Property tax relief will NOT be delivered
  through a rebate or reduction in the Districts
  tax rate.
• Instead, property owners will receive a credit
  known as a homestead / farmstead exclusion
  which would appear on your regular tax bill as a
  reduction in the taxable assessment.
• See sample in handout materials.
• Remember, you must apply for this exclusion. It
  is not automatic. Forms have been sent to all
  eligible property owners by Montgomery County
  Board Of Assessments. Forms must be returned by
  March 1, 2005.
• Additionally, only owner-occupied residential
  units are eligible for this exclusion

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NORRISTOWN AREA SCHOOL DISTRICT
And the answer to the toughest questionHow
much? According to Pa Dept of Education
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NORRISTOWN AREA SCHOOL DISTRICT
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NORRISTOWN AREA SCHOOL DISTRICT

• PDE projections from September 2004 estimate
  eligible NASD property owners to receive
  210 in tax relief.

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NORRISTOWN AREA SCHOOL DISTRICT

• PDE projections from September 2004 estimate
  eligible NASD property owners to receive 210 in
  tax relief.
• NASD preliminary calculations estimate 164 in
  tax relief.
• Based on
• 100 of eligible properties being approved for
  the exclusion
• Average home value 100,487
• 500 million in state gambling fund distribution

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NORRISTOWN AREA SCHOOL DISTRICT

• PDE projections from September 2004 estimate
  eligible NASD property owners to receive 210 in
  tax relief.
• NASD preliminary calculations estimate 164 in
  tax relief.
• Based on
• 100 of eligible properties being approved for
  the exclusion
• Average home value 100,487
• 500 million in state gambling fund distribution
• We expected a significantly higher amount of
  tax relief when this bill was passed. We, too,
  are disappointed that more money is not available
  to our taxpayers.

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NORRISTOWN AREA SCHOOL DISTRICT

• State gaming money? When will this be available
  to return to taxpayers as tax relief?
• Act 72 indicates that the distribution of state
  gaming money for funding relief can occur once
  900 million is generated
• 500,000 million will be distributed for tax
  relief
• 400,000 million will be set aside in a Reserve
  Account
• When Act 72 was passed in July 2004, it was
  projected that money would be available by the
  2006-07 school year. Latest indicators project
  that the first distribution may not occur until
  2008-09.
• Additionally, the amount of gaming money
  available may vary from year to year. There is no
  guarantee that the levels of revenue available
  for property tax relief one year will be
  available the following year.
• So much uncertainty remains about when how much
  gambling money will be available for
  distribution.long range planning for Districts
  will be extremely difficult.

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NORRISTOWN AREA SCHOOL DISTRICT

• Opting In
• In May 2005, NASD must decide to opt in.
• To opt-in, School Board must pass a resolution
  that
• Levies an additional .10 EIT
• -OR-
• Proposes a ballot question for the November 2005
  municipal election asking voters if they want to
  reduce property taxes by shifting towards a local
  EIT or PIT. The taxes proposed here can be
  greater than the .10 increase.
• If voters accept it, tax shifting occurs on a
  dollar for dollar basis at the tax level proposed
  in the ballot question.
• If voters reject this question, the additional
  .10 EIT is levied

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NORRISTOWN AREA SCHOOL DISTRICT

• Back End Referendum Consequence of Opting In
• If Board Opts-in in May 2005, what else
  happens?
• The District will be required to ask voter
  approval for future property tax increases that
  exceed an index established in the legislation.
  
• The District budgeting process changes
  drastically. The budget cycle is moved to the
  fall of the prior school year rather than the
  spring. Therefore, the District would have to
  make budget projections and decisions before data
  is available.

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NORRISTOWN AREA SCHOOL DISTRICT

• The indexhas been established as the average of
  the Statewide Average Weekly Wage the
  Employment Cost Index for elementary and
  secondary schools.
• Law does allow for some exceptions, or expense
  increases that are not subject to voter approval.
  However, approval of these exceptions will be
  difficult to achieve.

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NORRISTOWN AREA SCHOOL DISTRICT

• History of index
• In Montgomery County, the cost of living is far
  greater than the cost of living in western parts
  of the state. Is using the same index statewide
  fair?

