Pennsylvania Association of School Business Officials

Transcription

1 Pennsylvania Association of School Business Officials Mailing Address: Office Location: P.O. Box Market Place Harrisburg, PA Harrisburg, PA Telephone FAX Workshop Series TAX COLLECTORS COMPENSATION AND BEST PRACTICES FOR WORKING WITH TAX COLLECTORS* Friday, November 4, 2016 Webcast (1:00 2:30 PM) School solicitor Clarence Kegel and Dr. Wayne McCullough will provide sound advice and experiences related to tax collector compensation and working with tax collectors. INTENDED AUDIENCE: Business Managers, Assistant Business Managers, Superintendents SPEAKERS: Dr. Wayne McCullough, DBA, PRSBA, Director of Leadership and Development, PASBO Clarence C. Kegel, Jr., Partner, Kegel Kelin Almy & Lord, LLP ANNOUNCEMENTS: All participants must sign-in on the Webcast Attendance Form found at the back of the handout packet for attendance/credit tracking. The site coordinator is asked to collect and submit information on every participant at your site. For credit to be given, forms must be returned to PASBO by November 11. Your webcast experience will be only as good as your Internet connection. If you are having technical difficulties, close all other browsers on your desktop and reconnect, or restart your computer. If you are disconnected at any time during the program, please repeat the log-on procedure to reconnect. You can submit a question at any time using the Chat function at the left side of your screen type your question in the message box and click on Enter to send. Please track your CEU credits for PASBO Professional Registration. (Professional Registration CEUs = 1) Your evaluation of this program is important to us. The primary contact will receive an evaluation link via . Please provide feedback to ensure that PASBO programs are meeting your needs. This program is being recorded to provide access to those not able to participate in the live program and serve as a review tool. Find information in your handout and check out the PASBO Store at for other webcast titles. Thank you for your participation! Webcast Handout - Page 1

2 Pennsylvania Association of School Business Officials Tax Collector Compensation and Best Practices for Working with Tax Collectors November 4, :00 p.m. 1 Presenters Clarence C. Kegel, Jr., JD Founding Partner Kegel Kelin Almy & Lord, LLP Wayne McCullough, DBA, PRSBA Director of Leadership and Development PASBO 2 Webcast Handout - Page 2

3 Program Scope Tax collector compensation setting deadline and options Model for tax collector compensation Best practices 3 Big Picture 2/14/2017 deadline for school board to set compensation effective for taxes collected by elected or municipal-appointed tax collector starting 1/01/2018 Deadline is prior to February 15 of municipal election year every 4 years including 2017 May not increase or decrease compensation after collector election Rules set forth in Local Tax Collection Law 72 P.S (First Class Townships): The commission or compensation of the collector of school district taxes shall be fixed by the board of school directors. 4 Webcast Handout - Page 3

4 Big Picture 72 P.S (Boroughs and Second Class Townships): In the case of school district taxes, the commission or compensation of the tax collector shall be determined by the board of school directors P.S a (Increase or reduction of compensation): When any taxing district or taxing authorities propose to either raise or reduce the compensation or salary for the office of an elected tax collector, such action shall be by ordinance or resolution, finally passed or adopted prior to the fifteenth day of February of the year of the municipal election. Big Picture Need to decide now on how your district will address compensation and tax collection policies Requires consideration: If you currently use elected or municipalappointed tax collectors Even if you do not 6 Webcast Handout - Page 4

5 Big Picture Primarily real estate and other School Code taxes not Act 511 taxes Four basic tax collection approaches: Elected or municipal-appointed tax collector SD in-house/bank lockbox direct collection (90+ SDs) Private collector like Berkheimer or Keystone County Treasurer 7 Big Picture Elected tax collector system fragmented, inefficient, excessively expensive, and anachronistic just like pre-act 32 EIT Pennsylvania State Tax Collector s Association, Inc. very active and strong trade association relentlessly promoting: Retention of current system Tax collector economic interests 8 Webcast Handout - Page 5

