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Bishop: With ‘help’ like this…? - State Policy For Providence A One-Way Street

Thursday, June 25, 2015

Brian Bishop, GoLocalProv Guest MINDSETTER™

Now that the budget’s gone by, the sudden focus of every political body in the state seems to be creating property tax breaks to ‘help’ Providence. Funny how easy it is to pass out money when it’s not yours.

Forgotten are the promises that Providence, already saddled with the lion’s share of the state’s non-profits, would not see yet more tax exempt property. The original I-195 corridor legislation recognized this problem and reinforced Providence’s jurisdiction over property tax policy in development planning.

But in a chilly economic climate that has seen the ‘meds and eds’ job engine visions give way to subsidized dormitories for yuppies, the Governor and the legislature appear to be outdoing each other in throwing Providence under the bus.

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This idea that the state should decide who gets local tax breaks is as inimical to municipalities as undercutting their bargaining leverage with firefighters or the imposition of a statewide property tax.

Is Providence its own problem?

Is Providence a different case though? Is the caricature imagined by many exurban Rhode Islanders, that Providence is the architect of its own demise, correct? Has the city, in this view, overreached by continuing to run its historic patronage mill, passing out arts and culture subsidies like candy, hamstringing businesses with red tape -- all while stressed from providing social services and education to the state’s most challenging demographic? And isn’t it the shifting of these burdens onto commercial and apartment property that have resulted in high taxes for real estate investments that have choked off development?

There is evidence to support this outlook, but there are also challenges to its snide view of Providence as the basket case and state policymakers as the adults in the room. With GQ naming Providence the coolest city in America, there is more than just high property taxes that is keeping developers from investing here.

According to a Lincoln Institute study, commercial rates in Providence are in the 4% range compared to a New England urban average of 2.5%. That 1.5% penalty is not insignificant in a struggling real estate market where it could represent your entire profit margin. But it’s not enough on its own to bar developers from stealing the march in the most chic spot in country!

Perhaps the state, that thinks Providence doesn’t offer enough incentive, ought to be looking in the mirror. Of course it faces the same dilemma as Providence. Will it cut services or gamble on increased economic activity in order to support tax cuts and development incentives that make Rhode Island attractive? Or, God forbid, introduce major projects in Rhode Island to the competition of non-union contracting!

But the Providence as villain motif continues with even one of its own Senators, Dominick Ruggeiro, leading the charge to take Providence tax policy from its elected leaders. Senator Ruggeiro, who apparently hasn’t gotten along perfectly with Mayor Elorza, uses his legislative position to grind this axe at the expense of his constituents.

He has, as window dressing, the state’s penchant for cranes in the air at virtually any cost. But whose cost should it be?

Who should pay for tax breaks?

Of course the theory is that the city gives up near term taxes it wouldn’t get anyway, but augments its tax base later on. Far from dragging its feet, the city has worked on this basis to facilitate projects from the Renassiance Hotel to GTech to Hasbro that bring or retain jobs in state.

The problem is that the state collects sales and income taxes immediately while the hundreds of millions of dollars in property tax breaks the city has foregone over 15 years have yet to produce the promised new tax base. And meanwhile the city has built a reputation for givebacks. Projects that don’t need them, or have issues other than tax rates, come looking to the city anyway. Little wonder that Providence is going slower on these breaks.

This is not a signal that the city is not open for development, but that it expects developers and the state to meet it halfway. Providence is proud to remain the state’s signature destination for shopping, restaurants, culture, tourism, urban living, education and creative economy. But it should not be called on to do so by funding incentives solely on taxes from existing businesses and neighborhoods. And the evidence is, if the state makes property tax policy, things go worse for Providence.

What is the state’s track record?

The state cut the deal to give away property taxes on the Providence Place Mall for 30 years. With that kind of ‘help’, it isn’t just mismanagement that is ballooning Providence’s structural deficit.

Providence collects a token $300,000 of the $22 million in property taxes that should be due on the mall annually. The state subsidy, while not insignificant, is 1/6th of what Providence puts in, or about $3.5 million a year from sales tax collections -- and that for the shorter period of 20 years. So the city gets 1% of property taxes due but the state gets 70% of sales taxes collected and all the income tax from people who work there!

