Chambersburg School Board approves preliminary budget

Tax shifting referendum will appear on primary ballot

Tax shifting referendum will appear on primary ballot

February 08, 2007|by DON AINES

CHAMBERSBURG, Pa. - Voters in the Chambersburg Area School District will decide in May whether they will trade higher wage taxes for lower property taxes after the school board Wednesday approved both the preliminary budget for next year and a recommendation on tax shifting that will appear on the May 15 primary ballot.

The board voted unanimously to approve the Tax Study Commission's December recommendation to increase earned income taxes from the current 0.5 percent to 1.2 percent. In exchange, property owners would get a $367 homestead exclusion on their property taxes, according to the wording of the ballot question. Farmers would receive an additional $367 through a farmstead exclusion.

The catch is that the actual homestead exclusion for qualified owner-occupied residential properties in the first year likely will be $259 based on a collection rate on the additional 0.7 percent in earned income taxes of 70 percent, Business Manager Rick Vensel said. That is because collections of wage taxes tend to lag behind property taxes, the majority of which usually are received within a couple of months of the new budget year, he said.


The wording of the draft ballot question put the first year figure at the more likely $259, but was amended by the board.

By the second year, in 2008-09, Vensel said homeowners would receive the full $367 as collections on the additional earned income tax catch up.

Renters would receive no exclusion and, according to district projections, would pay an additional $385 in income tax on a household income of $55,000. Homeowners with a household taxable income of $55,000 in 2007-08 will pay $126 more in wage taxes than they save on property taxes, according to district figures.

Pensions, Social Security and most investment incomes would not be affected by the increased wage tax, Vensel said.

The referendum is required under Pennsylvania's Act 1 school property tax reform law, but if voters reject the measure, the earned income tax will remain at 0.5 percent.

In the same resolution, the board also approved a preliminary budget of $96,229,243 that raises real estate taxes 5.23 mills. The increase would raise the property tax rate to 75.91 mills, or $75.91 on every $1,000 of assessed value on a property.

The taxes on a property with a market value of $100,000 would increase approximately $56 per year if the budget is approved.

Act 1 imposes a cap on property tax increases keyed to an inflation index set by the state. For Chambersburg, the index is 4.1 percent, which would have allowed the district to increase taxes 2.9 mills without having to also place the budget before voters for referendum approval May 15.

However, Act 1 includes a number of exemptions allowing school districts to raise taxes above the cap. Among those Chambersburg qualified for was grandfathered debt it assumed in 2004 to pay for school construction, an exemption Vensel said will run dry in a few years.

Vensel said he expects the Pennsylvania Department of Education to approve the exemptions when the budget is submitted next week. Final approval by the board is scheduled for June 13.

Act 1 also requires districts to draft a "non-legal interpretive statement" explaining the referendum question to voters before the primary, although Vensel did not know how that document is to be disseminated to the public.

"We'll do the very best job we can of making the explanation clear," said Jan Sulcove, the district's solicitor.

Act 1 referendum question

This is the wording of the Act 1 referendum question that will appear on the May 15 ballot for voters in the Chambersburg Area School District:

"Do you favor Chambersburg Area School District imposing a 1.20% earned income tax? The revenue generated from the increased tax will be used to reduce taxes on qualified owner-occupied residential properties by $367 and on qualified farm buildings by approximately $367. The current school district earned income tax is .50%, and the current combined municipal/school district rate is 1.00%."

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