6 Big Picture Whether or not you currently use elected tax collectors: 9 You might be pressured to increase school board established elected tax collector compensation Association encourages You might be sued by elected tax collectors or candidates Primary Issues Should SD prior to 2/15/17 study and change previously established elected tax collector compensation or policies/resolution? Because collectors/candidates requested increase? Because you believe previously established compensation is too high or current practices create inefficiencies considering comparables or available direct collection alternatives? If you currently use direct collection to provide a defense against possible litigation? Should SD take no action on compensation or policies retain status quo? 10 Webcast Handout - Page 6

7 Case Study District tax collection Without action by the taxing jurisdiction, compensation continues from term to term. Tax collector concerns School board decision Tax collector default 11 Elected Tax Collector Compensation There are three basic methods of tax collector compensation: Salary A fixed amount is established for a period of time and paid periodically regardless of collections or value of duplicate Fee per bill A fixed amount is paid for each tax bill collected Commission A percentage of amounts collected (but not to exceed 5%) Example template included in handout 12 Webcast Handout - Page 7

8 Real Estate Tax Collection Legal History 18 th century Charles Dickens novel One-room schools/minimal government Neighbor-to-neighbor tax collector Separate municipal codes for different municipality types all assign elected tax collector the right and duty to collect SD School Code taxes School Code 683 authorizes SD to appoint in-house or other collector if vacancy in elected tax collector position 13 Real Estate Tax Collection Legal History Local Tax Collection Law Applies to collection of taxes other than Act 511 taxes Provides general rules for tax collection process (supplementing rules provided elsewhere, such as Act 1 on installment payments, and Real Estate Tax Sale Law on delinquent collection) States tax collector bond requirements States expenses paid by taxing authority, namely printing forms, postage States minimum tax collector office hours States discount/penalty payment rules Mandates timing for tax collector payments and reports subject to taxing authority right to establish rules accelerating timing requirements 14 Webcast Handout - Page 8

9 Real Estate Tax Collection Legal History Problems Political plum Expense and inefficiencies Cases of collector theft and defaults Reform movements Pennsylvania Economy League PASBO Progressive SD action Tax Collector s Association resistance Legislative default 15 Real Estate Tax Collection Legal History Pre-Pennridge court decision permissible compensation rules Many court decisions Courts are not super school boards Courts will not interfere with broad discretion of school board to establish compensation School board compensation decisions will be upheld as long as there was a reasoned basis for the decision and the SD does not prohibit elected collector collection of School Code taxes 16 Webcast Handout - Page 9

10 Real Estate Tax Collection Legal History Pre-Pennridge permissible compensation rules (continued) Intent to induce tax collector not to collect school taxes does not invalidate school board compensation decision as long as the decision has a reasoned basis and preserves elected collector option to collect school taxes For example, $1 per year invalid; similarly, prohibiting tax collector from tax collection invalid For example, 30 per tax bill valid 17 Real Estate Tax Collection Legal History Many SDs established compensation such as 30 per tax bill based on SD direct tax collection cost using bank lock box deposit arrangement immediate deposit to SD account, and bank daily computer generated payment reports 18 Webcast Handout - Page 10

11 Pennridge Court Decision PA Supreme Court 53 A.3d 705 August 20, 2012 Radical law change Political, not legal case/decision like Lower Merion real estate tax/budget case, Roe v. Wade abortion decision, Obamacare decision, and so many others 19 Pennridge Court Decision Background facts Pennridge lengthy and careful deliberations Business manager study and report of thenexisting tax collection costs versus alternatives Bank RFP Projected $50,000 annual savings by direct collection Multiple school board public meeting discussions Pennridge school board action revising compensation from $2.25 per tax bill to 70 per tax bill but offered collector option to disclaim collection 20 Webcast Handout - Page 11

12 Pennridge Court Decision Background facts (continued) 21 Tax collectors running for reelection filed suit Tax collector testimony that job required 1,800 work hours per year, involved 2,000 telephone calls per year, and substantial interaction with taxpayers could not possibly perform job for revised compensation amount Pennridge Court Decision County Court decision: County court invalidated new compensation and ordered return to prior compensation Ruled that SD compensation is invalid unless based on reasonable market rate of compensation determined from the universe of similarly situated elected tax collectors performing the established and traditional customer services that the electors have determined they wish to receive. Also ruled that collector may deputize SD, but may not disclaim collection. 22 Webcast Handout - Page 12

