PRINTER'S NO. 3908
No. 2659 Session of 2002
INTRODUCED BY R. MILLER, NICKOL, CAPPELLI, CREIGHTON, FEESE,
HANNA, MARSICO, READSHAW, SAYLOR, SCHULER, S. H. SMITH,
STEELMAN, STEIL, STETLER, R. STEVENSON, E. Z. TAYLOR, THOMAS,
TIGUE, TULLI, WATSON AND WILT, MAY 13, 2002
REFERRED TO COMMITTEE ON FINANCE, MAY 13, 2002
AN ACT
1 Amending Title 53 (Municipalities Generally) of the Pennsylvania
2 Consolidated Statutes, further providing for limitations on
3 incurring of debt by school districts, for assessor reports,
4 for adoption of referendum on the question of the levy of an
5 earned income and net profits tax, for referendum
6 requirements for increasing property taxes previously reduced
7 and for local tax study commission; providing for continuity
8 of homestead exclusion; and further providing for disposition
9 of earned income and net profits tax revenue.
10 The General Assembly of the Commonwealth of Pennsylvania
11 hereby enacts as follows:
12 Section 1. Sections 8022(f), 8584(i), 8703, 8704 and 8705 of
13 Title 53 of the Pennsylvania Consolidated Statutes are amended
14 to read:
15 § 8022. Limitations on incurring of other debt.
16 * * *
17 (f) Limitations on incurring of debt by school districts.--
18 (1) Except for purposes of refinancing existing debt
19 under this subpart and notwithstanding the other provisions
20 of this section, no school district of the first class A
1 through fourth classes shall incur any new nonelectoral debt
2 or lease rental debt if the aggregate net principal amount of
3 such new debt together with any other net nonelectoral debt
4 and lease rental debt then outstanding would cause the
5 outstanding total of net nonelectoral debt plus net lease
6 rental debt of the school district to exceed 225% of the
7 school district's borrowing base as defined in section 8002
8 (relating to definitions). This section shall apply
9 regardless of whether there is an election by the school
10 district under section 8703 (relating to adoption of
11 referendum).
12 (2) The calculation of the limitation under this
13 subsection shall not include any portion of debt allocated to
14 or by a school district for the support of an area
15 vocational-technical school or intermediate unit.
16 § 8584. Administration and procedure.
17 * * *
18 (i) Reports.--At the same time as the assessor certifies the
19 tax duplicate, the assessor shall provide to the governing
20 bodies of the county and each political subdivision within the
21 county upon request and at no charge a certified report listing
22 at least all of the following information:
23 (1) The parcel number of each parcel which is approved,
24 in whole or in part, as homestead property.
25 (2) The assessed value of each parcel which is approved,
26 in whole or in part, as homestead property.
27 (3) The portion of the assessed value of each parcel
28 listed under paragraph (2) which is approved as homestead
29 property.
30 (4) The median assessed value of the homestead property
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1 listed in paragraph (3).
2 (5) The parcel number of each parcel which is approved,
3 in whole or in part, as farmstead property.
4 (6) The assessed value of each parcel which is approved,
5 in whole or in part, as farmstead property.
6 (7) The portion of the assessed value of each parcel
7 listed under paragraph (6) which is approved as farmstead
8 property.
9 The assessor shall also provide to the governing body of a
10 school district considering an earned income and net profits tax
11 levy under Chapter 87 (relating to other subjects of taxation)
12 upon request and at no charge an interim report with preliminary
13 information as of June 30. The governing body of the county may
14 set reasonable fees for providing customized reports or services
15 not otherwise required under this chapter or other applicable
16 law to political subdivisions.
17 * * *
18 § 8703. Adoption of referendum.
19 (a) General rule.--
20 (1) In order to levy an earned income and net profits
21 tax under this chapter, a governing body shall use the
22 procedures set forth in subsection (b).
23 (2) Any governing body after making an election to levy
24 an earned income and net profits tax under this chapter may,
25 after a period of at least three full fiscal years, elect
26 under the provisions of subsection (c) to levy, assess and
27 collect the taxes prohibited by section 8701(b) (relating to
28 general tax authorization) to the extent otherwise provided
29 by law. If the electorate approves such referendum, the
30 governing body shall lose the authority to continue to levy
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1 an earned income and net profits tax authorized under this
2 chapter.
