PHOENIXVILLE AREA SCHOOL DISTRICT
Phoenixville, Pennsylvania
Minutes of the Tax Study Commission (TSC) Public Hearing
Monday, November 20, 2006
The Public Hearing of the Tax Study Commission was opened at 7:00 PM by Mr. William Mea, Board Member/Committee Member; with Mr. Harold E. Harr, Jr., Committee Member; Mr. Stephen P. Kelly, Committee Member; Mrs. Jan Potts, Committee Member; Mr. Gabriel Weinberg, Committee Member; Mr. Ray E. White Jr., Committee Member; Mr. James Shaughnessy, Alternate Committee Member; Mrs. Michelle A. Diekow, Business Administrator; Mr. John Frey of Public Financial Management (PFM); Mr. Chris Gehris, Comptroller; Mr. Fred Parry, Board Member; Mrs. Jill Slawecki, Board Member; and Mr. Keith Wickstrom, Board Member in attendance. Mr. Philip J. (PJ) Houm, Chairperson/Committee Member; Mr. Walter Fresch, Committee Member; and Mr. Paul R. Slaninka, Committee Member were unable to attend. The meeting was held in the auditorium of the high school and was taped for airing on Phantom TV.
OLD BUSINESS
The Committee approved the Minutes of the October 30, 2006 meeting. There were no changes or corrections to the minutes.
INTRODUCTION/OPENING REMARKS
In the absence of Mr. Philip J. (PJ) Houm, Chairperson/Committee Member, Mr. William Mea gave the introduction and opening remarks. Mr. Mea indicated that the purpose of the Public Hearing was to provide information to the public regarding Act 1 of 2006 and gather public input on the issue. Mr. Mea indicated that he and Mrs. Diekow would be giving a Power Point presentation to further explain Act 1 of 2006 (copy attached).
PURPOSE OF HEARING AND ACT 1 OVERVIEW
Mr. Mea indicated that Act 1 of 2006 was a tax shift from real estate taxes to either an Earned Income Tax (EIT) or a Personal Income Tax (PIT). Mr. Mea indicated that the TSC would make a non-binding recommendation to the Board of School Directors in December regarding the implementation of an additional EIT, or a new PIT and the rate at the minimum or maximum level which would be used to fund a tax exclusion on approved Homestead and Farmstead properties (slides 4 through 7).
EARNED INCOME TAX (EIT) VERSUS PERSONAL INCOME TAX (PIT)
Mrs. Diekow explained what income would be taxed under EIT and PIT. Mrs. Diekow indicated that EIT would tax all earned income including salaries, wages, bonuses, commissions, incentive payments, fees, tips, partnership and sole proprietorship income. Mrs. Diekow stated that PIT would tax the same type of income that is currently taxed by the Commonwealth, including all income taxed for EIT purposes plus net profits, net property income, income from rents, royalties, patents and copyrights, dividends, gabling and lottery winnings, interest, income from estates and trusts and S-Corporation net income (slide 8).
Mrs. Diekow explained that PIT taxed a larger percentage of the population than EIT, however PIT was more volatile than EIT, and that there was no structure in place for the levy and collection of a PIT by school districts (slide 9).
Mrs. Diekow reviewed a slide that showed how different demographic groups would be impacted by the implementation of an EIT (slide 10). Mrs. Diekow reviewed a slide that showed how individuals with different income levels would be impacted by the implementation of an EIT under Act 1 in the first year and the subsequent years (slides 11 and 12). Mrs. Diekow indicated the reason that the first year was lower was due to the delay in the collection of the additional EIT. Mrs. Diekow indicated that there were additional slides (slides 17-27) that individuals could review, including a chart showing how individuals at various income levels would be impacted.
Mrs. Diekow stressed that taxpayers needed to complete the Homestead Application in order to be eligible for the exclusion under Act 1. Mrs. Diekow indicated that taxpayers who did not complete the application would not receive the exclusion. Mrs. Diekow indicated that taxpayers could check the status of their application on the district website www.pasd.com or by contacting the Chester County Homestead Hotline at (610) 344-4570. Mrs. Diekow indicated that homeowners who had not completed the application would be receiving a notice from the district in late December.
TAX STUDY COMMISSION TENTATIVE CONSENSUS THOUGHTS
Mr. Mea indicated that the TSC’s tentative consensus was to recommend an EIT to the Board of School Directors at the minimum level of 1% in December (slide 13).
PUBLIC COMMENT
Mr. Paul Kuhns of Schuylkill Township asked if taxpayers could expect additional tax relief from gaming revenues. Mr. Mea indicated that gaming revenues would be in addition to this. Mr. Mea indicated that there needed to be a certain amount of gaming revenues in the fund prior to districts receiving the revenues.
Mrs. Rebekah Bowser of Schuylkill Township asked how the district budget would be impacted by the implementation of an EIT. Mr. Mea indicated that it would have no impact and would shift taxes currently being collected as real estate taxes, to collection through an EIT. Mr. Mea indicated that Act 1 of 2006 did limit the amount a district could increase taxes. For 2007-2008 the limit is 3.4%. Mr. Mea indicated that Act 1 did allow districts to seek specific exceptions from the limit.
Mr. Jim Smith of Schuylkill Township stated that he agreed with the TSC’s decision to recommend an EIT, indicating that a PIT would not be favorable to senior citizens.
Mr. Thomas Schadt of Birdsboro asked if he could comment. Mr. Mea indicated that he could. Mr. Schadt indicated that he was a member of the TSC for Daniel Boone School District. Mr. Schadt stated that he had attended several meetings and complemented the TSC on their presentation.
FUTURE MEETING DATES
Mr. Mea asked the TSC to consider making their recommendation to the Board of School Directors at the Board Reorganization meeting scheduled for December 4, 2006. Mr. Mea suggested the meetings scheduled for December 6 and 12, 2006 be canceled. The TSC agreed.
DISCUSSION
Mr. Mea asked if members of the TSC had heard anything at the Public Hearing that would make them consider changing their tentative recommendation from an EIT to a PIT, or the level at which it should be funded? The TSC indicated their recommendation had not changed.
Mr. Weinberg asked the TSC to discuss the wording of the sample referendum question, indicating that the question was geared towards a yes vote. Mr. Kelly indicated that he thought the referendum question was balanced. The TSC agreed to add the word “additional’ to the question. The following referendum question will be presented to the Board of School Directors on December 4, 2006:
Do you favor imposing an additional 1% Earned Income Tax? The revenue generated from the new tax will be used to reduce taxes on qualified residential properties by $462.
Mrs. Potts asked if the district could determine the percentage of the population within the district that would be positively impacted by the implementation of an EIT under Act 1 of 2006. Mr. Frey and Mrs. Diekow indicated that they would try to provide that information by the next meeting.
ADJOURNMENT
The meeting was adjourned at 8:00 PM.
Signature – Philip J. Houm, Chairperson December 4, 2006
* The tape and a video of the November 20, 2006 meeting of the TSC is available upon request (in accordance with School Board Policy 801, Public Records), from the Office of the Business Administrator.