13 Pennridge Court Decision Commonwealth Court decision: Reversed County Court based on prior case law. 23 Pennridge Court Decision Supreme Court decision: Reversed Commonwealth Court and reinstated County Court decision Ruled that compensation rate was so low as to deprive tax collectors of the ability to perform the duties of their elected positions. In setting compensation, the school board must consider the required duties and the time spent on those duties. 24 Webcast Handout - Page 13

14 Compensation Policies After Pennridge What should you do now before 2/15/17? Should review current tax collector policies/compensation resolution whether or not currently using elected tax collectors Do nothing if no one is complaining? Some Risk. Perform survey/study to determine if previously established rate can be justified under Pennridge and if elected tax collector policies are appropriate then make decision based on findings? Study risk: Might stir up issues that do not currently exist If SD currently does direct collection, increasing established compensation rate might incentivize a tax collector to run and/or insist on collecting school tax 25 Tax Collector Policies After Pennridge Final Decision? Reduce compensation rate if warranted? Increase compensation rate? Because warranted or litigation risk if current compensation policy/resolution cannot be justified based on time involved in performing collection duties or compensation rates applicable to collectors in some reasonably defined geographic area Revise elected tax collector policies? Do nothing? 26 Webcast Handout - Page 14

15 Tax Collector Policies After Pennridge Consider deputization option: 27 If not in current compensation resolution, add tax collector option to deputize school district thereby allowing direct collection like Southern York compensation resolution Pennridge court decision ruled that collector may deputize SD, but may not disclaim collection. Example template included in handout but must consult solicitor/adapt Direct Collection Steps after Election If school district uses direct collection: Best practice after November 2017 election, reach out to tax collectors to confirm continuation of past practice/written deputization of SD to collect Let sleeping dogs lie but some risk of surprise or challenge Decision will vary from district to district 28 Webcast Handout - Page 15

16 SD elected tax collector policies Related Issues New elected tax collector qualification and deputization rules Act 32 EIT county-wide collection/ legislative reform 29 Time for Questions 30 Webcast Handout - Page 16

17 Join us at these upcoming programs: FOOD SERVICE CONFERENCE & COMMODITY SHOW November 8-9, State College FRAUD PREVENTION: ARE YOU PREPARED? ENCORE November 14, Cranberry Twp ELEMENTS OF SCHOOL FINANCE November 17/Cranberry Twp, November 18/Kulpsville ELEMENTS OF HUMAN RESOURCES December 2, Harrisburg MARKETING YOUR LEA December 6, Webcast PROFESSIONAL STANDARDS: TRAINING YOUR FOOD SERVICE STAFF IS THE LAW! December 7, Webcast MANAGING A TRANSPORTATION CONTRACT December 9, Webcast FAIR LABOR STANDARDS ACT: THINGS YOU NEED TO KNOW December 13, Harrisburg For info, visit 31 Webcast Handout - Page 17

18 School District Tax Collector Compensation Municipality 1 Municipality 2 Municipality 3 Municipality 3 Municipality 4 Municipality 5 Total Time per bill to stuff envelopes and mail minutes/bill Time per bill to receive & process payments - 5 minutes/bill Time for reconciliation and making deposits - 1 hr/week per 1000 bills x 20 weeks/ # of bills Time for preparing reports for district and assessment office - 2 hr/week per 1000 bills x 20 weeks /# of bills Time spent responding to tax payer questions - 2 hr/week per 1000 bills x12 weeks/# of bills # of Minutes Hourly rate of pay based on Accounts Receivable Bookkeeper's compensation, exclusive of benefits $ $ $ $ $ $ $ Compensation per bill $ 3.15 $ 3.15 $ 3.15 $ 3.15 $ 3.15 $ 3.15 $ 3.15 Total compensation $ 5, $ 2, $ 5, $ 4, $ 9, $ $ 27, Time per subsequent installment payments of 3 minutes per installment Compensation per installment 2 and 3 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 $ 0.90 Note: An amount of time is assigned to each activity for each bill. The total minutes are added up and then a rate is applied to the amount of time. Webcast Handout - Page 18

