As Lower Macungie residents are getting their first township property tax bills in 12 years this week, township commissioners are taking steps toward reducing tax bills for homeowners in 2015.
The commissioners plan to develop a homestead property tax exemption program for the township.
The amount of township property tax that homeowners must pay is based on the value of their homes. A homestead exemption would exclude a portion of that value from being taxed.
Such homestead property exclusion programs are feasible only in townships with enough commercial and/or industrial properties to compensate for the reduction in residential property taxes, explained Atty. Richard Somach, the township's solicitor, in a memo prepared for commissioners.
Businesses and industries in the township would not be eligible for the tax break.
"It's a mechanism for us to pass on savings to residents of the township," said Commissioner Ryan Conrad.
Such homestead property tax exemptions are allowed under state law.
The amount of a home's value excluded from taxation is determined by a fixed dollar amount rather than a percentage.
But the amount of that exclusion cannot exceed one half of the median assessed value of owner-occupied homes in the township.
The median value of homes in Lower Macungie is $227,618.75.
"You could theoretically exempt up to one half of that, which would be about $114,000," said Somach. "But that would be really high. Most places do $30,000 to $50,000."
The solicitor explained the program this way: If you own a home in Lower Macungie that is worth $200,000, this year you are paying $66 in township property taxes. If the township would exempt $100,000 of your home's value, you would save $33.
The owner of a median-priced home in Lower Macungie is paying a $75 township property tax bill this year, said township manager Bruce Fosselman.
Somach said if Lower Macungie would exclude $100,000 of a home's value from taxation, someone living in a home worth $100,00 would pay no township property tax..
During the first year of the program, the township could not raise property taxes to make up for tax revenue lost by implementing a homestead exemption, explained Somach..
He said one way around that would be to approve a tax increase before adopting a homestead exclusion program.
The solicitor also suggested that keeping the township property tax unchanged but implementing a homestead exemption would produce the same result as lowering the tax for all property owners next year.
"Someone has to crunch the numbers," Somach told commissioners Thursday night.
"We're early enough in the year that you can do all that stuff. The goal is to get this in place for 2015 if you want to do it."
He asked them: "Conceptually, is this something that even appeals to you?"
"It's definitely worth continuing to explore," said Conrad, president of the five commissioners. "This is a good opportunity for us."
Conrad said the township will have to determine the dollar amount it intends to exclude from its 2015 property tax for homeowners.
"We'll start putting some numbers together," said Fosselman.
The township manager called creating a township homestead program "a key goal" to be done before 2015.
Conrad chairs the commissioners' budget & finance committee, where the homestead proposal was discussed early Thursday night. Four of the five commissioners were present. Commissioner James Lancsek was absent.