Tax designation means nothing without reforms

One school district has ruled out the tax reform plan but another is still looking at it.
MERCER, Pa. -- Twenty-five percent of Mercer County homeowners have had their homes designated as Homestead or Farmstead properties in hopes of getting a tax break, but so far it's only been an exercise in futility.
No school district or municipality in the county has enacted any tax reforms stemming from the passage of Act 50, the Homestead/Farmstead bill enacted by the state Legislature in 1998.
Michael DeForest, director of the county's revenue department, said 9,247 Homestead/Farmstead applications have been approved since then and the county opened a new application period Tuesday that will run until March 1.
The 2000 census shows 35,646 owner-occupied homes in the county.
Meaningless: However, getting the homestead designation means nothing unless the homeowners' local taxing body -- such as a municipality or school district -- enacts tax reforms to take advantage of it. Local school boards and municipalities haven't shown much interest in it, he said.
Act 50 followed the November 1997 passage of a voter referendum calling for local tax reform, asking if the state constitution should be amended to exclude a portion of the assessed value of homestead property from taxation.
Homestead property is described as a property owner's primary residence and the land it sits on. Farmstead applies to a farmer's residence and any buildings used for agricultural purposes but not the land used for farming.
Under the law, school districts could raise their wage tax (now set at 0.5 percent statewide) by as much as 1 percent to 1.5 percent in exchange for giving property tax breaks to Homestead or Farmstead properties.
Municipalities aren't given the same freedom and would have to devise some other measure to make up any taxes lost through the homestead exemptions of Act 50.
School districts would have to arrive at a median assessment value for all of those in its jurisdiction who applied for the Homestead/Farmstead designation and then would be able to exclude up to 50 percent of that median assessment from taxation, DeForest said.
For example, if the median assessment is $5,000, then everyone who applied for and got the designation could get up to $2,500 of assessed value knocked off their tax bill, he explained.
The Mercer Area School District looked at the program but a district spokeswoman said the numbers didn't really work out for anyone's benefit.
Property owners would only realize a property tax savings of about $35 a year but working people could see their wage taxes rise by as much as $300 a year, she said.
The Sharpsville Area School District is looking at Act 50 now and David DeForest, a member of the school board and chairman of the committee appointed to study it, said the committee has just recently received the 2000 census data it needs.
The committee probably won't make any specific recommendations but will most likely present several possible scenarios for the school board to consider.
Applications: About 23 percent of Sharpsville's homeowners have applied for the exemption so far, he said.
If the school board decides a change is in order, the issue must be placed on the ballot as a referendum question.
Should the school board decide to take no action but citizens feel a change would be in their best interest, they could circulate petitions to get the issue placed on the ballot.

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