Tax bills are never popular, but the ones that arrived this month in Providence
commercial property owners’ mailboxes had a particular sting to them.
Everyone knew there was a 3.5-percent tax hike, and many had predicted that it would affect commercial property the most. Several landlords and business owners had testified against Mayor David N. Cicilline’s plan before the City Council.
Your Business Has Gone Global. Has Your Insurance?
A decade ago, “doing business internationally” was mostly a large-company concern. Today, a manufacturer in…
Learn More
Still, nothing was firm until it showed up in print: small hikes for some, but huge jumps for a few. Joseph R. Paolino Jr. said he was shocked to see the bill for his new parking lot on the former Gulf station site downtown: $87,000, up from about $30,000.
“I should’ve kept it as an ugly gas station; they would’ve assessed me for less,” joked Paolino.
ýAlong with the overall hike, the tax bills reflect two things: the results of a statistical revaluation this year, and a realignment of tax rates that, for the first time, levies a higher rate on commercial property than on homes of five or few units Ð $37 per $1,000, compared with $29.65 or as low as $14.825 with the homestead exemption.
The revaluation hiked the assessments of commercial properties by about 11 percent. The new tax rates ensured that while, on average, single-family houses’ value increased by 68 percent, taxes on them will drop by roughly 3.7 percent, whereas commercial property owners will pay an extra 4.6 percent.
The impact on mixed-use properties and large apartment buildings (six-plus units), which also pay the $37-per-$1,000 rate, minus the homestead exemption, is even greater: a 36 percent jump in their assessment, and 19.5 percent bigger tax bills.
“They did a very good job for the homeowner; they killed the business community,” said Paolino, a major local property owner and former mayor. “The normal increase that the homeowner would have received, they shifted all to the businesses. … They shifted it to the small businessperson on Broad Street, to the small business on Atwells Avenue, to the drugstore that’s on Smith Street.”
In an interview, Director of Administration John Simmons acknowledged that business owners and commercial landlords had opposed the tax-rate change, but argued it was mostly because they expected the impact on them to be much bigger.
In reality, Simmons said, the city offset much of the property tax hike by cutting the inventory and tangible tax rates – from $38.38 to $30.70 per thousand and from $49.68 to $49.50, respectively. That and a 9 percent drop in the inventory tax base will cut collections this year by nearly one-quarter, and tangibles, which also dropped in value, but only slightly, will produce 4.4 percent less in taxes.
Ÿhen you combine the three taxes, Simmons noted, the overall hike for commercial taxpayers is much smaller Ð about 1.2 percent – and their share of the tax burden is actually lower than last year, about 42.15 percent instead of 43.11.
“We tried to maintain the overall burden by class,” Simmons said. “The levy went up for everyone; the allocation remained the same. The residential taxpayer actually picked up a little.”
That much is also true, though only when multi-family homes up to five units, condominiums, vacant residential-zoned land and other residential property is added to the mix, residential taxpayers’ share of the tax burden does show a small increase, from 41.8 percent to 42.7 percent of the total. Single-family homeowners’ share alone declined, from about 21.2 percent to 19.8 percent.
Simmons doesn’t dispute that larger-scale landlords – with buildings of six or more units, and mixed-use buildings – are taking a hit, or that their share of the tax burden has increased (from 7.5 percent to 8.5 percent). But the city eased the impact of the $37-per-$1,000 tax rate by applying homestead exemptions to the first five units in those buildings as well, Simmons said, and it also based their assessments on a formula that considers buildings’ income potential.
“It’s not a policy choice; it’s value-driven,” he said.
Brian Gill, chief financial officer of Granoff Realty, owner of the Turk’s Head Building and other downtown properties, said his buildings’ valuations declined, in one case dramatically, but it didn’t translate into lower taxes.
After years of arguing with the city over what he perceived as grossly inflated valuations (“with the Turk’s Head, the valuation used to be triple the market value,” he said), Gill was pleased when Cole Layer Trumble did “a very good job” of reassessing the properties to more accurately reflect their relative value. But then the bills came, with a tax rate 2.5 times the rate paid by single-family homeowners.
“It just seems like they turned the whole system upside down,” he said.