19 SCHOOL DISTRICT Resolution Establishing Tax Collector Compensation, Procedures, and Rules Background. The Local Tax Collection Law, 72 P.S , et seq., provides that changes in compensation applicable to elected tax collectors shall be made prior to February 15 of a municipal election year. Considering that 2017 is a municipal election year, the Board of School Directors desires to establish compensation applicable to elected tax collectors who collect school real estate taxes starting January 1, 2018 and continuing thereafter until changed by the school board. The compensation rate set forth below is based upon the elected tax collector performing all tax collection duties, including collecting and depositing taxes and making reports as set forth below and in the separate District Tax Manual. RESOLVED, by the board of school directors, as follows: 1. Per-Bill Compensation Rate. Starting January 1, 2018 and thereafter until changed, if an elected tax collector (or a tax collector appointed by a municipality to the office of tax collector) elects to collect school real estate taxes, the school district will pay compensation to the elected tax collector at the rate of $1.00 per tax bill mailed and an additional $2.15 per tax bill collected for each tax bill with respect to which the tax collector has collected and paid over the full amount of tax owed for the real estate parcel, performed all required duties, and made all required reports to the school district. This compensation rate applies to tax bills issued on or after January 1, This payment per tax bill applies to tax bills paid in one lump sum. If the taxpayer makes installment payments, the school district will pay compensation under paragraph 2 below. 2. Installment Payment Compensation. If the taxpayer makes installment payments pursuant to the school district real estate tax installment payment plan, the compensation will be $1.00 per tax bill mailed and an additional $.70 per installment collected for each tax bill and installment with respect to which the tax collector has collected and paid over, performed all required duties, and made all required reports to the school district. This compensation rate applies to tax bills issued on or after January 1, Tax Collector Option to Deputize. Elected tax collectors (or a tax collector appointed by a municipality to the office of tax collector) have the option of deputizing the school district to collect school taxes, thereby allowing direct collection by the school district. If a tax collector deputizes the school district, the tax collector will have no responsibility or liability with respect to school taxes. The payment to the tax collector for deputizing the District will be $200 per year. The deputization by a collector shall be on a form provided by the school district and must be signed and delivered to the school district by April 1 of the first year in office, or April 1 of any subsequent year in which a collector decides to deputize. If there is no elected tax collector in a particular municipality and the municipality appoints a person to fill the vacancy and serve as tax collector, the deadline for signature and delivery of the deputization by the appointed tax collector is 30 days after appointment, or April 1 of any subsequent year in which a collector decides to deputize. Webcast Handout - Page 19-1-

20 Rules and Procedures. The following rules and procedures shall apply to all tax collectors: a. The tax collector must pay over to the school district all school real estate taxes collected in a timely manner. Procedures for turn-over of tax payments are delineated in the District Tax Manual. b. The tax collector and any deputy shall comply with all other requirements, procedures, and policies established by the school district for collection of school taxes, including those in the District Tax Manual, as now in effect or in the future established by the school district. c. If there is no elected tax collector in a particular municipality and the municipality appoints a person to fill the vacancy and serve as tax collector, the compensation and other provisions set forth in this Resolution and in any other policies for elected tax collectors shall apply to such appointed tax collector. 5. Further Actions. The school district business office is authorized and directed to take all actions necessary or appropriate to implement this Resolution. 6. Severability. The provisions of this Resolution are severable and, if any section, clause, sentence, part or provision is determined to be illegal, invalid or unconstitutional, such determination will not affect or impair any of the remaining sections, clauses, sentences, parts or provisions of this Resolution. It is declared to be the intent of this school district that this Resolution would have been adopted even if any such illegal, invalid or unconstitutional section, clause, sentence, part or provision had not been included. This Resolution adopted by a majority vote of the board of school directors at a regular meeting held on. SCHOOL DISTRICT By: President By: Secretary Webcast Handout - Page 20-2-

