Tax rebate program expansion discussed

Budget impact could be minimal, staff say

LANSDALE >> The North Penn School District now has facts and figures about the first year of a tax rebate program for low-income seniors, and a discussion to have on whether to continue or extend it.

Director of Business Administration Steve Skrocki gave the school board an update on the real estate tax rebate program implemented over the summer, and how it could shape the district’s next budget.

“It’s now time to start talking about what the rebate program might look like for the next year. We know we have a couple of different options,” Skrocki said.

Last year the board approved a property tax rebate based on a similar rebate offered by the

Pennsylvania Department of Revenue, which is funded by state lottery proceeds. The district’s policy is to rebate 25 percent of what the state gives back to taxpayers, so long as the total rebates do not exceed the total district taxes.

“For example, if somebody has a $500 tax bill to the North Penn School District, and gets a $490 rebate from the state, they’re not eligible for 25 percent of that $490 — they’d only be eligible for $10, to get them to the $500 amount they paid to the school district,” Skrocki said.

District rebates are capped at $162.50 and based on a sliding scale of income levels, and those who apply for the rebate from the district must submit proof that they have gotten the larger state rebate first. Applicants must be age 65 or older, or a widow or widower of at least 50 years old, or permanently disabled and at least age 18 to qualify, and must have an annual household income of $35,000 or below, with a higher rebate for lower income levels.

Based on projections using the state rebate data, the district included just shy of $117,000 for the rebates in the roughly $260 million 2018-19 budget and budget talks have already begun for 2019-20. As of the end of October, Skrocki told the board during their Oct. 29 finance committee meeting, only 268 residents have applied for the rebate, well below the projections the budget was based on.

“Right now, through the end of October, we’ve issued $21,535 in rebates, so we’re actually projecting not an 85 percent utilization, but somewhere around 25 percent,” he said.

“We think, at this point of the year, the word is out. There’s a lower number of applications weekly: last week we had only seven, the first week we received 52 applications, so the number is definitely shrinking,” Skrocki said.

Increasing the district rebate to 50 percent of the state amount, which would roughly double the $21,535 spent so far, would still likely not reach the amount set aside in the budget, Skrocki told the board. Extending the rebate to renters as well as property owners could also likely be absorbed by the budget, but could raise objections from landlords who pay the taxes on their properties.

“One argument could be that the renters don’t pay the real estate tax, but we all know the renters do pay, they just don’t pay it directly,” but indirectly through their rent, Skrocki said.

“We have a couple of questions we need to answer: do we want to consider raising that 25 percent? Do we want to consider rolling this out to, maybe, renters? Do we want to allow a rebate that’s in excess of the total school tax an individual pays?” he said.

Based on state data for prior years, the district knows of 1,625 residents who have claimed the state rebates before. Assuming a 50 percent participation rate, the total cost of a 25 percent rebate would add up to $68,749, well below the $117,000 included in the budget, Skrocki said. Increasing the district rebate to 30 percent of the state total would increase the total cost to $82,498, a 40 percent rebate would cost $110,000 and a 50 percent rebate would cost $137,497, he said.

“Under every scenario, it’s actually a very small budget implication. Even if the rebate was increased to 50 percent, the impact to the budget is about $20,000” beyond the amount already budgeted, “and that’s if the participation rate doubles, which might be optimistic,” he said.

Again using state data, the district has identified 851 renters whose income qualifies for the state rebate, and the total state rebates they’re eligible for add up to $454,279. Assuming a 50 percent participation rate, the district could offer renters a local rebate of 25 percent of the state amount at a cost of $56,785; a 30 percent rebate at a cost of $68,142; a 40 percent rebate at a cost of $90,856 or a 50 percent rebate at a cost of $113,570.

Certain residents of areas like the Neshaminy Falls community in Montgomery Township may qualify as part-owners and part-renters, Skrocki told the board, since their ownership may be different for a mobile residence and the property where it is located. Board member Christian Fusco asked how the state handles hybrid owner-renter situations like those, and Skrocki said the state asks for proof of both property tax and rent payments, then uses the income levels to determine the rebate.

“When I talk renters, I think of an apartment building: some of those individuals, based on income level, could be eligible, if that’s a direction we want to head,” Skrocki said.

“That’s a question more for the board than a recommendation from administration, but we did want to illustrate what the financial impact might be,” he said.

Board President Tina Stoll said she would not have any problems with expanding the rebate to renters, “and I think it would be great to expand it up to the 50 percent,” but would want to keep the rebates capped at the total amount of taxes paid to the district.

“It’s supposed to be tax relief, not making money off of it, so I would personally cap it. I don’t think you should get more money back than what the actual tax bill is,” Stoll said.

Board member Jonathan Kassa said he thought renters “could use that type of break” by expanding the rebate, and as to changing the percentage, “would be open to further discussion about what that means for our budget.”

Board member Elisha Gee asked how the state handles renters with multi-

ple occupants, and Skrocki said the state only issues one rebate per household. Member Ed Diasio said capping the rebate amounts may not make sense for renters, since in some of the hybrid cases the renter may be paying both rent and property taxes.

“I agree we shouldn’t give more back than what somebody has paid cumulatively in rent and property taxes, but I don’t think we should just single one category out,” Diasio said.

Skrocki said the district did issue capped rebates to some Neshaminy Falls residents this year, since the total rebates would have exceeded their total tax bill, but that tax bill may have been impacted by a relatively low assessed value of their houses.

Kassa asked if Skrocki could develop financial projections showing the budget impact if the cap is lifted, and Superintendent Curt Dietrich suggested the board and staff not make any decision until they have time to study the results.

“That would be my recommendation: think about everything discussed tonight, and revisit it after you have an opportunity to process all of that information, and we’ll make a decision in the next month, or two or three,” Dietrich said.

North Penn’s school board next meets in a special facilities forum at 7 p.m. on Nov. 13, and the next regular meeting is at 7:30 p.m. on Nov. 15.