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					                          Property Tax Relief



    Making Property Tax Relief
    a Reality for Pennsylvania
      Implementing Act 72 in Your
             Community




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                                        Property Tax Relief

    Understanding Pennsylvania’s
     new property tax relief law
    • How does property tax relief work?

    • What does my school district have to do
      to receive its share of property tax
      relief?

    • How will property tax relief limit future
      tax increases in my community?

    • Where can I get more information?
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                     Property Tax Relief




    How does property tax
        relief work?



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                                                Property Tax Relief

       Homeowners will receive
       historic property tax relief
    • Property taxes will decrease by an average of more
      than $330 once property tax relief is fully in place

    • The funding for property tax relief in your
      community will come from two sources:

       – State funding from a tax on expanded gaming,
         which is expected to ultimately generate up to
         $1 billion a year for tax relief

       – A local 0.1% Earned Income Tax (EIT)

    • State-funded property tax relief is expected to begin
      during the 2007-08 fiscal year
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                                                        Property Tax Relief

     State funding alone will reduce
    local taxes by an average of 20%
    • Experts project that state funding for tax relief will
      ultimately reach at least $1 billion per year
    • Why do experts believe there will be so much funding
      available for property tax relief?
        – Gaming will have more of a public benefit in
          Pennsylvania than in almost all other states
            • 34% of gross revenue from gaming will be used for
              tax relief in Pennsylvania
            • In New Jersey and Nevada, the rate is about 8%
        – The law allows Pennsylvania to eventually have up to
          61,000 slot machines, compared to fewer than 35,000
          in New Jersey and under 10,000 in West Virginia
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                                       Property Tax Relief

      State funding for property tax
    relief is long-term and predictable
    • The law provides for the amount of state
      funding for property tax relief to stay the
      same or increase from one year to the
      next

    • $400 million will be kept in a Property
      Tax Relief Reserve Fund just in case less
      revenue comes in than projected for a
      given year
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                                         Property Tax Relief

     The revenue from the 0.1% EIT
      will stay in your community
    • All of the money that is raised from the new
      local 0.1% EIT will be used to fund property
      tax relief in your school district

    • For example: A family that earns $45,000 a
      year will pay $45 – and the revenue will all
      be used to reduce local property taxes

    • Social Security, pensions, interest and
      dividends are exempt from this tax
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                                          Property Tax Relief

       Every school district is
    guaranteed a minimum tax cut
    • Once gaming generates $750 million for
      state-funded property tax relief, the state
      and local funding for tax relief together will
      reduce property taxes by 10% to 40% in
      every school district

    • With $1 billion in state-funded property tax
      relief, the state and local funding together
      will reduce property taxes by 12.5% to 50%
      in every district
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                                                 Property Tax Relief

    Homeowners will receive tax relief
     through a “homestead exclusion”
• Every homeowner must fill out a simple 1-page
  “Application for Homestead and Farmstead
  Exclusions”
• If your district opts in to receive property tax relief,
  your property tax relief will be automatically
  deducted from your school tax bill
• For example: If your house is assessed at $50,000
  and your school district’s homestead exclusion is
  $5,000, then you only pay property taxes on $45,000
  of your house’s value:
                $50,000        Total assessed house value
               - $5,000        Tax relief: homestead exclusion
                $45,000        New taxable house value
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                              Property Tax Relief

 Sign up through your County
 Assessor to receive property
           tax relief
 • Contact your County Assessment
   Office for a homestead exclusion
   application
 • Applications must be submitted by
   March 1
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                           Property Tax Relief




     What does my school district
       have to do to receive its
     share of property tax relief?



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                                     Property Tax Relief

     School districts must “opt in”
     to get their share of tax relief
 • School boards must pass a board resolution
   by May 30, 2005, in order to participate in
   property tax relief

 • The only vote is taken by the school board
   – voters do not get to “opt in” by
   referendum

 • May 30, 2005 is the final deadline by law;
   school boards that do not “opt in” by that
   date will not have another chance
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                                        Property Tax Relief

     There are 3 ways to “opt-in”
        for property tax relief
1. For all school districts:

     •   Board resolution to levy a local
         0.1% Earned Income Tax (EIT)

     –   This local EIT will take effect once
         state-funded property tax relief begins

     –   All of the revenue from the local 0.1%
         EIT will be used for local property tax
         relief
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                                        Property Tax Relief


2. For all school districts:

     •   Board resolution to put a question
         on the November 2005 ballot

     –   Voters can decide to go even further
         than the 0.1% EIT – and all of the new
         EIT revenue will be used for local
         property tax relief

     –   If the referendum does not pass, the
         school board agrees to levy a 0.1% EIT
         to raise the local share of property tax
         relief
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                                                  Property Tax Relief

