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$240 Million in New Local Taxes Since 2009

Friday, May 04, 2012


Even as homeowners watched their property values plummet throughout the recession, city and town governments across the state were raising taxes to the tune of a combined $241 million, a GoLocalProv review of property tax levy reports shows.

Between fiscal years 2009 and 2012, the total amount of property tax dollars generated by municipalities increased from $1,970,327,321 to $2,211,587,482, a burden, leaders say, that has caused some residents to lose their homes and others to simply leave the state.

Municipal leaders blame the combination of the recession and drastic cuts in state aid under former Governor Don Carcieri (aid was slashed by 72.6 percent between FY 2008 and FY 2012) as the primary reason for raising taxes in recent years while others point the finger at the inability of cities and towns to control spending.

“The average Rhode Island property taxpayer is the last line of defense against a coming default that’s actually being caused by bad management of the operations over years if not decades,” said Mark Zaccaria, chairman of the state Republican Party.

Slash in State Aid

Zaccaria placed the blame on political leaders who have made unrealistic promises and union leaders for failing to “scream bloody murder” when politicians failed to fund the annual set-aside payments over the course of the last several decades.

That ineptitude, he says, has hurt the taxpayer the most.

In Barrington, for example, the property tax levy grew by more than 10 percent between fiscal years 2009 and 2012. In Burrillville, the levy increased by more than 25 percent, from $21,011,173 in FY 2009 to $26,687,010 in FY 2012.

The urban cities that are now struggling to avoid bankruptcy were also hit hard. In Providence, the tax levy increased by more than 12 percent. Pawtucket saw a 17 percent jump in its tax levy. And in Woonsocket, where Council members last month voted in favor of a 13.8 percent supplemental tax hike, the levy has increased by nearly 25 percent, from $42,128,184 in FY 2009 to 52,984,558 in FY 2012.

At the same time, local government revenue sources have faced significant declines, according to a report recently released by the Rhode Island Public Expenditure Council (RIPEC).

“Between FY 2008 and FY 2012, direct state aid to local governments in Rhode Island was reduced by 72.6 percent,” the report stated. “Moreover, as residential property values have seen steep declines in the recent recession, local tax bases have eroded. The resulting pressures on local governments to meet service level demands given increasingly constrained resources, coupled with unaffordable expenditure structures that some communities have not modified, have pushed some local governments to the brink of insolvency. “

Mazze: Many Reasons for Tax Hikes

Dr. Edward Mazze, Distinguished University Professor of Business Administration at the University of Rhode Island, believes the increase in property taxes goes well beyond the recessions and cuts in state aid. He said there are five reasons for property tax hikes.

1) Increases resulting from negotiated union contracts for salaries, benefits and pensions;

2) Budget cuts made by the Governor and the legislature;

3) The postponement of decisions at the local government level to cut expenditures;

4) The general increases in the cost of running local government;

5) Funding unfunded state mandates.

“Each factor has played a significant role in increasing local property taxes,” Mazze said. “Unfortunately, the Governor and the legislature believe they have not increased individual income and corporate taxes since they passed this burden to the cities and towns.”

Chafee’s Relief Package an Answer?

But Governor Chafee is now trying to reverse course by attempting to provide more aid for the state’s most distressed cities and towns. Last month, Chafee submitted a seven-part relief package he says will allow struggling communities to get back on their feet.

The package, which would only apply to Pawtucket, Providence, West Warwick and Woonsocket, would allow the municipalities to freeze COLAs for retirees, grant more control over school budgets, reform disability pensions and allow the state to advance municipal aid to the communities. It remains unclear how much, if any, of the package will be supported by the legislature.

“The reform and relief package I have submitted to the legislature will empower communities to use the tools they need to achieve fiscal stability, and I am pleased to have the support of the overwhelming majority of municipal executives across the state,” Chafee said last month. “Each city or town in Rhode Island is different, with unique needs and challenges. My legislation places the power to take steps to address these challenges where it belongs – at the local level. I look forward to continuing to work with municipal leaders to avoid more bankruptcies, keep property taxes down, and restore fiscal health for our cities and towns.”