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NORRISTOWN AREA SCHOOL DISTRICT

• Many argue that this index is needed to control
  local spending which is often viewed as out of
  control. It is believed that school districts
  should be able to live within inflation.
• We argue that school districts could live within
  inflation
• IF
• A reasonable index was applied
• State funded its fair share of public education.
• An end to unfunded mandates ?
• Either fund them appropriately or loosen up the
  regulations

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NORRISTOWN AREA SCHOOL DISTRICT

• If we look to the historical expenses of NASD
• In 2001-02, our budgeted expenses exceeded what
  would have been the allowable increase by 1.3
  million
• In 2002-03, our budgeted expenses exceeded the
  allowable increase by 2.8 million
• In 2003-04, this figure would have been 2.7
  million
• In 2004-05, this figure would have been 2.1
  million

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NORRISTOWN AREA SCHOOL DISTRICT

• So, what would have happened
• NASD could have applied for exceptions.
  Approval of these is uncertain.
• NASD would have proposed a ballot question asking
  voters to approve the additional spending.
• If approved, tax rate would be increased no
  changes would have been needed to District plans
  / programs.
• If rejected by voters, District would have been
  forced to implement budget cuts.

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NORRISTOWN AREA SCHOOL DISTRICT

• What kind of programs would / could be cut?
• All non-mandated programs can be eliminated.
  These include
• Kindergarten
• Honors / AP Courses
• Music, art and other electives
• Transportation
• Athletics
• After School Academic Support
• Building Maintenance / Operations

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NORRISTOWN AREA SCHOOL DISTRICT

• We believe that voter approval of our Budgets
  could have a devastating impact on our
  educational programs.
• The recent strides we have made in student
  achievement will be reversed.
• The gap between the haves and the have-nots
  in the Pa public education system will only get
  worse.
• Districts that do not participate may continue to
  spend at the discretion of their locally elected
  Boards on their educational programs. Here,
  School Boards maintain their local
  decision-making authority.
• Districts that participate will be extremely
  limited on the programs that can be offered.
  Decision-making is moved to the voting community.

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NORRISTOWN AREA SCHOOL DISTRICT

• To continue this train of thought, we believe
  that Act 72 could have a devastating impact on
  our economic vitality.
• Why live here?
• Particularly if you have children. Our schools
  may not be offering the same educational product
  as our neighboring districts may be able to
  offer. Our facilities may be sub-par as well.
• Home values in NASD may be negatively impacted.
• Why work here?
• Recent strides to become an employer of choice
  may be found to be useless. The impact of Act 72
  on collective bargaining processes is an area of
  great concern. Additionally, it will more
  difficult to attract quality employees if our
  salary and benefit packages are not competitive
  within our geographic area.

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NORRISTOWN AREA SCHOOL DISTRICT

• Wrapping it up at this point is probably a good
  idea.
• There are many other complex and controversial
  aspects of Act 72 that we did not discuss
  tonight
• How is the amount of gambling money to be
  distributed to each District calculated?....throug
  h a complex formula.
• How are building construction projects impacted?
• Can Districts issue debt if they opt-in?
• If a District opts in, how long must it stay
  in?
• Are there benefits of levying a PIT vs- our
  current EIT?

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NORRISTOWN AREA SCHOOL DISTRICT

• Please remember that we did not talk about one
  new dollar for our classrooms. Act 72 creates new
  costs and responsibilities for school districts,
  but it does not provide new dollars for
  educational programming.
• Additionally, this bill just shifts taxes among
  our local community. Why isnt the shift away
  from local taxpayersto increased funding by the
  state?

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NORRISTOWN AREA SCHOOL DISTRICT

• Additional Resources

• Act 72 Homestead Application
• Department of Community and Economic Development
• www.inventpa.com
• Act 72 summaries, timelines, sample letters and
  FAQPennsylvania Department of
  Educationwww.pde.state.pa.us
• Pennsylvania Association of School Administrators
• www.pasa-net.org
• Pennsylvania Association of School Business
  Officials
• www.pasbo.org

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NORRISTOWN AREA SCHOOL DISTRICT

• Thank you for your time and attention. Please
  write down and/or email your questions in.
• Join us again on March 21st.