It’s doubtful Providence will see much even after 30 years. You don’t need a crystal ball to know the owners will tell city and state leaders that they need to rejuvenate the mall, and that kind of investment can’t be made without a continuance of their tax breaks.

Indeed, precedent suggests just such an outcome if the state is running things. The legislature in 2010 unilaterally renewed expiring tax breaks only in Providence that should have been left to local decision. That cost the city $10 million a year for five years – or about the amount of deficit it was grappling with at the time. These were projects that had already been completed so no economic activity was even gained by the extensions. They were bailouts for connected developers - plain and simple.

And the state reinforces this problem by mollycoddling the ridiculous proposal that Providence give a Red Sox stadium treatment as overly generous as the Providence Place Mall. While Providence got a raw deal on the mall, at least it is the economic engine promised, generating $400 million in revenue annually. A stadium wouldn’t do a tenth of that. There has been plenty of resistance to state spending on a stadium, but nary a peep from state pols about the expectation that Providence give up property taxes for 30 years!

Of course the city must carefully calibrate tax relief for true short term stabilization that will contribute to the property tax base, while not giving such generous subsidies that projects become “virtual non-profits” that expect preferential tax treatment perpetually. Recent proposals ramp taxes up so they tend to be more like 60% tax discounts rather than complete giveaways. But the city must keep the term of these agreements under control, whereas the state shamelessly shills for longer agreements.

How about a real partnership, not a takeover?

The I-195 commission should emulate the cooperation between state and municipal interests at the Quonset Point industrial park. It has taken 40 years since the base closed to reach a point where the park is such a recognized contributor to the economy. The state could surely have rushed this artificially by legislating 20 year tax breaks from North Kingstown, but instead it took a slow and steady approach -- negotiating a standard 6 year program with the town.

If longer terms of 13 to 20 years are to be adopted for I-195 land (such as the Mayor Elorza and Council President Aponte are considering in a proposal to be heard June 30th at City Hall), the city ordinances should only give those longer abatements if the state matches the city investment dollar for dollar. It is the state that collects sales and income taxes while the city waits for property tax abatements to expire.

Of course this isn’t to suggest the state simply subsidize every project in Providence. Rather, if the state must match Providence’s give backs, due diligence on permanent job creation resulting in tax collections to offset that state share should improve. That would be a real help for Providence and the state without the scare quotes.

Brian Bishop is on the board of OSTPA and has spent twenty years of activism protecting property rights, fighting overregulation and perverse incentives in tax policy.

Related Slideshow: The Highest Taxed Communities for 2015

How do the taxes in your community compare to other cities and towns in Rhode Island?

GoLocalProv has ranked communities from the least to the highest taxed on the basis of their tax rates, using newly released data from the state Division of Municipal Finance. The below slides list the tax rate per $1,000 in value for homes, commercial property, personal property, and motor vehicles for the 2015 fiscal year, which began last July and ends next June.

Along with the rates are examples of what taxes might cost a typical resident in each city or town. For residential taxes, this calculation is based on the current statewide median price for a single family home, which is $215,000. For communities with them, homestead exemptions are factored in using the latest available figures. For motor vehicles, the example used is a 2008 Honda Accord, valued at the maximum retail price of $15,150. The total cost of home and car taxes is then represented as a percentage of the median income for that community, offering a rough measure of how affordable taxes are for those residents as compared with the taxes in another city or town.

Data sources: the Rhode Island Division of Municipal Finance, the Rhode Island Association of Realtors, the Rhode Island League of Cities and Towns, the National Automobile Dealers Association, and the U.S. Census Bureau.

#39 New Shoreham

FY 2015 Tax Rates Per $1,000 in Value

Residential: $5.34

Commercial: $5.34

Personal Property: $5.34

Motor Vehicle: $9.75

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $1,148.10

For a 2008 Honda Accord: $147.71

Total Taxes as a % of Median Income:1.43%

Note: Real property is assessed at 80 percent of value. This is reflected in the community's ranking.

