New for 2012—The Highest Taxed Communities

Thursday, August 25, 2011

Stephen Beale, GoLocalProv News Editor

Property taxes are on the rise across the board in the vast majority of the cities and towns in Rhode Island, according to a new state list of all the 2012 rates obtained by GoLocalProv.

 

In almost all cases, the tax rates increased, from as little as a few cents to as much as seven dollars per one thousand in value.

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Of all the cities and towns in the state, only a handful saw no increase in residential or commercial rates. Just six communities stayed the same—Foster, Lincoln, Little Compton, North Smithfield, Pawtucket, West Warwick. And only one saw a slight decrease in its residential and commercial rates: Exeter. (See below charts for the complete breakdown.)

“Rhode Island taxpayers better brace themselves, because it’s clear the local tax burden is only getting steeper, community by community, and category by category,” said Harriet Lloyd, executive director of the Rhode Island Statewide Coalition. “Residents of the more centrally located cities and towns are about to see substantially rising tax bills on everything from their own personal property, to a business property to their own car.”

Providence, Central Falls top the list

The highest taxed communities on the list reads like a who’s who of financially struggling communities. The top five are: Providence, Central Falls, North Providence, Woonsocket, and Johnston. Pawtucket edges into sixth place. The state’s two other big cities, Cranston and Warwick rank 10th and 11th, respectively.

Taxpayers in Providence and bordering communities, like North Providence, East Providence, Pawtucket, and Johnston, could be facing annual tax bills that could climb to anywhere between $10,000 and $15,000, according to Lloyd.

Broken down by category, the ranking of tax rates turns up a few surprises:

■ High taxes in Scituate: Scituate takes the top spot in residential taxes with a rate of $32.73, beating out Providence with $31.89. In terms of commercial rates, Scituate takes the number one place as well.
■ Homestead exemptions: Six out of the top seven communities in residential tax rates also have homestead exemptions, which reduces the effective rate for those taxpayers. After Scituate, the next highest community that does not have a homestead exemption is Glocester, which has a rate of $21.66.
■ Car taxes: Providence was the only community to cut its motor vehicle tax rate, yet it still tops the list with a rate of $60 per $1,000 in value. Although the rate was lowered, Providence reduced the exemption too—meaning more people will be paying the tax.

On the other end of the spectrum, the communities that have the overall lowest property taxes of any are: Block Island, Little Compton, Charlestown, Jamestown, and Narragansett.

Next hit: Soaring pension costs

Overall, property tax rates are already 40 percent above the national average and higher than neighboring states like Connecticut and Massachusetts, said Gary Sasse, the former longtime head of the Rhode Island Public Expenditure Council and Director of the Department of Administration under Gov. Carcieri. Sasse said the rising rates make housing less affordable and make communities less competitive in attracting businesses.

“This mounting tax burden is also hitting communities where thousands of the residents are unemployed, still struggling to find a job in Rhode Island. How are they going to keep pace with the growing tab?” Lloyd said.

But the big hit may be yet to come. If there is no significant pension reform at the General Assembly this year, cities and towns could owe a total of $93 million more towards pension contributions. In order to keep up with the demand, Sasse said communities will have to break the 4 percent state-mandated tax cap—a process that involves the approval of the local council and state authorities.

“The situation is going to get worse next year if communities have to come up with $93 million in pension obligations,” Sasse said. He said that would create financial pressures, causing municipal services and public education to suffer in communities across the state.

“The sharply rising tax burden … seems to be hitting those same communities that face substantial pension debt while coping with an eroding local business sector, which makes the pressure on the community even greater. The cities and towns unfortunately will keep going to the taxpayer unless the state is prepared to do a dramatic change of course,” Lloyd said. “RISC can only hope that as the pension reform legislative session unfolds this fall, General Assembly leadership stays mindful of these steeply rising local tax burdens as they begin to weigh their options.”

(Sasse points out that tax rates alone do not provide a complete picture of the property tax burden in each community. The tax base and rates could change, while the tax levy—the amount each city or town aims to raise in taxes, remains the same, according to Sasse.)

Widespread tax burdens in Providence

The rising tax rates in Providence—something city officials say is a necessary last resort to balance the budget—have a wide impact across the city, affecting rich and poor, luxurious condominiums and even higher-priced clunkers. (The exemption on the motor vehicle tax is being dropped from $6,000 to $1,000.)

 

GoLocalProv has previously reported that many homeowners are outraged that their taxes are increasing. Even though the increase is 5 percent—and despite a generous 50 percent homestead exemption—residents told GoLocalProv higher taxes are one more hit they cannot bear in a recession economy. Providence also places a higher burden on commercial taxpayers than any other city or town, thanks to a special exception in state law—making it harder for the city to attract business.

Another group that is feeling the brunt of the rising taxes are apartment owners. “The taxes on investment properties have gone through the roof,” said Mike Patch, president of the Providence Apartment Association.

Last year, he said the city removed the 33 percent homeowner exemption on apartment buildings of five units or less. The city eventually restored some of the exemption—up to 15 percent. But landlords still faced a 28 percent increase in their taxes. As a result, this year they will be feeling most of the 5 percent increase in the residential rate.

“The big problem is they look at the owner-occupieds as the only people who are real and they look at apartment owners as people with deep pockets and they can take as much as they want,” Patch said.

But many of those apartment owners own a handful of multi-family houses—not luxurious multi-unit complexes, Patch said. Not only have those owners seen higher taxes wipe out their profits, but their property values have declined as well, according to Patch. “Nobody wants to buy a property where the taxes are so unbelievably high,” he said.

Ultimately, he said the impact of apartment buildings ultimately will trickle down to renters—who tend to be on the lower end of the economic scale. “There’s only so much you can take,” Patch said. “It’s like taking blood from a rock.”

 

Worries spread across state

North Kingstown is one community where potential tax increases have been blunted in recent years, according to Jim McGwin, the president of the town taxpayer organization. He praised the town for consolidation positions, changing the shifts for police and fire, and sharing services, such as IT with Exeter—all measures that have cut costs or produced new revenue.

In recent years, he said the North Kingstown Taxpayers Organization has turned its focus to trimming the costs in the local school system. In the past three years, there has been one cut in the school share of the tax rate, one increase, and one year where there was no change. “At least we’re putting the brakes on the tax increases,” McGwin told GoLocalProv.

But he now worries that the town could be back on the fast track to higher taxes. In 2013, barring major pension reform, he said the cost of the retirement system for school employees will increase by a little over $2 million. The added costs for town employees will be roughly the same, according to McGwin. “Every district in the state has got to be worried about it, but Providence is going to be hit the worst,” he said.

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