3 (3) Upon defeat of a public referendum held under the
4 provisions of subsection (b) or (d), the governing body and
5 electors of a school district may, after a period of at least
6 three full fiscal years, use the procedures set forth in
7 subsection (b) or (d) to establish a local tax study
8 commission or initiate another referendum to levy an earned
9 income and net profits tax under this chapter.
10 (b) Public referendum requirements.--Subject to the notice
11 and public hearing requirements of section 8716 (relating to
12 procedure and administration), a governing body may levy the
13 earned income and net profits tax under this chapter only by
14 obtaining the approval of the electorate of the affected school
15 district in a public referendum at only the municipal election
16 preceding the fiscal year when the earned income and net profits
17 tax will be initially imposed. The referendum question must
18 state the initial rate of the proposed earned income and net
19 profits tax, the reason for the tax and the amount of proposed
20 budgeted revenue growth, if any, in the first fiscal year
21 following adoption of the referendum, expressed as a percent
22 increase over the prior year's budgeted revenue. If a stated
23 reason for the tax is a reduction in real property taxes by
24 means of a homestead exclusion, the governing body shall use the
25 best estimate of the reduction that is sustainable in at least
26 five subsequent years as additional parcels are approved for the
27 homestead exclusion. Any increase in budgeted revenue between
28 the first fiscal year following adoption of the referendum and
29 the prior year's budgeted revenue shall not exceed the annual
30 percent change in the Statewide average weekly wage. The
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1 question shall be in clear language that is readily
2 understandable by a layperson. For the purpose of illustration,
3 a referendum question may be framed as follows:
4 Do you favor the imposition of an earned income and net
5 profits tax of X% to be used to replace (names of local
6 taxes to be repealed), reduce real property taxes by X%
7 by means of a homestead exclusion and provide for a one-
8 time revenue increase of X% over the preceding fiscal
9 year?
10 A nonlegal interpretative statement must accompany the question
11 in accordance with section 201.1 of the act of June 3, 1937
12 (P.L.1333, No.320), known as the Pennsylvania Election Code,
13 that includes the following: the initial rate of the earned
14 income and net profits tax and the maximum allowable rate of the
15 earned income and net profits tax imposed under this chapter;
16 the estimated revenues to be derived from the initial rate of
17 the earned income and net profits tax imposed under this
18 chapter; the amount of proposed revenue growth, if any, in the
19 first fiscal year following adoption of the referendum; the
20 estimated reduction in real property taxes and the elimination
21 of certain existing taxes under this chapter; the identification
22 of the existing taxes to be eliminated under this chapter; the
23 method to be used to reduce real property taxes; the class or
24 classes of real property for which real property taxes would be
25 reduced; and the estimated amount of real property tax reduction
26 by class, expressed as an average percent reduction by class.
27 Any governing body which uses the procedures under this section
28 shall not be subject to the provisions of section 8704 (relating
29 to public referendum requirements for increasing property taxes
30 previously reduced) for any future increases in the earned
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1 income and net profits tax rates authorized under this chapter.
2 Any future real property tax rate increases are subject to the
3 provisions of section 8704. If the ballot question fails to
4 receive a majority vote pursuant to this section, approval of
5 the electorate under section 8704 shall not be required to
6 increase the rate of any tax which the governing body of the
7 affected school district is authorized to levy and increase
8 pursuant to any other act.
9 (c) Public referendum requirements to end participation
10 under this chapter.--Subject to the notice and public hearing
11 requirements in section 4 of the Local Tax Enabling Act, a
12 governing body may elect to end participation under this chapter
13 in accordance with subsection (a)(2) by obtaining the approval
14 of the electorate of the affected school district in a public
15 referendum at a municipal election.
16 (d) Public requirements to initiate referendum.--
17 (1) If the governing body of a school district fails to
18 place a referendum question on the ballot within two years
19 after the effective date of this chapter, the electors of the
20 school district may:
21 (i) Circulate a petition which, if signed by
22 electors comprising [2%] 5% of the number of electors
23 voting for the office of Governor in the last
24 gubernatorial election in the school district and filed
25 with the election officials and submitted to the
26 governing body thereof, shall require the governing body
27 to establish a local tax study commission. The provisions
28 under paragraph (2)(v), (vi), (vii), (viii) (ix) and (x)
29 shall not apply to this subparagraph.