Tea Party Leaders: Too Many Excuses

Still, others remain concerned that more increases in property taxes may drive businesses and residents out of the state. Rhode Island Tea Party President Susan Wynne said she believes the tax hikes are a result of “the inability of municipalities to control budgets, burdensome taxes and regulation on business and a public pension system that is sending RI on this downward spiral.”

Lisa Blais, who heads up the Ocean State Tea Party in Action, said local leaders have let communities down by agreeing to union contracts they could not afford.

“They have had too many excuses to do what has needed to be done for years,” Blais said. “Stop signing unsustainable and unaffordable public sector contracts. Generally, local officials have been provided with an excuse as a result of the GA failing to limit the scope of bargaining and by not tying state aid to certain requirements.”

More Difficult for Job Creation

Moving forward, Mazze said, cities and towns will still have to make further cuts in expenditures and services to meet unfunded pension and health benefits even if the legislature passes the municipal relief package supported by Governor Chafee.

Either way, Mazze predicted, city and town governments will likely be forced to continue to cut expenses look toward sharing services, a plan the communities of Pawtucket, Central Falls and East Providence are now exploring.

“Without dealing with these factors now, housing affordability will make it more difficult for job creation since workers will not be able to afford property taxes,” Mazze said.



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Another indication that this state is going straight down the toilet. The incompetence of elected officials is astounding. I'll be out of here in a New York minute once I unload my tax-eating properties.

Comment #1 by Peter Cassels on 2012 05 04

It's even worse than it appears. Take a look at righttax.org and see why.

Comment #2 by Harvey Waxman on 2012 05 04

If you remove the reduction of state aid from the increase in taxes for the same period, that total state-wide increase in local taxes for the entire four year period is 5%. That's 1.25% per year on average. Obviously, the poor cities most dependent on state aid because of low income and assessed values had to increase their tax burden the most while the wealthier communities could easily get by.

In all cases, the local cities and towns have made serious cuts in their spending programs since the state aid cuts were made. Unfortunately, this kind of report masks the great job many communities have done in respoding to the challenge. And worse, the General Assembly continues to believe that poor cities have not done enough cutting, though it has been far more than the state and much more than many of the wealthier neighbors

Comment #3 by John Ward on 2012 05 04

Why is it that people defend things that have gone on as “that was just the way it was” and still do nothing to correct the problems?
Unsustainable, meaning something that cannot be supported or maintained, like the expenses that are contractual to the towns/cities or mandated by the state. In these distressed times the local budgets are still increasing by 5% to 10% due to the lack of willingness by the councils and mayors to reduce expenses so they can give the citizens the same level of services that they have been used to, give me a break, we do not expect the same services.
RI has the unenviable position to being last in the country to recover from recessions and it is projected that it could take another 10 years if recovery is possible for RI. In that period of time we will have doubled our expenses at the rate we are spending at now. This is what unsustainable is all about.

Comment #4 by Gary Arnold on 2012 05 04

Look at the town I am in, North Providence, the tax went up more than 26% between 2009 and 2012, unsustainable.

Comment #5 by Gary Arnold on 2012 05 04

Democrats, keep up the good work, just keep taxing us more so the entire state-cities-towns can go bankrupt! After all, you wouldn't want to break your 7 decade trend!

Comment #6 by guy smily on 2012 05 04

Every city and town was warned a year before
The cuts were made and most did nothing.

In fact angel Tavares is facing bankruptcy and
Increased his budget.

It's not about state aid cuts, it's about most mayors
And councils and school committed don't know
How to say no

Comment #7 by jon paycheck on 2012 05 04

What makes this revelation all the more galling is that our illustrious general assembly took away our option to deduct property
taxes (and everything else for that matter) on our income tax returns
via General Law 44-30-2.6(December 2010). There's just no end to the
punishment inflicted on the average taxpayer.