#38 Little Compton

FY 2015 Tax Rates Per $1,000 in Value

Residential: $5.64

Commercial: $5.64

Personal Property: $11.28

Motor Vehicle: $13.90

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $1,212.60

For a 2008 Honda Accord: $210.59

Total Taxes as a % of Median Income: 1.56%

#37 Jamestown

FY 2015 Tax Rates Per $1,000 in Value

Residential: $8.75

Commercial: $8.75

Personal Property: $8.75

Motor Vehicle: $14.42

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $1,881.25

For a 2008 Honda Accord: $218.46

Total Taxes as a % of Median Income: 2.46%

#36 Charlestown

FY 2015 Tax Rates Per $1,000 in Value

Residential: $9.90

Commercial: $9.90

Personal Property: $9.90

Motor Vehicle: $13.08

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $2,128.50

For a 2008 Honda Accord: $198.16

Total Taxes as a % of Median Income: 3.20%

#35 Bristol

FY 2015 Tax Rates Per $1,000 in Value

Residential: $13.06

Commercial: $13.06

Personal Property: $13.06

Motor Vehicle: $17.35

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $2,807.90

For a 2008 Honda Accord: $262.85

Total Taxes as a % of Median Income: 5.04%

Note: Bristol had a revaluation or statistical update effective December 31, 2013

#34 Narragansett

FY 2015 Tax Rates Per $1,000 in Value

Residential: $10.04

Commercial: $15.06

Personal Property: $15.06

Motor Vehicle: $16.46

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $2,158.60

For a 2008 Honda Accord: $249.37

Total Taxes as a % of Median Income: 3.58%

#33 Westerly

FY 2015 Tax Rates Per $1,000 in Value

Residential: $10.64

Commercial: $10.64

Personal Property: $10.64

Motor Vehicle: $29.67

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $2,287.60

For a 2008 Honda Accord: $449.50

Total Taxes as a % of Median Income: 4.64%

#32 Portsmouth

FY 2015 Tax Rates Per $1,000 in Value

Residential: $15.80

Commercial: $15.80

Personal Property: $15.80

Motor Vehicle: $22.50

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,397.00

For a 2008 Honda Accord: $340.88

Total Taxes as a % of Median Income: 5.10%

Note: Motor vehicles are assessed at 70 percent of value. This is reflected in the community's ranking.

#31 South Kingstown

FY 2015 Tax Rates Per $1,000 in Value

Residential: $15.48

Commercial: $15.48

Personal Property: $15.48

Motor Vehicle: $18.71

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,328.20

For a 2008 Honda Accord: $283.46

Total Taxes as a % of Median Income: 4.91%

#30 Newport

FY 2015 Tax Rates Per $1,000 in Value

Residential: $12.06

Commercial:$16.72

Personal Property: $16.72

Motor Vehicle: $23.45

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $2,592.90

For a 2008 Honda Accord: $355.27

Total Taxes as a % of Median Income: 5.11%

#29 Middletown

FY 2015 Tax Rates Per $1,000 in Value

Residential:$16.07

Commercial: $21.34

Personal Property: $16.07

Motor Vehicle: $16.05

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,455.05

For a 2008 Honda Accord: $243.16

Total Taxes as a % of Median Income: 5.23%

#28 Exeter

FY 2015 Tax Rates Per $1,000 in Value

Residential: $14.63

Commercial: $14.63

Personal Property: $14.63

Motor Vehicle: $32.59

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,145.45

For a 2008 Honda Accord: $493.74

Total Taxes as a % of Median Income: 3.82%

#27 Tiverton

FY 2015 Tax Rates Per $1,000 in Value

Residential: $19.30

Commercial: $19.30

Personal Property: $19.30

Motor Vehicle: $19.14

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,149.50

For a 2008 Honda Accord: $289.97

Total Taxes as a % of Median Income: 6.46%

#26 North Kingstown

FY 2015 Tax Rates Per $1,000 in Value

Residential: $18.91

Commercial: $18.91

Personal Property: $18.91

Motor Vehicle: $22.04

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,065.65

For a 2008 Honda Accord: $333.91

Total Taxes as a % of Median Income: 5.49%

#25 Richmond

FY 2015 Tax Rates Per $1,000 in Value

Residential: $20.94

Commercial: $20.94

Personal Property: $20.94

Motor Vehicle: $22.64

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,502.10

For a 2008 Honda Accord: $343.00

Total Taxes as a % of Median Income: 5.88%

Notes:

