Homeowners Will See An Average Tax Cut Of $169

The 2006 Taxpayer Relief Act dramatically expanded Pennsylvania’s Property Tax/Rent Rebate Program for older Pennsylvanians.  Nearly 600,000 older Pennsylvanians will benefit from these rebates in the coming year, compared to 310,000 before the expansion. Under the Property Tax/Rent Rebate Program, older families with incomes up to $35,000 are eligible for rebates of up to $650.  Additional relief is available to seniors who pay a large share of their income in property taxes or live in high property tax areas.  The Property Tax Relief Fund will provide $48.5 million for the expanded program in the coming year, combined with $124.6 million from the Lottery Fund

Philadelphia’s share of funding for broad-based tax relief – $86.6 million – will be used to reduce the city’s wage tax instead of its property tax, since the wage tax is the greater barrier to economic growth in that city.  Philadelphia’s resident wage tax is projected to decrease from 4.169 percent to 3.93 percent in 2009 as a result of the certification released today.  The non-resident wage tax rate is projected to decrease from 3.685 percent to 3.50 percent in 2009.

The 2006 Taxpayer Relief Act created the Property Tax Relief Fund as a way to use gaming revenue to reduce property taxes for homeowners.  State law requires the budget secretary to certify the actual balance in the Property Tax Relief Fund by April 15 of each year. 

Masch certified today that the fund balance available for property tax relief is now $600.1 million, with an additional $101.9 million for the Property Tax Relief Reserve account.  Gaming revenue from April through September is projected to provide an additional $232.5 million for the Property Tax Relief Fund by Oct. 15. Masch said $171.2 million will remain in the Property Tax Relief Fund to ensure that the amount of state-provided local tax relief is sustainable in future years.

The level Masch certified today is sustainable for at least the next five years; it includes revenue from the seven gaming facilities already open and assumes that five more facilities will open in 2009. The certification assumes that two Philadelphia venues will open in 2010.  The opening of the Philadelphia facilities will make an additional $270 million available in tax relief by 2013-14 – the equivalent of another $75 in property tax relief for each Pennsylvania homeowner.  This will increase the average property tax relief per household by an additional 45 percent.

If the opening of the Philadelphia facilities is delayed, the current amount of property tax relief is expected to remain sustainable, but tax relief will not grow substantially after 2010-11, Masch said. 

The law permits the distribution of property tax relief funds to homeowners only when the Property Tax Relief Fund has a balance of at least $570 million. December revenue from the first six casinos pushed the balance past the $570 million threshold in January, when the December revenues were transferred to the Property Tax Relief Fund. Another casino opened in February, and seven more are authorized to open.

Under the terms of the law, homeowners will see the property tax reduction itemized on their tax bill, which school districts will issue this summer.  The amount of property tax relief will vary by school district.

<Masch today notified Secretary of Education Gerald Zahorchak by letter of the results of his certification.  The Department of Education will notify each school district of its specific level of property tax relief in early May.

The Rendell administration is committed to creating a first-rate public education system, protecting our most vulnerable citizens and continuing economic investment to support our communities and businesses.  To find out more about Governor Rendell’s initiatives and to sign up for his weekly newsletter, visit: www.governor.state.pa.us.

EDITOR’S NOTE: A copy of Secretary Masch’s April 15 letter to Secretary Zahorchak is attached. An estimate of statewide property tax relief through 2013-14 is available online at: http://www.state.pa.us/papower/lib/papower/ftp/estimated_property_tax_relief.pdf.
The amount of property tax relief in each school district will be available in early May at www.papropertytaxrelief.com.

Dear Secretary Zahorchak:

Pursuant to Section 503 of Act 1 of Special Session 1 of 2006, known as the Taxpayer Relief Act (the Act), I hereby certify that the balance in the Property Tax Relief Fund (the Fund) as of today is $600.1 million, with an additional $101.9 million in the Property Tax Relief Reserve Fund.  I am projecting that an additional $232.5 million in revenue will be deposited into the fund in the next six months, bringing the total amount in the fund to approximately $934.5 million (including the Property Tax Relief Reserve Fund) by October 15, 2008. 