30 (ii) If the local tax study commission makes a
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1 recommendation to levy the earned income and net profits
2 tax under this chapter and the governing body fails to
3 place the recommendation or other alternative of the
4 governing body authorized under this chapter on the
5 ballot in accordance with this chapter at the next
6 municipal election occurring at least 90 days after the
7 submission of the recommendation to the governing body, a
8 petition under this paragraph may be circulated. If the
9 petition is signed by the electors comprising [5%] 10% of
10 the number of electors voting for the office of Governor
11 in the last gubernatorial election in the school district
12 and filed with election officials at least 90 days prior
13 to the next municipal election, the petition shall compel
14 the election officials to place the recommendation upon
15 the ballot at the next municipal election occurring at
16 least 90 days after the filing of the petition.
17 (2) The following requirements shall apply to the
18 process under paragraph (1):
19 (i) The name and street address of each elector
20 signing the petition and of the person filing the
21 petition shall be clearly stated on the petition. The
22 petition shall include an affidavit of the circulator
23 that he or she is a qualified elector of the school
24 district referred to in the petition; that the signers
25 signed with full knowledge of the contents of the
26 petition; that the signers' residences are correctly
27 stated; and that, to the best of the circulator's
28 knowledge and belief, the signers are qualified electors.
29 (ii) The election officials shall, within ten days
30 after filing, review the petition as to the number and
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1 qualifications of signers. If the petition appears to be
2 defective, the election officials shall immediately
3 notify the person filing the petition of the defect and
4 may reject the petition if warranted.
5 (iii) The petition as submitted to the election
6 officials, along with the list of signatories, shall be
7 open to public inspection in the office of the election
8 officials.
9 (iv) If the election officials find that the
10 petition as submitted is in proper order, they shall send
11 copies of the petition without signatures thereon to the
12 governing body involved.
13 (v) The procedure for the referendum shall be
14 governed by the act of June 3, 1937 (P.L.1333, No.320),
15 known as the Pennsylvania Election Code.
16 (vi) If the election officials find the petition
17 meets the requirements of this chapter, they shall place
18 the proposal on the ballot in a manner fairly
19 representing the content of the petition for decision by
20 referendum at the proper election.
21 (vii) The election officials shall certify the date
22 for the referendum and shall notify the governing body at
23 least 30 days prior to such date.
24 (viii) At least 30 days' notice of the referendum
25 shall be given by proclamation of the governing body. A
26 copy of the proclamation shall be posted at each polling
27 place on the day of the election and shall be published
28 once in at least one newspaper of general circulation
29 which is distributed within the school district during
30 the 30-day period prior to the election.
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1 (ix) Approval of a referendum shall be by majority
2 vote of those voting in the school district involved.
3 (x) The election officials shall certify the results
4 of the referendum to the governing body.
5 (e) School districts located in more than one county.--
6 (1) In the event a school district is located in more
7 than one county, petitions under this section shall be filed
8 with the election officials of the county wherein the
9 administrative offices of the school district are located.
10 (2) The election officials receiving a petition shall be
11 responsible for all administrative functions in reviewing and
12 certifying the validity of the petition and for making all
13 necessary communications with the school district.
14 (3) If the election officials of the county receiving
15 the petition certify that it is sufficient under this subpart
16 and determine that a question should be placed upon the
17 ballot, such decision shall be communicated to election
18 officials in any other county in which the school district is
19 also located. Election officials in the other county or
20 counties shall cooperate with election officials of the
21 county receiving the petition to insure that an identical
22 question is placed on the ballot at the same election
23 throughout the entire school district.
24 (4) Election officials from each county involved shall
25 independently certify the results from their county to the
26 governing body.
27 § 8704. Public referendum requirements for increasing property
28 taxes previously reduced.
29 (a) General rule.--[Except as provided in subsections (c)
30 and (d), a] A governing body that elects to levy an earned
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1 income and net profits tax under this chapter pursuant to
2 section 8703(a) (relating to adoption of referendum) shall not
3 increase the rate of its tax on real property without
4 advertising its intention to adopt a resolution increasing the
5 rate of its tax on real property once a week for three weeks
6 pursuant to the notice and public hearing requirements in
7 section 4 of the Local Tax Enabling Act and, except as provided
8 in subsections (c) and (d), first obtaining the approval of the
9 electorate of the affected school district in a referendum [at
10 the primary election immediately preceding the fiscal year of
11 the proposed tax increase] if required under subsection (a.1).
