Colonial School Board Officially “Opts Out” of Act 72
       Three days after hearing the Colonial Citizen’s Advisory Committee recommendation not to opt in to Act 72, the slots legislation which promises property tax relief, the Colonial Board of School Directors unanimously voted to officially opt out of the program.
       “In addition to studying the Citizen’s Advisory Committee report, the members of the school board previously attended various Act 72 presentations, participated in Governor Rendel’s statewide conference call with school board members, and conducted extensive independent research of the legislation,” explained School Board President Marc Orlow. “The citizen’s advisory committee and the school board reached the same unanimous conclusion. Something must be done to control and alleviate the property tax burden, especially on those with fixed incomes and others whose property value exceeds their ability to pay. However, while good-intentioned, Act 72 does not address the root of the problem and is not the answer for the Colonial School District.”
       School Boards have until May 30 to decide whether or not to participate in receiving slots revenue. Colonial is the second Philadelphia area school district to officially opt out.

Board Resolution (pdf)

Citizen’s Advisory Committee unanimously recommends Colonial “Opt Out” of Act 72

       A panel of 19 comprising the Colonial School District Citizen’s Advisory Committee recommended that the school board “Opt Out” of Act 72 at the board’s public work session on April 18. The committee, which met eight times over a four month period, met with district administrators, a member of the school board, legal experts, members of the state legislature and more to compile information from which to make their recommendation.
       “We are very concerned with the effect of continuous increases in school taxes on all residents and, in particular, retirees and others with fixed incomes,” the committee stated in its official report to the board, which included six reasons for opting out. “We are equally concerned about maintaining high quality education for current and future Colonial students.
       “A significant portion of the rise in school property taxes is caused by under-funded state and federal mandates,” The report added. “Act 72 addresses the property tax increase symptom, not its underlying cause.”
       The committee reflects the overall diversity of the Colonial School District community. It consists of residents of Conshohocken Borough and Plymouth and Whitemarsh Townships, Democrats, Republicans, Independents, retired senior citizens, those with children in the schools, as well as people with children in private schools.
       "As a Board and as a community, we owe the Citizen’s Advisory Committee members enormous gratitude for the dedication and commitment that they have provided on behalf of our community,” School Board President Marc Orlow said. “I believe that this decision is the most significant issue to ever come before the board because it could fundamentally change the way the school district operates, affect our ability to provide the best educational opportunity for our children and impact the property value of our homes.”
       The school board is expected to vote on whether to “Opt In” or “Opt Out” of Act 72 at its public business meeting at 8:00 p.m. on April 21.

Colonial School District Citizens’ Advisory Committee Report – April, 2005

To watch the CAC presentation to the School Board, click here

       The Citizen’s Advisory Committee, consisting of community volunteers, was charged by the Colonial School District Board of Directors with investigating all aspects of Act 72, known as the Property Tax Relief Act and making a recommendation to accept or reject the Act.
       The Committee reflected the overall diversity of the Colonial School District community. It consisted of residents of Conshohocken, Plymouth and Whitemarsh, Democrats, Republicans, Independents, those with and without children in the schools, senior citizens, those employed and unemployed, as well as people with children in private schools. At the very first meeting, it was obvious that there were people who supported Act 72, those who opposed Act 72 as well as those who had no opinion. The report about to be presented to the Board and the community is a consensus report. We met eight evenings with sessions lasting 2-3 hours each.
       We are very concerned with the effect of continuous increases in school taxes on all residents and, in particular, retirees and others with fixed incomes. We are equally concerned about maintaining high quality education for current and future Colonial students.
       The Committee listened to presentations by CSD staff, asked critical questions, and requested volumes of information and legal opinions from the School District’s solicitor. We also interviewed a CSD board member and met with a state senator, a state representative, a school superintendent from another district with previous experience in states that had referenda, and an attorney, specializing in school law. In addition, many e-mails were exchanged between the Committee members who spent numerous hours on their own time researching and reporting their findings. We believe our conclusions are valid and impartial.
       The Committee concluded that the current and past elected school boards have done a commendable job, despite being hampered by unfunded mandates and regulations placed upon them by our state legislature, the federal government and the courts. It is the Committee’s opinion that the educational opportunity offered to our young people is among the best in the Commonwealth.
       It is the unanimous opinion of this Committee that the School District should not opt in to Act 72.

Our reasons are as follows:

A. Gamblers must lose $2.6 billion in Pennsylvania slot machines before any money is available for Act 72 property tax relief. Thereafter, our slots must generate nearly half as much revenue as all of the slot machines in Atlantic City to reduce a CSD homeowner’s annual school property tax by only $111(1) as determined by an Act 72 formula that favors less fortunate school districts. It is difficult to predict when, if ever, this much revenue will be realized.

