Speed Limit: 4.1%

From the BCCT.

Act 1 limits most districts to 4.1 percent tax hike
School boards have until the end of January to determine whether they need to raise taxes more than their district’s index.
By JOAN HELLYER

Most school districts in Bucks and Eastern Montgomery counties will be allowed to raise property taxes 4.1 percent in the coming school year without seeking voter approval during the May primary.

Act 1, the state’s property tax relief law, includes an index rate for districts to adhere to when imposing property tax increases. Should a school board want to exceed its district’s state-determined index, it has to get voter approval in the primary election. So far that hasn’t happened.

A district’s index is determined by averaging the statewide average weekly wage with employment cost index data from the Bureau of Labor Statistics, according to state officials.

Bristol can increase its tax rate 5.3 percent and the Bristol Township tax rate can be increased 5.2 percent before voter approval is needed. All other area districts have to keep their tax increases to 4.1 percent or less.

The 2009-10 index is between threetenths and sixth-tenths of a percent less than the index for the current school year. District officials have cautioned school boards in early budget reviews that the index is likely to go lower in subsequent years.

A former state representative credits the indexes with reigning in increasing property taxes.

Prior to 2006 when Act 1 was established, the average property tax increase statewide was about 5 percent, said David Steil, a former state representative from Lower Makefield.

That average appears to be declining, Steil said.

The former lawmaker sees early indications of benefits from the relatively new tax relief law.

“Districts are more cognizant of how their money is being spent and where the expenditures are,” Steil said.

As has been the case for the past couple of years, Bristol Township officials are suggesting all district expenses can be covered with a tax increase lower than the index rate.

“We budget wisely and tightly,” explained Superintendent Ellen Budman. “We listen to our community and we empathize with all that they are going through during these difficult economic times.”

The Bristol Township school board is set to adopt a resolution next week promising to keep the increase below the index.

But not all area districts are so sure they will be able to stay below their state-determined index. Bristol and Bensalem, for example, are looking for ways to trim their projected tax rate increase, which initially exceeded what is allowed by the state.

School boards have until the end of January to decide if they need to raise taxes above the index. If they don’t, they have to say so in a resolution. If they do need to go above the index, they have to put the referendum on the May 19 ballot.

A point of contention for many taxpayers in recent years has been that a district’s actual tax rate increase can be more than the index when school systems claim exemptions for some expenses. Those exemptions include previously approved contracts and special education costs, according to Act 1.

The exemptions could potentially add one or more percentage points to the rate of increase allowed in a district’s millage rate.

Steil, the former lawmaker, said the exemptions are needed and they are fair.

“You want the school districts to be responsible for what they can control. Those areas [covered by the exemptions] they cannot control,” Steil said.

He said residents tired of property tax increases need to give Act 1 a chance to work at controlling district spending habits.

“I’m very confident if you will look at the average increases in spending in the five years following Act 1 and compare them to the five years preceding Act 1, you will see some significant changes,” Steil said.