12 (a.1) Referendum.--The electors of a school district may
13 petition the governing body of the school district to require
14 approval of the electorate of the affected school district in a
15 public referendum for any increase in the rate of real property
16 tax beyond the rate provided for in subsections (c) and (d). A
17 school district proposing such an increase shall, upon first
18 advertising its intention to adopt a resolution increasing the
19 rate of its tax on real property, prepare and hold open a
20 petition to require a referendum in a designated office of the
21 school district to be available for signing by qualified
22 electors of the school district. The petition shall be available
23 for signing during the normal business hours of the school
24 district for a period of two weeks. In addition, the petition
25 shall be made available for signing at least three additional
26 hours on each of the two evenings prior to the signing deadline.
27 Notice of the petition, the date and times for signing and its
28 location shall be included in the advertisement required in
29 subsection (a). If the petition is signed by electors comprising
30 5% of the number of electors voting for the office of Governor
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1 in the last gubernatorial election in the school district, the
2 governing body of the school district shall not be permitted to
3 increase the rate of its tax on real property, except as
4 provided in subsections (c) and (d), without first obtaining the
5 approval of the electorate of the affected school district in a
6 referendum.
7 (b) Disapproval.--Whenever the electorate fails to approve
8 the proposed referendum question to increase the rate of tax on
9 real property under subsection [(a)] (a.1), the governing body
10 shall be [limited to the rate of tax in effect prior to the
11 referendum.] compelled to repeal the resolution increasing the
12 rate of tax on real property for the next fiscal year. Nothing
13 in this subsection shall be construed as prohibiting the
14 governing body from increasing the rate of tax on real property
15 pursuant to subsections (c) and (d).
16 (c) Exception to general rule.--The provisions of subsection
17 [(a)] (a.1) shall not apply to an increase in the rate of the
18 real property tax that does not cause [local tax revenue,
19 excluding real property taxes to be levied on newly constructed
20 buildings or structures or on increased valuations based on new
21 improvements made to existing houses, to increase by more than
22 the percentage increase in the Statewide average weekly wage in
23 the preceding year. Prior to any increase under this subsection,
24 the governing body must certify to the court of common pleas in
25 the judicial district in which the governing body is located the
26 estimates of total local tax revenues used in the calculation
27 under this subsection.] per-student school district revenue to
28 increase by more than the percentage increase in the Statewide
29 average weekly wage in the preceding year. For the purposes of
30 this paragraph, per-student school district revenue shall be
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1 determined by adding together local tax revenues, Federal and
2 State funding and dividing the total by the average daily
3 membership of a school district as defined by the act of March
4 10, 1949 (P.L.30, No.14), known as the Public School Code of
5 1949. Prior to any increase under this subsection, the governing
6 body must certify to the court of common pleas in the judicial
7 district in which the governing body is located the estimates of
8 total local tax revenues, Federal and State funding and student
9 enrollment used in the calculations under this subsection. The
10 court may, on its own motion or on petition of a person having
11 standing under subsection (f), revise the estimates certified by
12 the governing body and reduce the allowable increase in the rate
13 of the real property tax under this subsection.
14 (d) Referendum exceptions.--The provisions of subsection
15 [(a)] (a.1) shall not apply to increases in the rate of tax on
16 real property in this subsection only if the exception to the
17 general rule under subsection (c) has been utilized, if
18 applicable, to the maximum amount allowed:
19 (1) To respond to or recover from an emergency or
20 disaster declared pursuant to 35 Pa.C.S. § 7301 (relating to
21 general authority of Governor) or 75 Pa.C.S. § 6108 (relating
22 to power of Governor during emergency), only for the duration
23 of the emergency or disaster and for the costs of the
24 recovery from the emergency or disaster.
25 (2) To implement a court order or an administrative
26 order from a Federal or State agency that requires the
27 expenditure of funds that exceed current available revenues.
28 The rate increase shall be rescinded following fulfillment of
29 the court order or administrative order.