1. Motor vehicles are assessed at 80 percent of value. This is reflected in the community's ranking

2. Richmond had a revaluation or statistical update effective Dec. 31, 2013

#24 Hopkinton

FY 2015 Tax Rates Per $1,000 in Value

Residential: $20.64

Commercial: $20.64

Personal Property: $20.64

Motor Vehicle: $21.18

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,437.60

For a 2008 Honda Accord: $320.88

Total Taxes as a % of Median Income: 7.13%

Note: Hopkinton had a revaluation or statistical update effective Dec. 31, 2013

#23 Cumberland

FY 2015 Tax Rates Per $1,000 in Value

Residential: $17.08

Commercial: $17.08

Personal Property: $29.53

Motor Vehicle: $19.87

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,672.20

For a 2008 Honda Accord: $301.03

Total Taxes as a % of Median Income: 5.42%

Note: Cumberland had a revaluation or statistical update effective Dec. 31, 2013

#22 Coventry

FY 2015 Tax Rates Per $1,000 in Value

Residential: $20.40

Commercial: $24.58

Personal Property: $20.40

Motor Vehicle: $18.75

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,386.00

For a 2008 Honda Accord: $284.06

Total Taxes as a % of Median Income: 7.12%

Note: Coventry had a revaluation or statistical update effective Dec. 31, 2013

#21 Warren

FY 2015 Tax Rates Per $1,000 in Value

Residential: $20.07

Commercial: $20.07

Personal Property: $20.07

Motor Vehicle:$26.00

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,315.05

For a 2008 Honda accord: $393.90

Total Taxes as a % of Median Income: 8.62%

#20 East Greenwich

FY 2015 Tax Rates Per $1,000 in Value

Residential: $23.26

Commercial: $23.26

Personal Property: $23.26

Motor Vehicle: $22.88

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $5,000.90

For a 2008 Honda accord: $346.63

Total Taxes as a % of Median Income: 5.48%

#19 Burrillville

FY 2015 Tax Rates Per $1,000 in Value

Residential: $18.88

Commercial: $18.88

Personal Property: $18.88

Motor Vehicle: $40.00

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,059.20

For a 2008 Honda Accord: $606.00

Total Taxes as a % of Median Income: 7.01%

#18 Barrington

FY 2015 Tax Rates Per $1,000 in Value

Residential: $18.30

Commercial: $18.30

Personal Property: $18.30

Motor Vehicle: $42.00

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,934.50

For a 2008 Honda Accord: $636.30

Total Taxes as a % of Median Income: 4.43%

#17 West Greenwich

FY 2015 Tax Rates Per $1,000 in Value

Residential: $22.55

Commercial: $22.55

Personal Property:$33.85

Motor Vehicle: $19.02

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,848.25

For a 2008 Honda Accord: $288.15

Total Taxes as a % of Median Income: 6.36%

Notes:

1. Does not include rate for vacant land which is $16.07

2. West Greenwich has a homestead exemption

3. West Greenwich had a revaluation or statistical update effective Dec. 31, 2013

#16 Foster

FY 2015 Tax Rates Per $1,000 in Value

Residential: $21.06

Commercial: $21.06

Personal Property: $28.96

Motor Vehicle: $36.95

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,527.90

For a 2008 Honda Accord: $559.79

Total Taxes as a % of Median Income: 6.26%

#15 Scituate

FY 2015 Tax Rates Per $1,000 in Value

Residential: $18.98

Commercial: $21.94

Personal Property: $40.38

Motor Vehicle: $30.20

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,080.70

For a 2008 Honda Accord: $457.53

Total Taxes as a % of Median Income: 5.52%

Note: Motor vehicles are assessed at 95 percent of value. This is reflected in the community's ranking.

#14 North Smithfield

FY 2015 Tax Rates Per $1,000 in Value

Residential: $16.02

Commercial: $17.77

Personal Property: $42.80

Motor Vehicle: $37.62

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,444.30

For a 2008 Honda Accord: $569.94

Total Taxes as a % of Median Income: 5.21%

#13 Glocester

FY 2015 Tax Rates Per $1,000 in Value

Residential: $21.77

Commercial: $24.74

Personal Property: $43.34

Motor Vehicle: $24.37

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,680.55

For a 2008 Honda Accord: $369.21

Total Taxes as a % of Median Income: 6.31%

Note: Glocester had a revaluation or statistical update effective Dec. 31, 2013

#12 Lincoln

FY 2015 Tax Rates Per $1,000 in Value

Residential: $23.57

Commercial: $26.94

Personal Property: $37.02

Motor Vehicle: $30.66

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $5,067.55

For a 2008 Honda Accord: $464.50

Total Taxes as a % of Median Income: 7.33%

Note: Lincoln Has a homestead exemption.

