Property taxes in Rhode Island are among the highest in the nation, but strides are being made to change that distinction, according to a recent study.
From 1990 to 1995, the state’s reliance on property taxes jumped from being the 12th highest to the fifth highest in the United States, the Rhode Island Public Expenditure Council (RIPEC) found. The study found that for every $1,000 earned by a Rhode Islander, an average of $52 was paid in municipal property taxes. However, measures are being taken to lower the burden on the state’s taxpayers.
“The rates continue to go up, but a number of initiatives by legislators have been taken in the last couple of years to improve the system,” said Peter Marino, a spokesman for RIPEC, an independent non-profit group.
Marino said the reforms include changing the property revaluation cycle and phasing out the motor vehicle excise tax and inventory tax.
RIPEC’s report, “Property Taxes 1998 — Staying the Course,” didn’t surprise many taxpayers in Rhode Island, where the reliance on property taxes to support schools and public services has historically been high. States throughout New England also dominate the top of the list. New England’s average was $46.61 per $1,000 compared to the national average of $36.02.
Within Rhode Island the 39 cities and towns have a wide range of rates, with communities offering the greater services having the highest property taxes. Providence’s tax rate was the highest at $42.93 per $1,000 property’s assessed value while the town of New Shoreham’s rate of $7.76 was the lowest.
The larger cities have more municipal services to support and often spend more on those services than on education in comparison to other towns. Marino said those communities, including Providence and Pawtucket, which have the hardest time being able to afford further property tax increases, will get help from the state. He said the state’s 1999 budget calls for 83 percent of the $42 million in additional education aid be earmarked for the urban communities.
Marino said further steps in the state budget will look to broad-based taxes to support changes in property taxes. The first is to eliminate the excise tax on vehicles over the next seven years. That tax accounts for 7.4 percent of local property taxes. Local communities will not lose that revenue, because the state will reimburse them the amount they usually receive from taxpayers.
Also, during the next 10 years the retail, wholesale and auto dealer inventory tax will be eliminated. Again the state will reimburse the communities.
The third improvement will be to the revaluation cycle of property. For years Rhode Island had a 10-year cycle, the longest in the country. But in 1997 the cycle was changed to nine years and valuation adjustment periods were added during the first two, three-year periods. The adjustments will not be reevaluations of each property, but will be made using sales and assessment ratios and data quality studies.
Reevaluations will be made only in the ninth year.
“By making adjustments frequently it keeps the values much more accurate,” said James S. Savage of municipal affairs for the state’s Department of Administration. “In the past you could be faced with a 300 percent increase since the last evaluation. It can be a great shock.”
Communities will receive funding from the state to do the adjustments. Savage and his department are responsible for working with tax officials within the cities and towns.
“These improvements will require a lot of education to the public to make sure that everyone understands the process,” he said.
Part of RIPEC’s report is a recommendation that Savage’s department receive additional funds to provide expertise to the towns and to buy the proper equipment to keep tax data current.
“The key to these reforms is that the public and policymakers make sure they stay the course,” Marino explained. “It will take patience and time during the seven and ten year phase-out periods. We have to make sure it is followed through.”
Some people hope the state’s steps toward lowering property taxes become bigger and move quicker in the future.
“We are very disappointed to see the tax rate ranked so high,” said Dana Phillips, president of the Rhode Island Association of Realtors.
“Property tax is part of a buyer’s mortgage payment, which just increases the cost of a home.”
He said his membership will continue to push local and state officials on the tax issue. Phillips said the recent reforms have been encouraging.
“We support the reduction in the inventory tax, for example, because in our opinion it is good for business in the state,” he said. “When the economy is doing well it creates consumer confidence, which helps us all.”
