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Providence Business Property Taxes Worst in the State

Thursday, July 26, 2012

 

The city of Providence places a higher tax burden on businesses than any other community in Rhode Island, thanks to a special exception carved out in state law.

State law imposes a cap on how large the gap can be between the commercial and residential rates, but it makes an exception for two communities—Providence and Glocester (which does not use the exception).

In Providence, the exception hurts the economic development efforts, said Gary Sasse, a former Director of the state Department of Administration and current fiscal adviser to the city council. “Providence’s commercial rate puts it at an economic disadvantage,” Sasse told GoLocalProv.

Under the law, most other communities cannot have commercial tax rates that are 50 percent higher than the residential rates. Other cities and towns also have to use their local homestead rate in making that calculation. In other words, if a homestead exemption makes the residential rate effectively $15, the commercial rate cannot be higher than $22.50 per $1,000 in valuation.

Business leader: ‘Disappointed’ in high commercial tax burden

Laurie White, president of the Greater Providence Chamber of Commerce, agreed that the imbalance in tax rates is a problem the city’s economy.

“Providence’s property taxes on commercial property place the city at a competitive disadvantage,” White told GoLocalProv. “Given high unemployment and declining property values in Providence we understand why the City Council gave priority to reducing the proposed 13.5 percent increase to below 5.”

She added: “Nevertheless we were disappointed that more was not done to address Providence's high commercial tax burden in the 2012 budget. However, we look forward to working with the revenue commission that was created to suggest reform to the city’s tax structure in order to make it more balanced and competitive.”

State law grants the exceptions to both Providence as well as Glocester, but only Providence is using the exception on the homestead exemption. Glocester is not using the exception because it does not have a homestead exemption (according to the Economic Development Corporation.)

Gap between commercial and residential rates grows

In Providence, the gap between the commercial and residential rates will grow slightly wider under the new budget. The commercial rate will be $36.75 per $1,000 while the residential rate is $31.89. But with one of the most generous homestead exemptions in the state—as high as 50 percent of value—some homes in Providence effectively have a tax rate of $15.94. (The previous rates were $33.70 for commercial and $30.38 for residential. Click here to view 2010 tax rates for all cities and towns.)

If Providence did not have an exception under state law, its commercial rate could be only $23.91. Instead, thanks to that exception, the commercial rate is 230 percent greater than the homestead tax rate, a difference of more than $10 in the rate.

The exception dates back to at least 2006, but likely many years before that. Yesterday, questions as to why the exception was created in the first place were referred to Susanne Greschner, the Chief of the state Division of Municipal Finance, who did not respond to a GoLocalProv query in time for publication.

Meanwhile, at the local level, the city has formed a Revenue Review Commission to examine such issues, Sasse said. He said the city’s first priority this year was to minimize any additional tax burden. Now that the budget has been passed for the new fiscal year, he said the city can turn to the long-term task of restructuring its tax rates.

“The Taveras administration has worked since taking office to save Providence from financial collapse and put the city back on firm financial ground,” added city spokesman David Ortiz. “This is the foundation we'll build upon to support business, create jobs and grow our economy.”

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