30 (3) To pay interest and principal on any indebtedness
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1 incurred under Subpart B (relating to indebtedness and
2 borrowing). However, in no case may a school district incur
3 additional debt under this paragraph, except for the
4 refinancing of existing debt, including the payment of costs
5 and expenses related to such refinancing and the
6 establishment or funding of appropriate debt service
7 reserves. The increase shall be rescinded following the final
8 payment of interest and principal. The exception provided
9 under this paragraph shall not be used to avoid referendum
10 requirements to pay for costs which could not be financed by
11 the issuance of debt under Subpart B.
12 (4) To respond to conditions that pose an immediate
13 threat of serious physical harm or injury to the students,
14 staff or residents of the school district until the
15 circumstances causing the threat have been fully resolved.
16 (5) Special purpose tax levies approved by the
17 electorate.
18 (6) [To maintain per-student local tax revenue in the
19 school district at an amount not exceeding the amount of per-
20 student local tax revenue at the level of the preceding year,
21 adjusted for the percentage increase in the Statewide average
22 weekly wage. This paragraph shall apply only if the
23 percentage growth in student enrollment in the school
24 district between the current fiscal year and the third fiscal
25 year immediately preceding the current fiscal year exceeds
26 10%. For the purposes of this paragraph, student enrollment
27 shall be measured by average daily membership as defined by
28 the act of March 10, 1949 (P.L.30, No.14), known as the
29 Public School Code of 1949. For the purposes of this
30 paragraph, per-student local tax revenue shall be determined
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1 by dividing local tax revenue by average daily membership.]
2 To implement a statutory or regulatory requirement imposed by
3 the Federal or State government and for the first time
4 affecting the school district.
5 (e) Court action.--Prior to the imposition of the tax
6 increase under subsection (d)(1), (2), (4) or (6), approval is
7 required by the court of common pleas in the judicial district
8 in which the governing body is located. The governing body shall
9 publish in a newspaper of general circulation a notice of its
10 intent to file an action under this subsection at least one week
11 prior to the filing of the petition. The governing body shall
12 also publish in a newspaper of general circulation notice, as
13 soon as possible following notification from the court that a
14 hearing has been scheduled, stating the date, time and place of
15 the hearing on the petition. The following shall apply to any
16 proceedings instituted under this subsection:
17 (1) The governing body must prove by clear and
18 convincing evidence the necessity for the tax increase.
19 (2) The governing body must prove by clear and
20 convincing evidence that there are no assets or other
21 feasible alternatives available to the school district.
22 (3) The court shall determine the appropriate duration
23 of the increase and may retain continuing jurisdiction. The
24 court may, on its own motion or on petition of an interested
25 party, revoke approval for or order rescission of a tax
26 increase.
27 (f) Standing.--A person shall have standing as a party to a
28 proceeding under this section as long as the person resides
29 within or pays real property taxes to the taxing jurisdiction of
30 the governing body instituting the action.
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1 § 8705. Local tax study commission.
2 (a) Appointment.--A governing body may appoint a local tax
3 study commission.
4 (b) Membership.--The local tax study commission shall
5 consist of at least five but not more than 11 members who are
6 resident individuals or taxpayers of the school district and
7 shall reflect the socioeconomic, age and occupational diversity
8 of the school district to the extent possible.
9 (1) Except for paragraph (2), no member shall be an
10 official or employee, or a relative thereof, of the school
11 district.
12 (2) One member may be a member of the governing body.
13 (c) Staff and expenses.--The governing body shall provide
14 necessary and reasonable support staff and shall reimburse the
15 members of the local tax study commission for necessary and
16 reasonable expenses in the discharge of their duties.
17 (d) Contents of study.--The local tax study commission shall
18 study the existing taxes levied, assessed and collected by the
19 school district and their effect. The local tax study commission
20 shall determine how the tax policies of the school district
21 could be improved by the levy, assessment and collection of the
22 taxes authorized pursuant to this chapter. The study shall
23 include, but not be limited to, consideration of all of the
24 following:
25 (1) Historic and present rates of and revenue from taxes
26 currently levied, assessed and collected.
27 (2) The age, income, employment and property use
28 characteristics of the existing tax base.
