Pattye Benson

Community Matters

Act 1 exceptions

Corbett’s Property Tax Reform Throws a Curve Ball to School Districts . . . Limits on Act 1 Exceptions May Cause Angst to School Boards

School vouchers, Marcellus Shale fees and transportation funding may have been temporarily sidelined in Corbett’s budget but not so for property tax reform.

When Gov. Corbett inked the budget this week, school districts across the commonwealth collectively received a curve ball. Included in Corbett’s budget was property tax reform, which makes change to the Taxpayer Relief Act of 2006 (Act 1) that could effect future school board’s financial decisions.

With school districts struggling with significant reduction in state spending, many used Act 1 exceptions in their budget decisions, which permit tax increases without allowing voters the right to veto. However, with Corbett’s property tax reform, the school districts will not be permitted to increase property tax above the rate of inflation without voter referendum. Corbett suggests that the property tax reform will give the power to the taxpayers to decide whether they want a property tax increase to fund a particular program. A reduction in allowable Act 1 exceptions will force school boards to make their case to the voter for approval of a property tax increase.

Prior to the amendment, Act 1 included 13 permitted exceptions including new construction projects, debt, pension and special education costs – school boards could increase property tax using these exceptions without a voter referendum. The Act 1 exceptions will continue to include special education spending and payments to the state pension system but no other exceptions will be permitted without voter approval.

It is my understanding that if a school district has a building project underway, the previous Act 1 exception for construction will remain in place for the length of the project. However, the amendment to Act 1 does not permit an exception for future constructions projects without voter approval. So where does the Act 1 reform legislation leave TESD’s planned transportation garage/storage building on Old Lancaster Ave.? Although the project is only in the initial architectural development stages, the Facilities Committee may need to rethink their plans or be prepared for voter input. No longer qualifying for an Act 1 exception, this proposed new construction project would require a voter referendum. In addition, because the transportation garage is not educational programming, I would suggest that voters might not show their support for a property tax increase for this type of project.

By removing so many of the Act 1 exceptions, school boards will be limited in their ability to increase property taxes without voter referendum. On the other hand, you could say that property owners in Pennsylvania will have a more active roll in what school boards do with their money. Gaining voter support at the polls will require public convincing by school boards. Do you think that this is the way for taxpayers to receive property tax relief? I also wonder if some school districts will opt for creative responses to the Act 1 changes, such as forming their own charter schools.

On the subject of property taxes but slightly off topic, the T/E school district tax bills arrived in the mail. Having just read somewhere online that the average school taxes paid in Pennsylvania is $1,200 – I am struggling to see how that is possible.

My husband and I own an investment property in Glenhardie Condominiums in Wayne — a small 1-bedroom condo. According to the tax bill, our school taxes for the 1-bedroom condo are $1,232 — equivalent to the average school tax bill in the state. It is interesting that our 1-BR condo represents in T/E the model for the ‘average’ price of real estate across the state. So . . . $1,200 in school taxes buys you a 1-BR condo in the T/E school district – wonder what that same $1,200 in average school property taxes buys you in other parts of the state? A quick search online indicates that Pittsburgh is ranked as one of the ‘best buys’ in America. For the price of a 1-BR Glenhardie condo, one could buy a nice 4-BR house in Pittsburgh!

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