Comment #8 by Joseph Reynolds on 2012 05 04

For information why the City of Warwick is in such bad shape take a look at these two Youtube videos from the April 23 Municipal Pension Study Commission hearing. The first is my presentation on why Warwick's taxes keep on increasing. The second is Council 94 President reaction.

My testimony:

Council 94 Reaction:

Analysis document:

Comment #9 by Robert Cushman on 2012 05 04

But we'll get all of that back in government provided services and government honesty, right?

Comment #10 by pearl fanch on 2012 05 04

Let 'em go bankrupt and restructure.
That is the ONLY way it will happen.
Otherwise, the unions will scream and cry, and delay, delay, delay.
The quickest way to resolve this is bankruptcy.

Does anybody seriously think that Central Falls would have been farther along the curve had they not gone bankrupt?
I understand there are many reasons not to go bankrupt, but there is one huge over-riding reason to do so.

Comment #11 by Matt Cavanagh on 2012 05 04

"Political Legacies" are rewarded in RI.
These are based on unsupported spending of money we can't sustain. The distracted and disinterested join the vested interests and vote themselves whatever they want. THEN they escape (laughing all the way) to Florida. Jefferson called this the end of a society.

Why do we continue to reward crooked politicians who are in bed with bullying unions? Kenny Carter was just like this in North Kingstown.

We need to give more crooked democRAT politicians the KC Treatment. Retirement!

Comment #12 by Paul Marshall on 2012 05 04

It is just like wall street big banks they use our money, that our representatives gave them and do nothing for the people who preserved their jobs.The big differece is that BANKS are regulated: State of RI-- not so much. thanks boys: for nothing.

Comment #13 by kevin sadowski on 2012 05 04


The Illinois Retirement Security Initiative has published a very well-crafted and thorough legal analysis of the pension rights of Illinois’s public employees.

The paper, written by Eric M. Madir, notes that the Illinois Supreme Court has invalidated the taking of vested pension benefits from public employees based on both the Pension Clause and the Contracts Clause of the Illinois Constitution. “The court’s principal holding that the Pension Clause (and the Contracts Clause in the public pension context) is an absolute bar to legislative impairments or reductions in pension benefits” cannot be ignored.

The paper addresses the development of pension law in Illinois and other states, focuses on Illinois’s historical underfunding of its pension systems, and summarizes the past campaign for a constitutional pension protection provision in Illinois.

Here is an introduction to the paper by the Illinois Retirement Security Initiative:


Here is a PDF (76 pages) of the paper:


I gave the paper a quick read last night and was struck by the fact that it exclusively addresses the pension rights of current workers. The idea of taking of fully-vested benefits from retirees (Colorado’s pension theft target) is so far beyond the pale that it is not even contemplated.

Below are some excerpts from the paper (in no particular order) that I found interesting:

First a quotation:

“There is no moral exemption for any man or body of men that breaks contracts. Nor is there any hope of public or private respect for a contract breaker. A contract breaker is an utter misfit as a citizen or a business man.”

—Franklin MacVeagh, former President of the Commercial Club of Chicago and U.S. Secretary of Treasury.

Particularly relevant to the current Illinois Governor’s pension reform proposal is the following statement:

“An Illinois Appellate Court has explained that “the [government] cannot whipsaw citizens into ‘voluntarily’ choosing one of two means by which they will be divested of an existing property interest.”

“Public employees have paid their required fair share of pension costs; it is incumbent on the State to meet its end of the bargain.”

“These unfunded liabilities, though, are not the fault of public employees. Public employees have historically paid their fair share of the normal cost of benefits through payroll deductions. Rather, the liabilities principally stem from the State’s decades-long failure to make its required contributions to the five pension systems.”

“Illinois courts have long held that the General Assembly lacks the power to amend or repeal legislation that affects vested rights.”

