School Board Preps For Tax Hike

School board members in Mt. Lebanon have begun the process of seeking a tax increase for 2009-2010 beyond that which is permitted by Act 1, the state Taxpayer Relief Act.

While the move doesn't preclude the school board will follow through with such a hike, it leaves the option open which is what the board wants, said President Alan Silhol. Act 1 outlines a multi-step process school boards must follow if they wish to raise taxes beyond pre-set limits.

Governor Ed Rendell (D) signed the Taxpayer Relief Act (Act 1) into law on June 27, 2006. Mt. Lebanon agreed to abide by the law, which aims to ease the financial burden of home ownership by providing school districts the means to lower property taxes to homeowners, especially senior citizens, via the funding provided by gaming revenue.

Link: www.thealmanac.net/ALM/Story/01-28-ML-referendum-exmpt-B

Last Call for Act 1

I received the following email late today. I'm not sure that I buy the argument, but I'm reproducing it in case it you're still trying to figure out what to make of Act 1:

The Mt Lebanon School Board has threatened us with a tax hike equaling $1.12 per month per $100,000 of assessed valuation if Act 1 passes.

Other Boards told their residents what tax savings they would get under Act 1. Mt Lebanon did not.

Our tax saving information is deep in the district website. All the negative publicity is on page 1.

Our Board didn’t tell us about the REFERENDUM AGAINST LARGE TAX HIKES contained in Act 1, or

the ACT 1 provision that would FORCE LARGE HEALTH CARE CO-PAYS when the union contract extension expires in 2010.

Never has so much been withheld from so many by so few.

I will be voting for the property tax reduction.

If you vote against it don’t complain about school taxes.

More on Act 1

The Mt. Lebanon PTA has produced the following statement on Act 1:

ACT 1

On May 15th, the referendum question below will be placed on the ballot:

"Do you favor your school district imposing an additional .9% earned income tax? The revenue generated from the tax increase will be used to reduce taxes to qualified owner occupied residential properties by approximately $640 the first year and increasing to approximately $914 in succeeding years. The current school district earned income and net profits tax rate is .5% and the current combined municipal/school district rate is 1.3%."

According to the Mt. Lebanon School District Local Tax Study Commission, "members were generally surprised and disappointed that they lacked the ability or opportunity to make significant proposals to improve our current system of local taxation, and were uncomfortable with the thought that their recommendation, if accepted by the Board and approved by the electorate, would do nothing more than shift tax burden from one member of the population to another, without any clear relationship to issues of fairness and equity."

Mt. Lebanon School Board unanimously passed a resolution on Act 1 at the April 16th board meeting. The resolution states: "Members of the School Board of the Mt. Lebanon School District hereby express their opposition to Act 1 as it fails to enact any meaningful or genuine tax relief, but rather only provides for a tax 'shift.'" (Go to www.mtlsd.org and read the resolution.)

What does this mean for our community? Everyone in the community will pay tax of .9% on earnings.

• Residents with no earned income tax will not see their taxes go up, and will see a first year savings on real estate taxes of $640 (estimate only).



• Renters (25% of our population) receive no relief at all, nor do properties owned by businesses.



• Renters could opt to live elsewhere, and then purchase in those communities instead. Many of our home owners in this community began as renters.



• We have many seniors who rent. They will not see any relief with this tax shift.

If surrounding communities do not pass Act 1, this could greatly affect the property values of Mt. Lebanon homes, as well as affecting our ability to attract new residents. We could see families and dual-income residents exiting this community for surrounding areas without this tax on earned income.

Increased earnings do not offset the immediate loss of $400,000 in investment earnings from the change in timing of the tax receipts. We pay property taxes once a year; EIT is collected over the year, in 4 different installments. When the property taxes are collected, the money is invested so that it works for the District.

If Act 1 passes, the School Board must consider the need for .13 of a mill increase.

