Encouraging School Districts to Raise Property Taxes:
The "Act 72 Millage Strategy" that Dr. Hartman spent an inordinate amount of time explaining shocked me beyond belief! The notion suggested by Dr. Hartman was that school boards have no sense of honesty or prudent fiscal management and will cavalierly raise real estate taxes year after year to the maximum allowable level allowed by Act 72 even though they do not have to.
Dr. Hartman presented an illustration that showed the Juniata Valley school district actually collecting $1,402,264 in additional real estate taxes over the past five years if they had cavalierly raised the tax levels as proposed in Dr. Hartman's Millage Strategy. To suggest that the Juniata Valley school board would actually behave with a mentality that has a complete and utter disregard for how many senior citizens and other homeowners on fixed income would be hurt by 4% - 5% tax increases year after year is an insult to everybody in the Juniata Valley school district. I genuinely hope that this is just a figment of his wild imagination and that there are really no unscrupulous school boards out there like he describes. I would be shocked if the Juniata Valley school board was actually a proponent of this convoluted logic.
The fact of the matter is that the Juniata Valley school district is prohibited from raising real estate taxes as long as the amount of money in the "Undesignated Fund Balance" exceeds 12% of the total budget. The PDE-2057 Annual Financial Report for the Juniata Valley School District shows that as of fiscal year end 2004, Juniata Valley had over $1,709,031 in this "Undesignated Fund Balance" account #0772. This $1,709,031 represents the cumulative effect of the Juniata Valley school district collecting more taxes than what is needed to run the schools each year. Dr. Hartman's suggestion that the Juniata Valley school district can cavalierly raise taxes flies in the face of the Harrisburg rules that prevent the Juniata Valley school board from doing so. Note that the $1,709,031 represents 21% of the $8,073,455 actually needed to run the schools through fiscal year end 2004. Also note that the 21% is significantly higher than the"12% or less" rule needed to be able to legally raise the real estate taxes. In effect, the boring and painful process of listening to Dr. Hartman's fantasy as he described his "Act 72 Millage Strategy" was a complete waste of time for Juniata Valley members of the audience.
As an aside, Dr. Hartman's repeated comments as to there possibly being many real estate tax increases by the school boards convinced a lady in the audience who was a proponent of Act 72 to change her mind. Her reason for doing so was that "if Act 72 were implemented, the young people would be getting too many tax increases." Go figure...
Slide #5 - "District Requirements to Participate" (in Act 72):
Dr. Hartman stated that there must be a "Front-End" referendum in November 2007 to lower real estate taxes further by raising the Earned Income Tax to a higher level."
The fact of the matter is that the PDE web-Site states that "this requirement does not apply to school districts that will have already reached at least 50% of the maximum homestead exclusion allowed by state law." Refer to question # 15 in the Q&A section of the PDE web-site.
Go to PDE Web-Site - Q&A Section
Note that the Juniata Valley School District will have reached 50% of the maximum homestead exclusion when 50% of $362.50 is achieved. This $181.25 multiplied by the 1,126 homestead / farmstead exclusions approved in the Juniata Valley school district results in $204,088 being needed in tax relief for Juniata Valley to not have to have the November 2007 referendum. Juniata Valley will reach this level when the minimum ($500 million) tax relief goal is reached. Note that when Juniata Valley reaches this 29.4% tax relief level, there will be 488 of the remaining 500 school districts with a lower percentage of tax relief. These other school districts will have received tax relief that represents as little as 7.4% to just under Juniata Valley's 29.4%. The reason this referendum exists is to let the residents in these other districts improve on their tax relief by voting on increasing their income tax level.
A questioner in the audience asked Dr. Hartman if the school board could raise taxes if the slot machine revenue were to drop one year from the previous year. For some inexplicable and unfathomable reason, Dr. Hartman responded that they could. Remember, Juniata Valley would be prohibited from doing so as explained above.
Also, refer to the "Act 72 Tax Relief Estimates " section to understand that the school district cannot lose any money if slot machine tax revenue fluctuates as the residential homeowners being taxed will always pick up the shortfall.
Slide #16 - "Does Act 72 Meet Its Goals?"
Dr. Hartman reiterates the need for real estate tax increases by stating that in terms of Act 72 meeting its goals, it "may encourage additional real estate tax increases." Again, Juniata Valley would be prohibited from doing so as explained above.
On this same slide, he notes that the school boards "can increase up to the index: 4% - 6% annually." Again, Juniata Valley would be prohibited from doing so as explained above.
Slide #19 - "Remaining Concerns (2)"
Dr. Hartman reiterates by stating: "Encourage tax increases every year" as his 2nd bullet-point.
Again, Juniata Valley would be prohibited from doing so as explained above.
Dr. Hartman reiterates by stating: "Commercial property owners receive no benefit - Possible higher taxes with annual Real Estate Tax increases." as his 3rd bullet-point.
Again, Juniata Valley would be prohibited from doing so as explained above.
Slide #20 - "Act 72 Millage Strategy"
Dr. Hartman suggested that the school boards could "Levy larger real estate tax increase in 2005 - 2006."
This would be the last opportunity before Act 72's index limitation.
In other words, hurry up and raise taxes before Act 72 prevents you from doing so.
This would enable you to have a higher base to begin Act 72 calculations.
Dr. Hartman then suggested that the school boards could "Avoid backend Referendum" and reduce the chance of having one year spikes in millage increases by implementing annual tax increases to protect against the year when the index is insufficient.
Again, this was a very shocking and unsettling portion of Dr. Hartman's presentation. Juniata Valley would be prohibited from cavalierly raising taxes year after year as suggested by Dr. Hartman as explained above.
Note that Dr. Hartman spent an inordinate amount of time to show multiple graphic representations of his complex and convoluted "Millage Strategy" logic.
Robert K. Wargo