21 /29/14 Deputization without bond SCHOOL DISTRICT Tax Collector Deputization of School District to Collect Taxes and School District Acceptance Background. [Insert name of elected Tax Collector] (hereinafter referred to as Tax Collector ), is the duly elected Tax Collector for [insert name of municipality], [insert name of county] County, Pennsylvania ( Municipality ) for calendar years 2014, 2015, 2016, and In accordance with the Local Tax Collection Law, 72 P.S , Tax Collector wishes to deputize [insert name of school district] School District ( District ) to collect all District taxes the Tax Collector is legally responsible to collect. Deputization. Intending to be legally bound, [Insert name of elected Tax Collector], being the duly elected tax collector for [insert name of municipality], [insert name of county] County, Pennsylvania, and in return for $1.00, hereby deputizes and appoints District to collect all taxes levied by District for which Tax Collector has legal responsibility of collection. The terms of this deputization are as follows: 1. The deputization of District as deputy tax collector shall become effective upon District s receipt of this document with Tax Collector s signature, reflecting the deputization by Tax Collector and acceptance by District. The date of District s acceptance as set forth in the signature area below is referenced herein as the Effective Date. 2. This appointment shall extend from the Effective Date throughout the remaining term of office for which Tax Collector has been elected. 3. As of the Effective Date, District shall perform all steps for the collection of District taxes within the Municipality for which Tax Collector has legal responsibility of collection. Because District will perform all steps for collection of such taxes, except for $1.00, Tax Collector will receive no compensation or expense reimbursement for collection of District taxes. 4. If Tax Collector is contacted concerning school taxes, Tax Collector will advise the individual who has contacted Tax Collector that District has assumed all responsibility for collection of District taxes, and Tax Collector will refer such individual to District at the address and telephone number provided by District to Tax Collector. 5. If Tax Collector receives any funds intended for payment of District taxes, whether in the form of cash, check, electronic fund transfer or otherwise, or any written communication with respect to District taxes, Tax Collector will promptly (within one week after receipt) transfer such items to District. District shall reimburse any expense of Tax Collector for such transfer. Webcast Handout - Page 21 1

22 /29/14 Deputization without bond 6. District will hold harmless and indemnify Tax Collector from and against any claim, loss, damage, liability or expense (including reasonable attorney fees) arising from or related to District s collection or failure to collect District taxes after the Effective Date. 7. Tax Collector and District will cooperate, and take any additional steps the District deems necessary or appropriate, to facilitate District s collection of District taxes within the Municipality. 8. This document does not in any manner address Tax Collector responsibility for collection of Municipality or County taxes. 9. If any portion of this document is determined by the courts to be invalid or unenforceable, the validity and enforceability of the remaining provisions shall not be affected or impaired thereby. 10. Because the District is assuming all responsibility for collection of District taxes, the District relieves Tax Collector from any responsibility to post a bond relating to District taxes, and District and Tax Collector agree that there will be no bond posted by Tax Collector relating to District taxes. The undersigned Tax Collector and [insert name of school district] School District agree to the deputization and appointment as set forth in this document. Date: Tax Collector Signature Acceptance Date: President, Board of School Directors [insert name of school district] School District Webcast Handout - Page 22 2

23 /29/14 Deputization without bond SCHOOL DISTRICT Resolution to Approve Deputization of School District as Tax Collector Date of School Board Resolution: Background. The elected tax collector ( Tax Collector ) for [insert name of municipality] has deputized or will deputize this school district ( District ), by the attached Tax Collector Deputization of School District to Collect Taxes and School District Acceptance, as deputy tax collector pursuant to the Local Tax Collection Law, 72 P.S , to collect all District taxes the Tax Collector is legally responsible to collect. The District wishes to accept such deputization. RESOLVED, by the board of school directors, as follows: 1. District shall collect District taxes directly through District s business office, under the supervision of District s Director of Administrative and Business Services. 2. All such District taxes collected shall be payable directly to the District, and shall be deposited directly in a District bank account. 3. The School Board President, or if the President is unavailable the School Board Vice President, is authorized to sign the attached Tax Collector Deputization of School District to Collect Taxes and School District Acceptance. 4. District s appointment as deputy tax collector shall become effective upon District s receipt of the attached fully signed Tax Collector Deputization of School District to Collect Taxes and School District Acceptance, reflecting the deputization by Tax Collector and acceptance of the deputization by District. Webcast Handout - Page 23 3