Act 1 of 2006 Workshop The Local Tax Study Commission Presented by: Bonnie A. Sheehan, Esquire bsheehan@foxrothschild.com A. Kyle Berman, Esquire aberman@foxrothschild.com October 3, 2006

Major Components Adopted June 27, 2006. Applies to all school districts. Designed to reduce real estate taxes through state-wide sharing of gaming revenues. Requires front-end voter referenda on tax shifting.

Major Components Requires back-end voter referenda on future real estate tax increases above an “index”. New budget timeline and process. Establishes formula for the distribution of state funds raised through gambling proceeds. Allows public to participate in local tax decisions. Requires state reimbursement to school districts for income tax loss due to residents working in Philadelphia.

First Step under Act 1: Local Tax Study Commission By September 14, 2006, school boards must appoint a Local Tax Study Commission. Purpose of LTSC is to make a recommendation on the tax rate for the Spring 2007 front-end referendum question on shifting taxes from property to income tax. LTSC must study existing taxes and how tax policies could be improved by funding tax relief through the levy of income taxes.

Composition of Membership 5, 7 or 9 residents or taxpayers of the district. 1 member may be a school board member. Must reflect the diversity of the district by: Age Occupation Socio-economic status No officer or employee of the district, or any of their “relatives” . Act 1 does not define “relative”.

Establishing the LTSC Board should adopt a resolution establishing the LTSC, its functions, operational procedures, a budget and resources of the commission. Among the procedures: How the commission will vote When meetings will take place Public participation/public comment Access to the superintendent, business manager and solicitor Budget and expenditures

Which Brings Us to Today  Demographic diversity studied by the board for selection of LTSC members  Resolution for appointment passed, effective September 14, 2006  Operating procedures for LTSC adopted  Study of required areas complete

What is the LTSC required to do? LTSC must study 4 items: Historic and present rates of district revenue from current taxes. The percentage of total district revenues provided by current taxes.

What is the LTSC required to do? 3. The age, income, employment and property use characteristics of the existing tax base. 4. Projected district revenue from current taxes, including possible new taxes authorized under Act 1 (new EIT or PIT).

LTSC - Time to Completion Commission must hold at least one public hearing. Commission must make a nonbinding recommendation to school board within 90 days of appointment: If appointed Sept. 14 2006, report due by December 13, 2006. If appointed earlier than Sept. 14, the report will be due earlier.

Local Tax Study Commission Commission must make a nonbinding recommendation to school board whether to levy an EIT or PIT for the next fiscal year. Recommendation must be presented at a public school board meeting. School board votes to accept or reject recommendation.

Local Tax Study Commission Sunshine Law applies to Commission. School board must make recommendation available to public. All “records” of the LTSC must be turned over to the Board and retained for review. Board has defined “records” within the operating procedures

Board Action: Procedural Issues If LTSC fails to report within 90 days, the Board is required to discharge the commission. Once the 90 day period has elapsed, the Board then has until March 13, 2007 to decide to accept or reject the recommendation.

Board Action: Procedural Issues Prior to adopting the 2007 Front-End Referendum Resolution, school board must: Public Vote – Must take a public vote to accept or reject the recommendation. Public Notice – Must provide public notice in accordance with the LTEA. Public Hearing – Must conduct at least one public hearing.

Contact: Jeffrey T. Sultanik, Esquire Bonnie A. Sheehan, Esquire 215.661.9407 jsultanik@foxrothschild.com Bonnie A. Sheehan, Esquire 215.661.9418 bsheehan@foxrothschild.com A. Kyle Berman, Esquire 215.661.9483 aberman@foxrothschild.com

Disclaimers A school district should consult with and receive recommendations from its financial advisor and solicitor before proceeding with a plan of financing. Act 1 is a new law and the options set forth herein are untested. It is possible that Act 1 may be interpreted inconsistent with our interpretation. A school district should consult with and receive legal advice from its solicitor. Market conditions and investor response to Act 1 may influence the financing options the school district may have.