Domino Effect: Are Commercial Real Estate Value Changes Going to Bankrupt Providence?
Friday, December 04, 2015
GoLocalProv News Team and Kate Nagle
Will a new appraisal of the Providence Journal building that is two-thirds less than what the city last had on the books have a spillover effect to the rest of the city’s commercial real estate tax base?
GoLocal reported Thursday that a battle is brewing between lawyers and appraisers worth millions over the next decade centering on the Providence Journal Building on Fountain Street. The building had last been assessed by the city at just over $10 million, while new owner Buff Chace purchased the property this year for $3.2 million -- and a third party appraiser just pegged the value at $3.6 million.
“Look, the [Vision] appraisal wasn’t smart on that property,” said Providence real estate professional Tom Sweeney of the city's last assessment. “The best indicator as of December 31, 2015 is what it sold for, no question in my mind. Of course [other] people will try and come in and use that -- but people will be asked for their rent roll.”
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST
The development comes on the heels of Moody’s revising its outlook to "negative" for the city.
“Owners and property developers want to be treated fairly and play on a level field. Providence does not have a business friendly reputation. This is why there are few cranes in the sky in Providence and very few new businesses coming to the city or planning to expand in the city,” said URI Distinguished Professor of Business Edward Mazze.
“Most if not all owners of large commercial properties in Providence will probably consider getting their property(ies) reappraised to lower their taxes. Lower tax payments go directly to the bottom line of a business,” continued Mazze. “Many commercial properties in Providence have lost some value as a result of the 2007 recession, the poor image of the State as a place to do business and the movement of businesses from Providence to suburban areas, other states and to people's homes. Three common signs seen in Providence are building for rent, building for lease and building for sale.”
Superman Impact
View Larger +
The Industrial National Bank building being empty had a major impact on one real estate investor.
While the actual new appraisal of the Providence Journal building by the city remains to be determined by the city, former Providence Mayor — and real estate investor and developer — Joseph Paolino said that the Journal building is not the biggest issue for Providence, in his opinion.
“The City of Providence will have their own appraisal, that's the owner's take,” said Paolino of the new $3.6 million appraisal of the former Journal building. “You have to see what the income is in the building, how much money the owners are putting in, and what their projections are.”
“I think the biggest problem is Superman, because it depresses everything around it,” said Paolino of the empty iconic Industrial National Bank building downtown. “To me that's the key --- more so than the Journal building.”
Paolino, who bought three properties nearby downtown back in 2014, said the revelation that the Industrial National Bank building was empty had cost him a mortgage with a major lender.
“I had to get a mortgage, and was set to get one with UBS — until they saw coverage about the empty Superman building,” said Paolino. “They said, ‘We can't give you it,’ at the last minute. They did not want to put a substantial mortgage on a building next to an empty Superman Building. That has a major impact on the city.”
Commercial, Residential Pitted?
Keith Fernandes with the Providence Apartment Association said that if new owner Chace “get his way,” that other commercial owners might try and follow suit.
“The issue is if Chace get his way, everyone else will say the same thing,” said Fernandez. “There's nothing that stops you from challenging [appraisals].”
Fernandes said he didn’t think the purchase price, however, should be the primary determinant.
“I paid nothing for some houses on the East Side, but that's not what they're assessed at. It's kind of like the Superman [building[ saying it was worth zero. The third party appraisal is their appraisal, they'll probably meet somewhere in the middle," said Fernandes.
Former Director of Administration Gary Sasse said that while he didn’t have the data to comment on adjustments to the assessed valuation of specific properties, he warned of what could happen if commercial property values declined in the city.
“If the values of commercial properties decline and the cost of delivering city services is not reduced then homeowners can expect to see huge increases in their property tax bills,” said Sasse. “Furthermore, as the City approves lucrative tax stabilization agreements to entice economic development, small businesses and homeowners may have to make- up the foregone revenues resulting from preferential tax deals.”
TSAs in Spotlight
The Providence City Council this past week had a finance hearing on extensions of four tax stabilization agreements (TSAs) — and the new ownership of the Providence Journal Building has sought one as well.
Providence resident and real estate professional John Jacobson spoke to the potential consequences of what transpires at the Providence Journal building.
“I think the implications are huge as that is a significant piece of property. It will bring down other values,” said Jacobson. “I have long argued that the tax incentive (TSA) improperly used can have the opposite result of its intended outcome.”
“We have unfortunately created a 2nd real estate market that pays very low taxes and it creates economic activity in the short term. There is no doubt of that,” continued Jacobson. “The problem is when you create too much. There should be a cap for one and TSAs should expire before you create new ones.”
GoLocal last looked at whether a Providence bankruptcy “was on the table” immediately following the last elections; this past April, GoLocal contributor Mike Riley “repeated his call for bankruptcy” for the city, and Local 799 Firefighter union head Paul Doughty warned in September that if the city loses its protracted legal battle over platoon shift changes, that Mayor Jorge Elorza should “just hand over the keys of the city” to bankruptcy.
“If the commercial base craters, Providence has two immediate major options - raise taxes for everything and anything that can be taxed or reduce government expenditures and services. Neither of these options are good. They will result in bigger budget deficits for the city,” said URI’s Mazze.
“Leaders in government and business must look for new and better ways to operate government, reduce expenditures a implement a realistic economic development strategy,” added Mazze. “If large numbers of commercial properties obtain lower tax rates as a result of reassessments, and there is no way to gain additional tax receipts, the city will be a candidate for a Chapter 9 bankruptcy.”
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.
View Larger +
Prev
Next
#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.
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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.
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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.
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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.
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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.
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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%
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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
View Larger +
Prev
Next
#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
Related Articles
Enjoy this post? Share it with others.