“The Legislature and various governors chose for decades to use the pension system as a credit card to fund public services and stave off the need for tax increases or service cuts.”

“In sum, welching is not a legal option available to the State.”

From the case Felt v. Judges Retirement System: “The court ‘found that a contract clause violation was not defensible as a reasonable exercise of police power.’”

“These are the ill effects of decades of skipping pension contributions to avoid tax increases and service cuts—a circumstance Illinois Governor John Peter Altgeld described long ago as the “cost of [getting] something for nothing.”

From an Illinois Appellate Court decision in: Sklodowski v. State: “Once rights are created by the constitution or statute, ‘It is within the realm of judicial authority to assure that the action of members of the executive branch do not deprive [individuals] of an institution of rights conferred by statute or by the Constitution.’”

The paper includes a concept from the case Ziebell v. Forest Park Pension Fund that adds clarity to public employee pension rights where employee pension benefits have increased over time. An employee’s right to a pension benefit is protected where the employee made contributions to the pension system after an increase in a pension benefit takes effect (for example, Colorado PERA members have continued their pension contributions after past increases in the COLA benefit took effect, and therefore have a vested right to that statutory benefit.)

The paper cites an Arizona Supreme Court decision in Yeazell v. Capins. In that case, the court held that since pension benefit rights of public employees became “vested” upon accepting employment, the legislature could not later change those rights retroactively without the mutual assent of the employee. The court also held that the fact that the employee continued to work after the statutory change took effect could not be construed as employee acquiescence or a waiver of rights.

The Madir paper notes that even if Illinois’s pension funds were to default, pension recipients would have a cause of action to receive their pension benefits. “Pension recipients will receive their pension payments when due even if a pension fund defaults or is on the verge of default. Any state pension participant placed in such a position would have a cause of action in circuit court to enforce this guarantee and obtain payment directly from the State’s General Fund. A participant need not pursue payment before the Illinois Court of Claims and depend upon the largesse of the General Assembly.” The Illinois Supreme Court has held that “where a constitutional or statutory provision categorically commands the performance of an act, so much money as is necessary to obey the command may be disbursed without any explicit appropriation.”

Can legislatures breach contracts and blame it on a recession?

“Courts, though, “sit to determine questions on stormy as well as calm days,” and the Constitution was upheld during the Great Depression.”

“As the Oregon Supreme Court stated in a similar context, “Once offered and accepted, a pension promise made by the state is not a mirage (something seen in the distance that disappears before the employee reaches retirement).”

What can you do? Go to the saveperacola.com website, click on the “Support” tab, and send them a contribution. Call or e-mail every PERA member and retiree you know and ask them send support. Call your public employee union representatives and ask them how they can stand idly by while the Colorado Legislature attempts to breach its contracts with public employees. Colleagues of our public sector union officials across the country are aggressively defending the pension rights of their union members. What has happened in Colorado is truly bizarre.

To follow developments in the Colorado pension theft lawsuit sign up as a Friend of Save Pera Cola on Facebook.

Have your friends sign up as Friends of Save Pera Cola. Copy this post and e-mail it to PERA members and retirees you know.

Comment #14 by Al Moncrief on 2012 05 04

Al, so to sum up what you're trying to say is that Illinois is as whacked as RI?

Just because they make it their law, doesn't make it right.

Comment #15 by pearl fanch on 2012 05 04

"Starving the beast" is a fiscal-political strategy of American conservatives[1][2][3] to cut taxes in order to deprive the government of revenue in a deliberate effort to create a fiscal budget crisis that is intended to force the federal government to reduce spending (rather than restore tax levels)."


That is what the "conservatives" call it, "starving the beast". It's like beating your horse to death so you don't have to feed it.

Comment #16 by edith pilkingoton on 2012 05 05

Americans once revolted against the British, because of taxation without representation.
Anyone want IN, on the pool as to when our next revolution will begin? It may be sooner than you think.

Comment #17 by pearl fanch on 2012 05 05

Commenting is not available in this channel entry.