Elorza proposes tax cuts to offset higher property values as part of FY23 budget

Updated at 6:45 p.m. on Tuesday.

MAYOR JORGE O. Elorza on Tuesday unveiled a $567 million fiscal 2023 budget proposal with major cuts to city tax rates to offset higher property values. / PBN FILE PHOTO/STEPHANIE ALVAREZ EWENS
MAYOR JORGE O. Elorza on Tuesday unveiled a $567 million fiscal 2023 budget proposal with major cuts to city tax rates to offset higher property values. / PBN FILE PHOTO/STEPHANIE ALVAREZ EWENS

PROVIDENCE – As property values soar under a recent city revaluation, Mayor Jorge O. Elorza wants to slash tax rates for the fiscal year that starts July 1.

Elorza on Tuesday afternoon unveiled his proposed $567.3 million fiscal 2023 budget, including a nearly 25% drop in the city’s residential tax rate. But the proposed rate of $18.50 per $1,000 of assessed value doesn’t necessarily mean homeowners will see lower tax bills. The recently finished property revaluation, conducted on a three-year schedule, means homeowners and landlords have seen their property values skyrocket, although by how much depends on the neighborhood and property type, according to Lawrence Mancini, the city’s chief financial officer.

“Property values have grown so much in the past three years that many property owners will indeed pay more in taxes, but we were able to minimize the increase,” Elorza said.

The proposed tax cuts – both residential and a 7% drop in the city’s commercial tax rate – are intended to offset the higher revaluations, although exactly what percentage of business and residential property owners will see their annual tax bills go up was not immediately available.

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City residents who live in their homes – rather than renting them out – are more likely to see a drop in their tax bills thanks to a 5% increase to the city’s homestead exemption, which would now give eligible homeowners a 45% break on city property taxes.

Under Elorza’s proposal, the city’s tangible tax rate would also decline 25 cents to $55.55 per $1,000, although small businesses with $10,000 or less in personal property will continue to be exempt from paying tangible taxes. 

The proposed $567.3 million spending plan marks a 5.2%, or $27.8 million, increase over the prior year’s budget, which would be covered in part by $25.5 million of the city’s American Rescue Plan Act funds.

In January, Elorza rolled out a separate plan for how to distribute the city’s remaining $124 million in federal relief dollars, including $28 million to plug holes in the next two budget years. Many of Elorza’s signature initiatives, including a racial reparations program, affordable housing funding and a redesign of the greater Kennedy Plaza area, are included in the proposed ARPA budget, which will be approved separately from the main city spending plan.

With that in mind, Elorza’s proposed fiscal 2023 budget does not introduce many new projects or programs but instead continues to concentrate on issues of years past: public safety, youth programming and high-paying jobs, and affordable housing.

In his address Tuesday, the term-limited mayor reflected on his seven years in office, growing teary amid enthusiastic applause in the council chambers as he pledged to continue to serve out his term with the same “intensity and dedication” he has brought to date.

“I’m going to sprint to the finish line,” he said.

As the city prepares to advance a plan to borrow $515 million to shore up its beleaguered pension fund, Elorza touted the ways he has already strengthened the city’s fiscal status, turning an inherited deficit into a nearly $30 million surplus, bolstering what had been a “junk” credit rating into one of investment-grade.

“With our finances in order and all that allows us to do, we have helped create a positive outlook that ultimately draws people in,” Elorza said. “People are moving to Providence and believing in Providence, investing well over $2 billion in the past seven years.”

Still, the influx of new residents hasn’t helped the housing crisis, which Elorza named a top priority of his administration. Although he highlighted the city’s involvement in the redevelopment of the “Superman” building as one example of its commitment to adding more housing, the $5 million city contribution to the project is not included in his budget plan.

The direct city funding will be granted once the building has received a certificate of occupancy, likely several years away, according to  Theresa Agonia, the mayor’s chief of external affairs.

Despite controversy over funding for the Police Department proved controversial during budget negotiations with the City Council last year, Elorza has proposed adding another $1.5 million for a new police academy to add up to 50 new officers.

Signature programs and events such as PVDFest, after-school programming through the Providence After School Alliance and city department-run services to deal with homelessness and substance abuse would be funded at their current levels while a “crisis diversionary program,” which started last year, would get a $121,000 boost over fiscal 2022 to hire more employees.

The mayor’s budget also sets aside $1.1 million for “landmark public artwork” in the Providence Innovation District Park, slated to be unveiled this fall.

Elorza has again proposed giving $130 million to the Providence Public School District, which is under state control, despite an ongoing court battle between Elorza and state education leaders over how much money the city should be providing for its schools.

Elorza criticized the “structural failings” of Providence schools, which he called a “quagmire” that risks losing another generation of students.

“The dirty secret is that if we really, and I mean really, want to turn public education around, it requires radical transformation,” he said. “Changing personnel, reorganizing departments and simply spending more money will not do.”

The budget also includes a $100.3 million payment to the city pension fund, which will not change even if the proposed $515 million pension obligation bond moves forward, according to Mancini.

Another $100,000 would be set aside for the city’s rainy day fund.

Separate from its general fund, the budget proposal also includes $500 million worth of capital projects to be funded over the next four fiscal years. 

Updated through to add comments from Mayor Elorza from his budget address Tuesday night.

Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.

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