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Act 1 of 2006: The Taxpayer Relief Act Newport Public Schools

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Act 1 of 2006: The Taxpayer Relief Act Newport Public Schools

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    1. Act 1 of 2006: The Taxpayer Relief Act & Newport Public Schools*

    2. Act 1 of 2006: The Taxpayer Relief Act Finalized June of 2006: effective immediately Applies to all school districts in the Commonwealth Intended to reduce school district real estate taxes via tax shifting and distribution of state gaming revenues (when available) Repeals and replaces Act 72 of 2004: The Property Tax Reduction Act

    3. Act 1 of 2006: Major Provisions Impacting School Districts Appointment of Local Tax Study Commissions Front-end voter referenda on tax shifting Back-end referenda on future school district tax rate increases above an “index” New budgetary timelines Distribution of gaming revenues

    4. Local Tax Study Commissions (LTSC) LTSC to be appointed by school boards on or before September 14, 2006 5, 7, or 9 members; residents or taxpayers of the district, reflective of diversity of the district Tasks: to study historic and existing rates of district revenue; percentage of district revenues provided by current taxes; projected revenue from current and possible new taxes; age, income, employment and property use characteristics of the new existing tax base

    5. Local Tax Study Commissions (LTSC) Objective : Make a recommendation on the tax rate to be proposed at a public referendum in the spring of 2007 – 90 days to develop a nonbinding recommendation to the school board as to whether to levy an EIT or PIT for the next fiscal year for the purpose of lowering real estate taxes.

    6. Referendum Spring 2007 Board must adopt a 2007 referendum resolution: convert EIT to PIT; increase an existing EIT, create new EIT or a new PIT. Purpose is to utilize the revenue to fund property tax relief. Sample Referendum 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 $_____.

    7. Gaming Money Revenue from slots to be used for property tax reduction. No allocations of slot revenues until there is $400 million in the state fund. Fully funded at $750 million or more.

    8. Homestead Properties Property tax reductions available to qualified property owners who filed and received approval of their homestead/farmstead applications (owner occupied properties).

    9. Index Districts may not raise their tax rates above the index without voter approval. The base index is the average of the increase in the Statewide Average Weekly Wage (SAWW) and the Employment Cost Index for Elementary and Secondary Schools. Base index for 2006-2007 is 3.4%. There is an additional calculation for districts that have an aid ratio greater than 4.0 (wealth calculation).

    10. Back-End Referendum (to raise tax rates above the index) Budgetary Options: Reduce the budget and stay below the index Seek budget exceptions to stay under the index Go to referendum If a referendum question is not approved the district can not exceed the index or approve any new taxes.

    11. Exceptions to Back-End Referendum Declared emergencies/disasters Court order or administrative order Debts (with qualifications) Responses to immediate threats Special Education expenditures (exceeding index) Costs of school improvement plans (if not offset) AIE maintenance Maintenance of revenue Certain healthcare costs PSERS increases (exceeding index) Note: Exceptions require either PDE or court approval.

    12. Budgetary Timelines School district budgetary timelines are “enhanced” by Act 1 January 25, 2007 Deadline for preliminary budget to be displayed February 14, 2007 Adopt preliminary budget February 19, 2007 Proposed tax increase to PDE March 1, 2007 File for exceptions March 21, 2007 Exceptions granted or denied March 26, 2007 Referendum question to county if exceptions denied May 15, 2007 Primary Election Day June 30, 2007 Budget Adoption Deadline

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    17. Newport Schools Taxes School District Local Taxes 2004-05 Revenue Property Tax 2,940,714 64% Earned Income Tax 602,557 13% Occupation Tax 534,945 12% Delinquent Taxes 360,448 08% All other taxes 127,618 03% Total 4,566,283

    18. 2005-2006 Millage Rates Greenwood 11.05 Newport 11.16 West Perry 13.00 Susquenita 17.00 2006-2007 Millage rates Increase Greenwood 11.64 0.59 Newport 12.16 1.00 West Perry 13.30 0.30 Susquenita 17.00 0.00 Newport Schools Taxes Perry County Millage Rates

    20. Newport School District Act 1 Calculator Median Assessed Value Maximum Exclusion Median Assessed Value 88,900 Maximum Exclusion 50% Maximum Allowable Assessed Value Exclusion 44,450 EIT Rate for Maximum Exclusion Total Projected Gaming & Sterling Act Credit Dollars ****** Total Estimated Value for Maximum Exclusion 945,355 Amount Need to Fund Maximum Exclusion 0.85% Total EIT Rate 1.95%

    21. Tax Study Commission Recommendation Sample Referendum Question: Do you favor imposing an additional .85% earned income tax? The revenue generated from the increased tax rate will be used to reduce taxes on qualified residential properties by $540.51?

    22. The impact of the tax shift will depend on a) your income and b) whether you own a home or rent. Assumptions Homeowner’s home assessment 95,405 Proposed EIT rate increase .85% Exclusion 44,450 Scenario #1 Retired homeowner on fixed income Current property tax ($95,405 assessed value home) 1,160.12 Homestead exclusion amount 619.61 Retiree saves 540.51 Percentage savings 45.59% Scenario #2 Family who rents w/ combined income of $40,000 annually EIT tax increase (@.85%) 340.00 Net savings/increase +340.00 Percentage increase .85% Newport School District Tax Shift Scenarios

    23. Newport School District Tax Shift Scenarios Scenario #3 Homeowner (family) w/ combined income of $40,000 annually Current property tax ($95,405 assessed value home) 1,160.12 Homestead exclusion amount 619.61 Family saves 540.51 EIT tax increase (@.85%) 340.00 Net savings/increase - 200.51 Percentage savings 17.28% Scenario #4 Homeowner (family) w/ combined income of $100,000 annually Current property tax ($95,405 assessed value home) 1,160.12 Homestead exclusion amount 619.61 Family saves 540.51 EIT tax increase (@.85%) 850.00 Net savings/increase + 309.49 Percentage increase 26.68%

    24. Questions & Answers

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