3.       For school districts that do not already have
         a local Earned Income Tax only:
     •     Board resolution to put a question on the
           November 2007 ballot
     –     Voters can decide to wait until 2007 to levy a
           local EIT, since it is harder to start collecting a
           new EIT than it is to increase an existing EIT
     –     The proposed EIT in 2007 – combined with the
           state funding for property tax relief – must
           provide at least 50% of the maximum amount
           of tax relief allowed by law
     –     If the referendum does not pass, the school
           board agrees to levy a 0.1% EIT to raise the
           local share of property tax relief
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                                         Property Tax Relief

     School districts can go even
      further in November 2005
 • School boards can put an optional
   referendum question on the November
   2005 ballot
 • Voters could either:
     – Raise the EIT beyond 0.1% and use all of
       the additional revenue for local property tax
       relief, or
     – Turn the Earned Income Tax into a Personal
       Income Tax (PIT) and use all of the new PIT
       for local property tax relief
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                                              Property Tax Relief

    And voters will have more
 local control in November 2007
 • School districts that opted-in to property tax relief
   must give voters a choice at the November 2007
   election to either:
     – Raise the EIT so that the district can further
       reduce property taxes, or
     – Turn the EIT into a PIT and further reduce
       property taxes
 • The new EIT or PIT rate must further reduce
   property taxes so that the total property tax relief is
   at least 50% of the maximum tax reduction allowed
   by law
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                            Property Tax Relief




     How will property tax relief
     limit future tax increases in
           my community?



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                                          Property Tax Relief

     The property tax relief law
     limits future tax increases
 • Pennsylvania’s property tax relief law protects
   homeowners from large tax increases while
   ensuring that schools can still raise enough
   revenue to provide a quality education

 • The new referendum requirement is intended to
   be flexible and reasonable; it includes
   exceptions for a number of costs that school
   boards face

 • The referendum provisions only apply to
   districts that choose to participate in property
   tax relief
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                                                Property Tax Relief

 Elected school boards will still have
   significant control over budgets
 • School boards will be allowed to raise property
   taxes to keep pace with inflation without holding a
   referendum
 • Boards can vote to increase millage by as much as
   the average of:
     – The increase in the Statewide Average Weekly
       Wage over the last year, and
     – The increase in employment costs from public
       schools across the nation over the last year
  • This “inflation index” is adjusted to give districts
    with a high Aid Ratio even greater flexibility in
20  raising their millage rates
                                            Property Tax Relief

      Over the last decade, the inflation
      index has averaged more than 3%
                               Unadjusted
                      Year       Index
                     FY96-97      2.8%
                     FY97-98      3.0%
                     FY98-99      3.0%
                     FY99-00      3.2%
                     FY00-01      3.8%
                     FY01-02      3.5%
                     FY02-03      3.5%
                     FY03-04      2.9%
                     FY04-05      3.3%
                     FY05-06      3.1%


     • With the Aid Ratio adjustment, the average
       school district may raise its millage by up to
       4% for 2005-06 without seeking voter approval
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                                   Property Tax Relief

Districts must get voter approval to
raise taxes faster than the inflation
                index
 • If a school board wants to raise taxes
   above the Aid Ratio-adjusted inflation
   index, then the district must seek
   approval from voters

 • Voters would have the option of
   approving or rejecting the tax increase in
   the Spring primary election
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                                          Property Tax Relief

    School districts can also seek a
referendum exception for certain costs
 • School boards may need to raise taxes faster
   than inflation because of unavoidable costs or
   for educational necessities

 • This law provides the flexibility to help school
   districts address those costs without holding a
   referendum

 • Districts must receive approval from the
   Department of Education or the court in order
   to gain an exception to raise taxes faster than
   inflation without voter approval
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                                        Property Tax Relief

 Districts can apply for referendum
exceptions for the following costs…
 • Responding to an         • Providing special
   emergency or               education if costs
   disaster                   increase by more
                              than 10% in a given
 • Implementing a             year
   federal or state court
   order                    • Implementing a
                              school improvement
 • Paying for certain         plan to meet the
   school construction        requirements of No
   debt                       Child Left Behind

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                                        Property Tax Relief

 Districts can apply for referendum
exceptions for the following costs…
                           • Ensuring that per-
 • Responding to             student spending
   conditions that pose      keeps pace with
   an immediate threat       inflation
   of harm
                           • Maintaining district
 • Providing health care     revenue adjusted for
                             inflation
   benefits in existing
   collective bargaining   • Mandatory
   agreements                retirement
                             contributions that
                             increase by more
                             than 7.5%
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                                       Property Tax Relief

     Districts must start their
     budgeting process earlier
 • Districts that receive property tax relief
   must adopt a preliminary budget 90 days
   before the spring primary election

 • The new timeline will provide time to plan
   for the coming fiscal year and determine
   whether a spring referendum is necessary

 • The final budget can still be adjusted later
   to reflect changes in state funding and in
   local revenue projections
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                       Property Tax Relief




     Where can I get more
        information?



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                               Property Tax Relief

     The Department of Education
     has answers to your questions
• Visit the Department of Education
  online at
  http://www.pde.state.pa.us/proptax

• Email ra-propertytax@state.pa.us with
  your questions to receive a personal
  response

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