#11 Warwick

FY 2015 Tax Rates Per $1,000 in Value

Residential: $20.06

Commercial: $30.09

Personal Property: $40.12

Motor Vehicle: $34.60

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,312.90

For a 2008 Honda Accord: $524.19

Total Taxes as a % of Median Income: 7.93%

#10 West Warwick

FY 2015 Tax Rates Per $1,000 in Value

Residential:

For apartments with 6+ units: $36.28
For Two to Five Family buildings: $36.45
For Single family homes: $25.3

Commercial: $30.85

Personal Property: $40.13

Motor Vehicle: $28.47

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $5,458.85

For a 2008 Honda Accord: $431.32

Total Taxes as a % of Median Income: 11.46%

Note: For rankng purposes, an average of the three residential rates was used.

#9 Smithfield

FY 2015 Tax Rates Per $1,000 in Value

Residential: $17.13

Commercial: $17.13

Personal Property: $59.70

Motor Vehicle: $39.00

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $3,682.95

For a 2008 Honda Accord: $590.85

Total Taxes as a % of Median Income: 5.89%

#8 Cranston

FY 2015 Tax Rates Per $1,000 in Value

Residential: $22.84

Commercial: $34.26

Personal Property: $34.26

Motor Vehicle: $42.44

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,910.60

For a 2008 Honda Accord: $642.97

Total Taxes as a % of Median Income: 9.45%

#7 East Providence

FY 2015 Tax Rates Per $1,000 in Value

Residential: $22.95

Commercial: $25.40

Personal Property: $56.67

Motor Vehicle: $37.10

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,934.25

For a 2008 Honda Accord: $562.07

Total Taxes as a % of Median Income:11.09%

Notes:

1. Rates are for FY 2014

2. East Providence has homestead exemptions

#6 Johnston

FY 2015 Tax Rates Per $1,000 in Value

Residential: $28.75

Commercial: $28.75

Personal Property: $59.22

Motor Vehicle: $41.46

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $6,181.25

For a 2008 Honda Accord: $628.12

Total Taxes as a % of Median Income: 11.99%

Note: Johnston has homestead exemptions

#5 Pawtucket

FY 2015 Tax Rates Per $1,000 in Value

Residential: $23.06

Commercial: $30.88

Personal Property: $52.09

Motor Vehicle: $53.30

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,957.90

For a 2008 Honda Accord: $807.50

Total Taxes as a % of Median Income: 14.28%

#4 Woonsocket

FY 2015 Tax Rates Per $1,000 in Value

Residential: $35.94

Commercial: $39.99

Personal Property: $46.58

Motor Vehicle: $46.58

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $7,727.10

For a 2008 Honda Accord: $705.69

Total Taxes as a % of Median Income: 21.99%

Note: Woonsocket has homestead exemptions

#3 North Providence

FY 2015 Tax Rates Per $1,000 in Value

Residential: $27.94

Commercial: $34.68

Personal Property: $69.91

Motor Vehicle: $41.95

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $6,007.10

For a 2008 Honda Accord: $635.54

Total Taxes as a % of Median Income: 13.04%

Notes:

1. North Providence has homestead exemptions

2. North Providence had a revaluation or statistical update effective Dec. 31, 2013

#2 Providence

FY 2015 Tax Rates Per $1,000 in Value

Residential:

For owner-occupied residential property: $19.25
For non-owner-occupied residential property: $33.75

Commercial: $36.75

Personal Property: $55.80

Motor Vehicle: $60.00

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $4,138.75

For a 2008 Honda Accord: $909.00

Total Taxes as a % of Median Income: 13.20%

Note: For ranking purposes, the average of two residential rates was used

#1 Central Falls

FY 2015 Tax Rates Per $1,000 in Value

Residential: $27.26

Commercial: $39.48

Personal Property: $73.11

Motor Vehicle: $48.65

Tax Cost for Residents

Taxes for a Single Family Home Valued at $215,000: $5,860.90

For a 2008 Honda Accord: $737.05

Total Taxes as a % of Median Income: 22.54%

Note: Central Falls has homestead exemptions

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