29 (3) Projected revenues of taxes currently levied,
30 assessed and collected, including taxes authorized and taxes
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1 not levied under this chapter.
2 (e) Recommendation.--[Within 90 days of its appointment, the
3 local tax study commission shall] The governing body shall
4 establish a deadline for the local tax study commission to
5 conduct its study and make a nonbinding recommendation to the
6 governing body regarding the imposition of an earned income and
7 net profits tax to be levied, assessed and collected commencing
8 the next fiscal year. The deadline for the recommendation shall
9 be no later than 150 days before the next municipal election.
10 Except as provided in subsection (f), if the governing body
11 appoints a commission, the earned income and net profits tax
12 authorized under this chapter may not be levied, assessed or
13 collected until receipt of the recommendation. No later than 90
14 days prior to the next municipal election occurring at least 150
15 days after the submission of the recommendation, the governing
16 body shall accept or reject the recommendation of the local tax
17 study commission or adopt an alternative proposal authorized
18 under this chapter.
19 (f) Failure to issue a recommendation.--If the local tax
20 study commission fails to make a recommendation under subsection
21 (e), the governing body may adopt a proposal authorized under
22 this chapter.
23 (g) Public distribution of report.--The local tax study
24 commission shall publish a final report of its findings and
25 recommendation and deliver the report to the governing body. The
26 governing body shall supply copies to any interested persons
27 upon request.
28 (h) Materials.--All records of the local tax study
29 commission shall be available for public inspection during the
30 regular business hours of the school district.
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1 (i) Definitions.--As used in this section, the term
2 "relative" means a spouse, parent, sibling, child, stepchild, or
3 the spouse of the parent, sibling, child or stepchild.
4 Section 2. Title 53 is amended by adding a section to read:
5 § 8707. Continuity of homestead exclusion.
6 A homestead exclusion created under this chapter shall
7 continue in full force and effect and not be diminished unless a
8 governing body elects to end participation in accordance with
9 section 8703 (relating to adoption of referendum) and obtains
10 the approval of the electorate of the affected school district.
11 Section 3. Section 8717 of Title 53 is amended to read:
12 § 8717. Disposition of earned income and net profits tax
13 revenue.
14 The disposition of revenue from an earned income and net
15 profits tax or an increase in the rate of an earned income and
16 net profits tax imposed by school districts under the authority
17 of this chapter shall occur in the following manner:
18 (1) For the fiscal year of implementation of a newly
19 imposed income tax, all earned income and net profits tax
20 revenue received by a school district shall be used first to
21 offset any lost revenue to the school district from the taxes
22 prohibited under section 8701(b) (relating to general tax
23 authorization) in an amount equal to the revenue collected
24 from the prohibited taxes in section 8701(b) in the preceding
25 fiscal year; second, to provide for an increase in budgeted
26 revenues over the preceding fiscal year in accordance with
27 the amount specified in the referendum question approved by
28 the voters under section 8703 (relating to adoption of
29 referendum); [and] third, to reduce the school district real
30 property tax [in the following order:
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1 (i) By means of an exclusion for homestead property
2 pursuant to section 8583 (relating to exclusion for
3 homestead property).
4 (ii) By means of a reduction in the millage rate
5 after the limit on the exclusion for homestead property
6 has been reached under section 8586 (relating to
7 limitations).] by means of an exclusion for homestead
8 property pursuant to section 8583; and fourth, any or a
9 combination of the following, at the discretion of the
10 board of school directors:
11 (i) to reduce the school district real property tax
12 by means of a reduction in the millage rate;
13 (ii) to reduce the outstanding debt of the school
14 district; or
15 (iii) to create a designated budgetary reserve to
16 provide funds to sustain the level of the homestead
17 exclusion in subsequent years as additional parcels are
18 approved for the homestead exclusion.
19 (2) For the fiscal year of implementation of an increase
20 in the rate of the existing earned income and net profits tax
21 imposed under this chapter, all revenue received by a school
22 district directly attributable to the increased rate shall be
23 used to reduce the school district real property tax in the
24 following order:
25 (i) By means of an exclusion for homestead property
26 pursuant to section 8583.
27 (ii) By means of a reduction in the millage rate
28 after the limit on the exclusion for homestead property
29 has been reached under section 8586.
30 Section 4. This act shall take effect in 60 days.
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