B. To qualify for this property tax relief from gambling revenue, CSD must impose a minimum 0.1% earned income tax. This would reduce a CSD homeowner’s annual school property tax by an additional $83(2) Shifting taxes from property to earned income would benefit retirees and other fixed income residents, but it would also increase taxes for income earners and renters.

C. Act 72 requires voters to approve most school property tax increases above a state calculated inflation index. Voters who may be unfamiliar with educational funding would decide revenue limits in typically low turnout primary elections. Revenue limits could dictate program cuts such as kindergarten, the arts, athletics, and advanced placement courses, impairing educational quality. Lowering the quality of education will reduce property values.

D. The earlier budgeting schedule as set forth by Act 72 will distract CSD administrators and school board directors from their primary focus - providing quality education to our young people. Requiring directors to promote their budget to voters could also make it more difficult to find qualified citizens willing to serve on the school board.

E. A significant portion of the rise in school property taxes is caused by under-funded state and federal mandates. Act 72 addresses the property tax increase symptom, not its underlying cause. CSD administrators forecast a significant rise in school taxes over the next 5 years. If budget increases cannot be reduced, all of Act 72’s benefits would be absorbed by school tax increases in just 16 months.(3)

F. Act 72 is overly complex and poorly written. Attorneys, school administrators and even the legislature itself have already disagreed on its interpretation. Until these issues are resolved, the Act’s eventual benefits are uncertain.

While committee members may differ on the relative importance of each finding, we unanimously recommend that CSD not participate in Act 72 because its downside risks far outweigh its likely benefits. This is the conclusion of the CSD Citizens’ Advisory Committee:

Marci Blum, Neil Brown, Janet Cahill, David Caplan, Leslie Finegold, Robert Franz, Walter Humm, Jr., Marc Marrone, Connell McGill, Claire Meashey, Bob O’Neill, Kenneth Pearson, Bill Peters, Jack Pinheiro, Frank Precopio, Stanley Rosenau, Craig SanPietro, Corey Stricklin, Joanne Walker

Supporting Sources & Calculations:

1. Act 72 taxes gambling losses at 34% and $900 million must accumulate before any distributions are made. 900/.34 = 2.64 billion. “Last year, New Jersey casinos racked up $4.8 billion, with 74% coming from slots.” 1/30/05 Phila. Inquirer, page E4. So slots won 4.8 X .74 = $3.55 billion. To get $500 million for tax relief, Pennsylvania slots must win 500/.34 = $1.47 billion and Pennsylvania must do as much traffic as 1.47/3.55 = 41% of Atlantic City. PA Senate Republican research tables show $500 million in tax relief yields $1.3 million for CSD. Responding to a 1/12/05 email, Joe Bickleman, CSD Chief Financial Officer, converted this to $111 per homeowner.

2. PA Senate Republican research tables show the Act 72 0.1% EIT raising $981,623 in CSD. Responding to a 1/12/05 email, Joe Bickleman, CSD CFO, converted this to $83 per homeowner.

3. CSD’s “Act 72: The Budget Perspective”, page 45 shows the property tax rate increasing from 14.98 to 20.20 mils in the next 5 years. 20.2/14.98 = 1.348 or 35% or 7% per year (uncompounded). Responding to a 1/12/05 email, Joe Bickleman said the CSD median home is assessed at $140,235. With the current tax rate of 14.98 mils, the property tax is 140,235 X .01498 = $2,100. A 7% tax rate increase raises median home taxes 2100 X .07 = $147 each year. Act 72 total homeowner benefits = $111 from gambling + $83 from income taxes = $194. Act 72 benefits are offset in 194/147 = 1.32 years = 16 months.

Citizen's Advisory Committee Meeting Minutes

January 11, 2005
January 25, 2005
February 8, 2005
February 22, 2005
March 8, 2005
March 15, 2005

Act 72 -- The Homeowner Tax Relief Act

The purpose of the act is to provide limited property tax relief through the distribution of gaming revenue.

Did You Know?
     Only about one third of the monies the state derives from taxes on slots revenue will be used to fund property tax relief. The rest of the monies will fund local development in the communities the slots are placed, the creation of a Pennsylvania Racehorse Development Fund, the creation of The Gaming Economic Development and Tourism Fund, the Compulsive Gambling Treatment Fund, and the Volunteer Fire Company Grant Fund.

Did You Know?
     Money to fund all of the above initiatives is derived from a 34% daily tax on slots revenues.

Did You Know?
     $900 million ($500 million in the Property Tax Relief Fund and $400 million in the Property Tax Relief Reserve) must be acquired before any property tax relief will be provided.

Did You Know?
     Gaming monies for property tax relief will be paid to school districts, not individual homeowners. Homeowners of districts which participate in the program will see a reduction in their real estate tax bill, if they have filled out their Act 72 homeowner application.

