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CHAFEE BUDGET: $20 Million In New Municipal Aid

Thursday, January 17, 2013

 

In his State of the State address last year, Governor Chafee made headlines by declaring that 2012 was going to be the year of “cities and towns” in Rhode Island.

It’s his proposed policies in 2014, however, that may finally make that statement mean something.

In an effort to reverse four trends that he says are putting pressure on local communities, the Governor’s proposed budget calls for an additional $20 million in municipal aid, $5 million of which comes in 2013.

The Governor’s budget documents say the increase is to offset the cuts that have come in General State Aid to municipalities in recent years and to alleviate pressure on municipalities that feel they must increase property taxes to fund “necessary operations and maintenance.”

“As a former local official, I have worked in my time as Governor to make property tax relief a key priority of my Administration,” Chafee said in his State of the State address. “I may sound like a broken record at this point, but in the years before I took office, cities and towns bore the brunt of the downturn in state revenues. Those most severely affected were the distressed communities that could least afford it.”

Chafee said he believes that property taxes are a burden that often go unnoticed compared to other categories that measure a state’s resident’s standing.

“While everyone likes to talk about onerous tax rates at the state level, the property tax is the real major barrier to economic growth – particularly on small businesses,” he said.

All told, Chafee’s budget calls for a total of $71 million in local aid, $41 million from previous budgets and the additional $30 million for property tax relief in 2014.

“This is divided between $20 million in additional aid to our cities and towns – with particular attention to distressed communities – and $10 million in RICAP funds for local roads and streetscapes,” Chafee explained.

Under his proposal, the governor would create a new $10 million category of state aid assistance called “Municipal Incentive Aid” and the program would “encourage retirement plan sustainability” and “reduce municipal unfunded pension liabilities.”

Funds in the program would be distributed based on population.

Another Chafee proposal would modify the historic tax credit program by “providing access to abandoned tax credits.”

Preference will be given to projects that are “ready to begin, would be completed within 24 months and that are located within distressed communities.”

The Governor estimated that as of January of this year, 15 projects have been abandoned, representing close to $25 million in abandoned tax credits. That number is expected to increase after a May 15 deadline that mandates projects must illustrate a 10-percent completion.

“A targeted, limited renewal of the historic tax credit program can provide near-term economic stimulus using already-authorized financing mechanisms,” Chafee’ s budget proposal states.

“Failure to support these initiatives will only drive Rhode Island further down on the chart that matters most to our economic climate – the burden of local taxes borne by businesses,” Chafee said last night. “Our state as a whole cannot be successful without the financial health of our cities and towns. We’re going to continue encouraging local prosperity by supporting our municipalities.” 

 

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