Report: Providence has third-highest commercial property tax rate in nation

PROVIDENCE ranked third highest among 100 cities in the U.S. for its commercial property tax rate of 3.7 percent, behind only Detroit and New York City, according to a report from the Lincoln Institute of Land Policy. / COURTESY LINCOLN INSTITUTE OF LAND POLICY
PROVIDENCE ranked third highest among 100 cities in the U.S. for its commercial property tax rate of 3.7 percent, behind only Detroit and New York City, according to a report from the Lincoln Institute of Land Policy. / COURTESY LINCOLN INSTITUTE OF LAND POLICY

PROVIDENCE – When it comes to commercial property, Providence has the third-highest tax rate in the nation, according to a report from the Lincoln Institute of Land Policy.
The institute, which released its latest edition of its annual report on property taxes this week, said Providence is behind only Detroit and New York City on the list of the highest effective property tax rates on a commercial property worth $1 million. Data is based on taxes paid last year.
Detroit’s property tax rate of 4.1 percent is driven by low property values, while New York City’s rate of 3.96 percent is driven by high local government spending. Providence’s 3.7 percent rate is driven by a high property tax reliance, according to the report.
“In Detroit, low property values require higher rates to fund services in the struggling city. In New York’s red-hot real estate market, policy makers have chosen to shield homeowners by shifting the burden to commercial property. And in Providence, the city has historically relied heavily on the property tax, compared with other local revenues,” the report stated.

On the opposite end of the spectrum, Cheyenne, Wyo.’s property tax rate of 0.64 percent is the lowest in the nation, thanks to a low property tax reliance, the report said.
In 2015, the effective tax rate on a commercial property worth $1 million averaged 2.1 percent across the largest cities in each state, the report stated.
The report analyzed why tax rates vary from city to city, exploring factors such as reliance on property taxes relative other revenues such as the sales tax; variation in property values; the differential treatment of residential and commercial property; and level of local government spending.
“The property tax is a critical source of revenue for local government services, from education to public safety,” Joan Youngman, chair of the Lincoln Institute’s Department of Valuation and Taxation, said in a statement. “This report provides a snapshot of property taxation across cities, one step toward a fuller picture of how communities meet their responsibility to serve their citizens.”
Providence ranked 16th highest on the report for its 1.74 percent property tax rate on a median valued home. Bridgeport, Conn., topped the list with its 3.88 percent property tax rate, a reflection of its heavy reliance on property tax, as residents pay no local sales or income taxes, while Honolulu had the lowest, at 0.3 percent due to high home values and low local government spending.
In the list of industrial property taxes for the largest city in each state, Providence ranked 15th for its 1.94 percent rate; Columbia, S.C., topped the list with a 4.16 percent rate, and Virginia Beach, Va., was at the bottom of the list with a 0.54 percent rate.
On the list ranking property tax rates for apartments, Providence was sixth-highest at 3 percent, behind No. 1 New York City at 5.47 percent. Rates were based on a $600,000 valued property plus $30,000 worth of fixtures, according to the report. Honolulu was lowest on the list with a 0.33 percent rate for apartments.

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