Did You Know?
     Gaming monies will be distributed to districts based on a formula that takes into account personal income, equalized mills, school tax ratio and more.

Did You Know?
     Colonial, and most of the districts in Montgomery County, would receive the lowest possible payment based on the above formula. Estimates indicate if $500 million in property tax relief is available, the per household property tax reduction in Colonial would be $194. If $1 billion is available, the reduction would be $312.

Citizen's Advisory Committee Resolution (pdf file)

School Board appoints 29 to Citizen's Advisory Committee (Nov. 24)
     The Colonial Board of School Directors has appointed 29 citizens to the newly created Citizen’s Advisory Committee. The committee has been formed to explore the benefits and ramifications of the Homeowners Property Tax Relief Act, also known as Act 72. The school board must decide by May 30, 2005, whether or not to participate in Act 72, which utilizes gaming revenues to potentially provide homeowners with property tax relief.
     “We are pleased that such a diverse group of individuals has stepped forward to help us better understand the ramifications of Act 72 and how the community perceives the legislation,” said School Board President Marc Orlow. “It was critical that the committee be comprised of a broad cross section of the district demographic and that has been achieved. The board is looking forward to the findings of this group.”
     The committee includes men and women affiliated with both major political parties and ranging in age from 26 to 79. The residents, some of whom have children who are attending or attended Colonial schools and some who had no children in Colonial schools, represent all three of the district’s municipalities.
     Once the board secures a facilitator, the committee will meet to assess the financial and educational impact of Act 72 on the residents and the resources of the Colonial School District, and the capacity to continue to meet the high educational expectations of the community. The Committee shall report its findings to the Board of School Directors by April 15, 2005.

Committee Members (Updated)

Colonial announces formation of Citizen’s Advisory Committee (Oct. 18)
     The Colonial Board of School Directors has announced its intention to form a Citizen’s Advisory Committee to explore the benefits and ramifications of the Homeowners Property Tax Relief Act, also known as Act 72. The school board must decide by May 30, 2005, whether or not to participate in Act 72, which utilizes gaming revenues to potentially provide homeowners with property tax relief.
     “This is a decision that will affect every member of our community and could have a profound impact on the quality of education we provide,” said School Board President Marc Orlow. “The Board feels it is vital that we receive input and feedback from all of our constituent groups so that we make the best informed decision we possibly can.”
     Orlow hopes applicants for the committee will represent a diverse sampling of the district’s population and encompass all political viewpoints. He envisions the committee to include 20-30 citizens who will meet on a monthly basis.
     The Committee shall assess the financial and educational impact of Act 72 on the residents and the resources of the Colonial School District, and the capacity to continue to meet the high educational expectations of the community. The Committee shall report its findings to the Board of School Directors by April 15, 2005.
     Applications for the committee are available online at www.colonialsd.org, by calling 610-834-1671, ext. 2115, or e-mailing dsherman@colonialsd.org. The deadline for applications is Friday, November 5.

Homeowner property tax relief application to hit mail soon (Oct. 15)
     The Montgomery County Board of Assessment Appeals, on behalf of local school districts, will soon begin to mail homestead/farmstead applications to property owners as the first step in complying with the Homeowners Property Tax Relief Act (Act 72). More than three million property owners in all counties except Philadelphia will receive an application for the Act, which utilizes gaming revenues to potentially provide homeowners with property tax relief. Colonial School District residents should see an application in the mail before the end of the month.
     Completed applications should be mailed to the county assessor at One Montgomery Plaza, Suite 301, Norristown, PA 19404. The deadline for submission is March 1, 2005. If an application is not filed by the appropriate deadline, property owners will not be eligible for Act 72. A second mailing will be made by the county before the end of the year to those who have not responded to the first mailing.
     School boards must then decide by May 30, 2005 if they will participate in Act 72. If a district does not participate, state property tax relief funds from gaming licenses and operations will not be paid. The state funds, plus the revenue raised by new mandatory income taxes of at least .1 percent, would provide the property tax relief.
     Colonial School District officials remind property owners that potential property tax reduction is not automatic. If an owner’s homestead/farmstead application is approved (Commercial and industrial property owners are not eligible for Act 72), the potential property tax reduction will appear in the form of a tax credit on the property tax bill issued by the school district in July. Property owners will not receive a “rebate” as has been reported in some newspaper articles. School officials also stress that if the district opts to participate in Act 72, potential property tax relief will not be immediate to property owners. State payments to school districts for property tax reduction are not anticipated until at least the 2006-07 school year or later.
     Questions concerning the completion of the homestead/farmstead application may be directed to the county’s Board of Assessment Appeals at 610-278-3761. Information is also available on the Board’s website.