Elorza reduces property tax rates for FY2017, but total tax haul grows based on property revaluation

PROVIDENCE MAYOR JORGE O. ELORZA said that the newcomer program
PROVIDENCE MAYOR JORGE O. ELORZA said that the newcomer program "marks a tremendous step in ensuring that all Providence students learn in an environment that is welcoming and supportive. Newcomers, just as the rest of our students, deserve a fair shot at a quality education.” / PBN FILE PHOTO/STEPHANIE ALVAREZ EWENS

PROVIDENCE – Mayor Jorge O. Elorza unveiled a $716.8 million operating budget for the upcoming fiscal year Wednesday, a spending package that includes reductions in the commercial and residential tax rates, and an increased exemption for auto excise taxes, but which will most likely result in increased taxes for many property owners due to rising assessments.

The budget for fiscal 2017, which begins in July, represents a 2 percent increase over the current year. The plan includes a $5.3 million deficit reduction payment, part of a scheduled series of payments intended to eliminate a $13.2 million cumulative deficit facing the city.

The recent comprehensive revaluation of all commercial and residential property in Providence has resulted in an average tax base boost of 10 percent, according to the administration. Rising property values, based on the projected tax rates, will contribute an additional $13.1 million to the city’s top line next fiscal year.

If the property tax collections were not capped at a 4 percent increase, by state law, the increased commercial and residential valuations would have resulted in an increase in revenue of $22 million.

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Despite the injection resulting from the city’s increasing worth, Providence finances remain challenged by increasing costs that continue to place the city on precarious financial ground.

Elorza, who released the budget in a televised address to the City Council, said the budget begins a long-term approach to making the city financially sustainable. He acknowledged that a recent report by the National Resource Network found the city was poised to spend $176 million more than it could afford over the next decade, unless changes were instituted.

“The fact that Providence faces ongoing financial challenges is not new,” he said. “When Mayor [Angel] Taveras took office, he called attention to a serious cash-flow issue that manifested itself in a $110 million budget shortfall that very next year. I applaud Mayor Taveras and those who joined him to take action to address that shortfall, which could have resulted in the city declaring bankruptcy.”
He continued: “Today, Providence faces a different, yet just as dangerous, financial threat. It risks a different kind of fate. If we do not resolve our long-term challenges with long-term, sustainable solutions, Providence risks dying a slow and painful death.”

To provide some measure of tax relief, the budget proposes a reduction in the tax rate for commercial property, the first lowering in five years, as well as a lowering of the tax rates for both owner-occupied and non-owner-occupied residential properties.

If approved by the City Council, the commercial rate will drop by 25 cents, to $36.50 for each $1,000 of value. The commercial rate, often criticized as being uncompetitive with other cities in New England, has discouraged businesses from locating in Providence, Elorza said. Over the long run, the small reduction will be continued even further, he said.

The rates for the two types of residential properties, including those held by landlords, would fall by 34 cents each, to $18.91 for each $1,000 of value for owner-occupied structures, and to $32.76 for non-owner-occupied structures.

The excise tax rate, which is highest in Providence among all Rhode Island communities, would remain the same, at $60 for each $1,000 of car value. But Elorza has proposed to double the amount of the exemption from tax, to $2,000 per vehicle. The move will lower the tax paid by car owners throughout the city, and will eliminate 6,500 lower-cost cars from paying tax altogether, according to the mayor.

“This is a big first step toward addressing the unfair car tax burden on our residents,” he said.

Meanwhile, the tangible tax paid by businesses yearly on equipment and inventory, while remaining unchanged at $55.80 for each $1,000 of assessed value, will be the subject of a new tax incentive program, according to the administration. A standardized, 12-year, tax stabilization agreement for tangible taxes will be extended to businesses that either expand or locate in Providence in key economic segments, including food, maritime-related industry, medical and biotechnology companies, and the design-related field.

In other budget highlights, all non-union employees are expected to receive a raise of 2 percent in fiscal 2017, to match the negotiated raises of collective bargaining units that were previously approved. The contract for the Providence police union, which expires this year, is being renegotiated.

Exempting new police and fire recruits, the proposed budget assumes a 3 percent reduction in city employees, as measured by full-time equivalent positions. Providence now employs 1,932 people, according to the administration, and the new budget proposes a total of 1,872.

The budget does include funding for new fire and police academies, which are expected to produce 80 new firefighters and 60 police officers in early to mid 2017.

The budget for the Fire Department, whose firefighter union has challenged Elorza on a restructuring that resulted in longer work hours, includes $2 million for overtime, as well as a $5 million contingency, should the city lose an ongoing court challenge that argues the firefighter were not adequately compensated for the change in hours.

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