I am certifying that the balance in the Property Tax Relief Reserve Fund will be $101.9 million.  As you know, Act 1 requires the amount of the Property Tax Relief Reserve Fund to be at least $100 million, up to a maximum of $150 million.  However, Act 42 of 2007 (amendments to the Fiscal Code) has the following provisions:

Section 1720-G(a) “…funds appropriated to the Pennsylvania Gaming Control Board from the state Gaming Fund shall be deducted from the amount transferred to the Property Tax Relief Reserve Fund under Section 504(b) of the Taxpayer Relief Act and loaned to the Pennsylvania Gaming Control Board for payment of the Board’s administrative and operating expenses for the fiscal year commencing July 1, 2007.”

Section 1720-G(c)(1) “Notwithstanding the provisions of Section 504 of the Taxpayer Relief Act, until the loan to the Pennsylvania Gaming Control Board under Subsection (a) is repaid, the Secretary of the Budget is authorized to provide for property tax relief under Section 503(d) of the Taxpayer Relief Act, regardless of whether the amount deposited in the Property Tax Relief Reserve Fund is less than required by Section 504 of the Taxpayer Relief Act.”

Section 1720-G(c)(2)  “…if the Secretary of the Budget determines that the moneys in the Property Tax Relief Reserve Fund are needed for property tax relief, the Secretary shall notify the Pennsylvania Gaming Control Board and upon notification, the Board shall immediately assess each slot machine licensee for the repayment of the loan in an amount proportional to each slot machine licensee’s gross terminal revenue.”

This certification assumes that comparable language will be part of the 2008-09 budget and that loans payable by licensees will continue to be treated as a resource of the Property Tax Relief Reserve Fund.  When including the loans payable by the licensees, the balance of the Property Tax Relief Reserve Fund is $150 million.

Of the amount projected to be in the Fund by October 15, 2008, $48.5 million will be transferred to the Lottery Fund to reimburse costs related to supplemental property tax rebates pursuant to Sections 704 and 1304(a)(2)(ii) of Act 1.  Additionally, $124.6 million from the state’s Lottery Fund will be used to provide enhanced rebates of up to $650 through the Property Tax/Rent Rebate program.  2008-09 marks the second year of the enhancements made to the Property Tax/Rent Rebate program.  Overall, nearly 600,000 older Pennsylvanians will benefit from the state rebate program this year, compared to 310,000 before the expansion. 

In addition, $17.9 million will be used to reimburse eligible school districts pursuant to Section 324 of Act 1, commonly referred to as Sterling Act reimbursements.

After subtracting the amount of funding required for the Property Tax Relief Reserve Fund, supplemental funding for the Property Tax/Rent Rebate Program, and Sterling Act reimbursements, I certify that $595 million will be available for statewide property tax relief.  This relief will reduce school district property taxes by 10 percent statewide, averaging $169 per household across the state.  Philadelphia’s share of funding for broad-based tax relief – $86.6 million – will be used to reduce the city’s wage taxes instead of property taxes, since the wage tax is the greater barrier to economic growth in that city.  Philadelphia’s resident wage tax is projected to decrease from 4.169 percent to 3.93 percent in 2009 as a result of the certification released today.  The non-resident wage tax rate is projected to decrease from 3.685 percent to 3.50 percent.

Based upon the latest projections, the amount of statewide property tax relief certified above will be sustainable in future years.  To satisfy the sustainability requirements of Act 1, $171.2 million will remain in the Fund for the April 2009 certification.  This amount is in addition to the amount of funding in the Property Tax Relief Reserve Fund. 

In addition to the seven facilities currently operating, the certification assumes that five more facilities will open in 2009.  The projections assume that all issues related to constructing the two gaming facilities in the City of Philadelphia will be resolved by January 1, 2009 and that those facilities will open in November and December of 2010. 

The amount available annually for property tax relief will remain stable and sustainable but relatively constant beyond 2010-11 if the opening dates for the Philadelphia facilities are delayed.  When the Philadelphia facilities are fully operational, the amount of funding available for statewide property tax relief will increase by $270 million in 2013-14, an increase of 45 percent from this year’s broad-based tax relief.  This additional funding will further decrease the average Pennsylvania homeowner’s property tax bill by an additional $75 per year.  Also by 2013-14, with both Philadelphia facilities fully operational, the Philadelphia resident wage tax is projected to be 3.50 percent, and the non-resident rate will be 3.13 percent.

Under the terms of Act 1, homeowners will see their property tax reduction itemized on their tax bills, which school districts will issue this summer.  The amount of property tax relief will vary by school district.  The Department of Education will notify each Pennsylvania school district of its property tax reduction allocation no later than May 1, as Act 1 requires.

Please let me know if you require any additional information or assistance from my office.

Sincerely,