Elorza’s Budget Hits Providence Homeowners, Gives Relief to Car Owners
Thursday, April 28, 2016
Providence Mayor Jorge Elorza’s budget is a bad news budget for many homeowners, a good news budget for some car owners and does little for the city’s long-term financial plight.
Despite a near consensus that Providence’s financial situation is dire and that rating agencies have downgraded the city’s bonds, Elorza has proposed budget includes no major financial reforms.
It does call for more studies. The budget also calls for $13 million in new taxes from property owners.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“I do know that over the last two years we haven’t raised taxes, we froze the commercial tax rate for three years while a lot of other expenses have gone up during the same time,” said City Council President Luis Aponte, following Elorza's budget address at City Hall on Wednesday evening. “We’ll take full advantage of the new [revaluation] numbers and really look hard at any increases in this proposal and look deeply at what that signifies, and balance that against reports that we have seen in the past few years so that we’re making investments that make sense.”
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Following the city’s recent revaluation in which property values went up roughly ten percent on average, Elorza’s Fiscal Year 2017 budget proposal calls for a two percent residential tax rate reduction of 34 cents and a lowering of the commercial rate by twenty-five cents, which equates to $18.91 per thousand on the residential side (down from $19.25) and $36.50 per thousand on the commercial (down from $36.75).
But not everyone is happy.
“I like the lowering of the rates, except for the commercial rate. They got their cookie three years ago when we said we would freeze the rate for 7 years,” said City Councilman Kevin Jackson. “You can’t have it both ways. We had originally proposed freezing the amount, not the levy, and now that their property taxes have gone up, they want another cookie. I know we’re high nationally but our homeowners and our renters don’t get to have that advantage of getting two shots at it.”
To put in context, a homeowner last year with at $200,000 home paid $3,850 in taxes at the $19.25 per thousand tax rate. If the recent valuation went up 10% to $220,000, at the new $18.91 tax rate, would be a tax bill of $4,160.
And landlords are not pleased about how the budget impacts owner versus non-owner occupied rates -- and specifically the difference between each.
“Providence has one of the highest tax rate differentials in the nation between owner occupied and non-owner occupied homes. This current budget actually increases that differential. Study after study shows Providence as one of the most cost burdened cities for renters,” said Keith Fernandes with the Providence Apartment Association.
“Wages have not kept up with the dramatic increase in rents, which are a direct result of the draconian tax increases on the most vulnerable members of our city. In 2014 the city council overwhelmingly supported lowering the difference of the two rates to no more than 60%. The time for talk is over and the hour of fixing this issue is upon us," said Fernandes.
Homeowners, Car Owners, Tax-Exempts in Focus
With real estate prices increasing in the city, especially in Providence’s East Side, and the city in the midst of a revaluation, the Elorza budget will see an increases in revenue from residential real estate and much of the $13 million is likely to hit East Side homeowners.
Car owners on the lowest end of the spectrum will see relief, however.
Elorza proposes in his budget increasing the car tax exemption from 1,000 to $2,000 at a cost of an estimated $4 million annually, as approximately 6,500 low-value cars would no longer be taxed in Providence, the next 12,5000 with the lowest value would see their bill cut in half, and another 22,500 would see a reduction of 33% or more.
Addressing the car tax issues was a major campaign platform for Elorza when he ran in 2014. Council President Aponte spoke to the $4 million price tag for increasing the exemption.
“I think we’re left to respond to what the state has given us, when the state did away with the car tax,” said Aponte. “They put the burden back on the people least able to pay out.:
Aponte pointed to an issue that Elorza addressed — but has yet to find a resolution — in addressing renegotiation of agreements with tax-exempts in the city.
“It is high time that our partners at the large tax-exempts understand that our futures are linked. There cannot be a successful Brown if there is not a successful Providence, as there can’t be a successful Rhode Island if there isn’t a successful Providence,” said Aponte.
Elorza mentioned working on a uniform PILOT stucture on just one of the areas he intends to tackle -- but has no plan as of now, after recent reports show that the city is poised to spend $176 million more than it can afford in the next ten years if nothing is done.
“We will be working with our non-profit anchor institutions to come up with a fair framework for PILOT payments,” said Elorza. “A framework that is stable, predictable, and has party among similar institutions. “
Elorza also said on Wednesday in an effort to address the city’s “long-term alliance on property and car taxes,” that he would form a “revenue working group to find alternative sources of revenue.”
And acknowledging the city’s pension system being currently 27% funded, Elorza said he would be “reaching out and engaging the city’s labor unions, retirees, and stakeholders to put the city’s finances on a sustainable path.”
Schools and Public Safety
Elorza’s $717 million budget proposal calls for a $500,000 investment in technology to provide 1200 new computers in classrooms across the city in the coming fiscal year.
The budget calls for an expanded police academy class from 32 to 60 cadets, and opens the application process “to conduct the city’s 51st Fire Academy which will replenish a number of recent and anticipated retirements,” said Elorza.
The city is currently awaiting the outcome of pending litigation regarding Elorza's platoon shift changes made last year, the implications of which will likely be in the millions.
Editor's Note: The story has been updated to reflect that the tax on a $200,000 home under last year's budget would have been $3,850.
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