Gambling revenues will not be distributed until the 2008-09 school year, and even then will not benefit Districts until many other entities, the gaming board, communities where the slots are located, even the Penguins, are paid. We get what's left.

The savings are just that: savings. You don't see the money—you just do not pay it on your tax bill.

What can we do?

• Talk to your neighbors, your friends, and local business owners about this referendum question. Be open to and respectful of their opinions.



• Discuss the long-term consequences for our community and our school district if it passes.

This information was compiled by Mt. Lebanon PTA Council at the request of PTA members.

PTA does not support referendum with a resolution, but we do not have a position on Act 1 itself.

Tax Increases in Mt. Lebanon?

The point of the post title is to get your attention.

There is a primary election scheduled for Tuesday, May 15. Several School Board and Commissioner seats are being contested. The most important question on the ballot, however, doesn't have to do with your elected representatives. It doesn't have to do with the TIF, or with deer. It has to do with your taxes, and specifically with the thing known as "Act 1."

"Act 1" is shorthand for the Special Session Act 1 of 2006, the Taxpayer Relief Act, which was passed by the state legislature and signed by the Governor on June 27, 2006. The purpose of the Act is to provide property owners with property tax relief -- by shifting some of their property tax burden onto those who pay Earned Income Tax.

Act 1 is implemented voluntarily, via referendum, on a school district-by-school district basis. Mt. Lebanon will vote on Act 1 on May 15. Vote "yes" if you want to approve Act 1; vote "no" otherwise.

The basic proposition behind Act 1 is that overall funding for schools will remain the same. The source of that funding, however, is supposed to shift: Real estate taxes go down; local income taxes go up.

As a matter of general purpose tax policy, Act 1 has a lot to recommend it. Inequities in public education funding between wealthy towns such as Mt. Lebanon and poor towns such as (take your pick; there are lots of candidates nearby) can be pretty striking. Reducing school districts' reliance on real estate taxes as a principal source of funds is designed to reduce those inequities over the long run. For example, this was the theory behind California's property tax reform in 1978.

Mt. Lebanon voters, however, may want to skip the lesson on theory. Most people want to know how this will affect them personally. And how Act 1 would affect you, the individual taxpayer, depends on a number of things. First, it depends on whether you pay real estate taxes at all. If you're a renter, property tax relief via Act 1 doesn't do you much good. Second, it depends on whether you have much earned income. If you don't (i.e., if you live on passive or government income), then Act 1 is great. Third, as I understand it, when you trade off the average amount of real estate tax reduction involved against the increase in Earned Income Tax, your overall tax bill will go down if your household income is below a certain threshold, or it may go up, if your household income is above that threshold. And that threshold is, apparently, somewhere just north of $100,000.

Finally, the tax tradeoff that Act 1 represents may be only a one-time thing. Even if you vote "yes" and Act 1 passes, your real estate tax reduction may be only temporary. Mt. Lebanon is not among the districts that committed to capping increases in its real estate tax rate, which Act 1 encouraged. Real estate taxes may go down this year -- but they may head upward again, a year from now.

The Mt. Lebanon School Board recently passed a resolution opposing Act 1.

A report from a Mt. Lebanon School District Local Tax Study Commission has some helpful detail.

The Post-Gazette ran this feature on the mechanics of the legislation and what it might mean for certain school districts.

I haven't had time to collect a lot of information about this. If you have corrections to what I've written or more specifics, particularly as to how Act 1 would impact Mt. Lebanon, please post it in the Comments, or email me for posting in the blog. Thanks.

UPDATED 7:50 p.m. 5/03/07:

From the School District:

For additional information on Act 1 and its impact on the District, including the investment income shortfall the District will experience with its passage:

http://www.mtlsd.org/district/stuff/07-08budgetreport.pdf

Additional information on Act 1’s impact on renters and homeowners in Mt. Lebanon:

http://www.mtlsd.org/district/stuff/act1%20mt%20%20lebanon%20sd%2010-27.pdf