New tax rebate discussed
District could give tax discount to low-income residents; proposal based on existing state program
A new property tax rebate is up for discussion that could provide a discount for North Penn School District residents at the lowest income levels.
Director of Business Administration Steve Skrocki described a new rebate the district could implement as soon as next summer, giving rebates of up to $162.50 for low-income property owners.
“Basically, the individual applies through the state for the rebate, they have to meet all the criteria set at the state level, per the Department of Revenue,” Skrocki said.
“Once all of that information is submitted to the state, and a rebate is received, the individual fills out a district form, proves they received the rebate, and the district issues a rebate to the individual,” he said.
The new district property tax rebate would be based on the Pennsylvania Property Tax and Rent Rebate Program, which was established in 2006 as part of the state’s Act 1 and is administered by the state’s Department of Revenue. According to Skrocki, the state program is funded by lottery and slot machine proceeds, and is available to property owners with household income limits of $35,000 or lower, with the state program also available to renters but with a lower limit.
Eligibility for the state program is limited to property owners 65 years old or older, widows or widowers 50 years old or older, or those 18 or older and permanently disabled, criteria Skrocki said would carry over to the district’s rebate. The state program provides a series of rebates of amounts that decrease as one’s income increases: a $650 rebate for those with income
from zero to $8,000; a $500 rebate for those with income of $8,001 to $15,000; a $300 rebate for those with income of $15,001 to $18,000; and a $250 rebate for those with income of $18,001 to $35,000.
“It is a sliding scale, so the more money you make, the less money is available for a rebate,” Skrocki said.
“And all income is counted. That’s really important to note, because if individuals have any kind of investment income, capital gains from investments, dividends, or interest income, that is counted. It’s not just earned income,” he said.
Based on the state law, the district’s finance staff are recommending the board start with a rebate at 25 percent of the state amounts, which would be given to those who provide proof that they’ve received the state rebate, and would need to be reapproved each year by the school board.
“Our thought process behind that was that if we started out lower, we can always increase the amount later. We can ramp it up, if it works well the first year,” Skrocki said.
“It might be 50 percent the second year, maybe it’s 75 percent the third year, maybe it’s 100 percent at some point in the future, a dollar-for-dollar match. But we felt it was important to start lower and ratchet it up,” he said.
Doing so would provide district rebate amounts of $162.50 for residents who make $0 to $8,000 per year; $125 for those who make $8,001 to $15,000; $75 for those who make $15,001 to $18,000, and $62.50 for those who make $18,001 to $35,000. Based on state data, Skrocki said, a total of 1,646 residents have claimed the state rebate between those four categories in 2017, based on taxes paid in 2016, and total state rebates added up to $594,564. A 25 percent district rebate would therefore cost roughly $137,391 in total district funds to those eligible to claim the rebate, but Skrocki said when he worked in the Penn Manor School District and a similar rebate was implemented, only about 50 percent of those eligible actually claimed it.
“The largest number of individuals that applied was in year one. You would think it would grow, year after year, as word spreads about the program, but the largest number they had was in year one. It was quite baffling, frankly,” he said.
School board President Vince Sherpinsky asked if the district would need to start an outreach program to make residents aware of the rebate, and Skrocki said Penn Manor did so with the help of local lawmakers.
“A lot of individuals will go to their local legislative office to get the application” for the state property tax rebate, Skrocki said.
“It’s free money, in terms of the rebate, if you file the (state) application — the application for the school district is minimal. It can be completed in 10 or 15 minutes,” he said.
Comparing the rebate figures to the district’s recently approved 201718 budget, Skrocki said the smallest available rebate would be for $62.50 for a property owner in the $18,001 to $35,000 tax bracket, and based on the district’s average assessed property value of $148,000, taxes were increased by 1.99 percent or roughly $71 per year starting next year.
“Even at the lowest tier, it would basically cover the increase with the 1.99 percent tax increase we’ve had this year,” he said.
North Penn also offers a homestead exclusion residents can claim, and the maximum amount available is roughly $200, according to Skrocki, so the average district tax bill of roughly $3,650 could be offset by 25 to 30 percent between the new rebate and the homestead exclusion.
If the board votes to adopt the rebate, it would take effect on July 1, 2018, on taxes paid in 2017, and residents would be asked to submit their state property tax documents and rebate applications to the district. Since vetting would be handled by the state for their rebate, the cost to the district would be minimal, Skrocki said, and the district rebates could be issued via checks or direct deposits.
Finance committee chairman Frank O’Donnell raised several questions that committee discussed in vetting the proposal. Those who apply for the rebate would likely not need to file a federal 1099 tax form, and if Right-to-Know requests are filed regarding the rebate, identifying information such as Social Security numbers would be redacted.
Board member Josie Charnock asked if the 1,646 number accurately represents the number in the district who would take the rebate, and said she thought staff should plan for “100 percent, just to be safe.” Skrocki said the number could be higher, if those who haven’t applied for the state rebate apply for that after hearing about the district rebate.
“There are two approaches we could take: just budget the full 100 percent max amount, and that way it provides a little cushion, in case more people apply through the state. Or, simply take maybe 75 percent for that level. It’s not a large dollar amount either way,” Skrocki said.
Member Ed Diasio asked how the rebate would impact the district’s 2018-19 budget and those beyond, and Skrocki said while the budget process is still early, the roughly $4.5 million deficit in the 2017-18 budget does not look likely to come down.
“It’s going to be quite a challenge, there’s no question about it. Preliminary numbers, we’re looking at a significant deficit absent any tax increase, and even with the Act 1 index (tax increase) of 2.4 percent next year, it still will be a significant deficit,” he said.
Diasio asked if the thresholds could be widened, or other credits created for residents who make more than the eligibility amounts to earn credits by doing work or volunteering for the district.
“A lot of residents that make just over the $35,000 threshold may feel they, too, are low income, and there’s no opportunity through this program to get any relief,” he said.
Skrocki said he considered that question when Penn Manor began the rebate in 2006, and determined doing so would be “wrought with more potential pitfalls,” since those working for the district would need to be vetted, paid, classified as contractors or employees, and covered if they were injured.
“There were so many considerations that that would be a separate program in and of itself, that would have a large degree of internal management that would be required,” he said.
“We felt the nice thing about this is, since it’s piggy-backing on the state program, the state’s doing the lion’s share of the vetting, and the (district) administration and oversight was minimal. That’s why we felt it was better,” Skrocki said.
Recent state and federal budget talks would likely have no impact on the rebate program, he added. Board members directed Skrocki to proceed with a motion to approve the rebate program during a future school board meeting, and Sherpinsky said he thought the new rebate could see growing acceptance similar to the homestead exemption, once residents learn about it.
“People looked at it like they had no idea how to do it, and yet it was as simple as sending in a form,” Sherpinsky said.
“If you’re going to do something like this, I think you really need to do the outreach program with it, so that you at least do what you expected to do, which is help people with low incomes,” he said.
The North Penn School Board next meets at 7:30 p.m. on Oct. 19 at the district Educational Services Center, 401 E. Hancock St. For more information or meeting agendas and materials visit www.NPenn.org.