The 2019 real estate revaluation came as a surprise to the Providence residents whose ZIP codes faced unusual tax increases.
That triggered a legislative tangle. According to news reports in June 2019, Providence City Council President Sabina Matos attempted to modify the way we tax property in back-room discussions that excluded some finance committee members. Matos targeted one ZIP code with a two-tiered structure that flew in the face of state law.
Matos’ efforts failed at the state level last June. However, another news report in August indicated that Matos continues to pursue the change.
She doesn’t seem to understand the problems lurking beneath the tax system’s underbelly. Her reaction thinly sliced the revaluation analysis by considering ZIP code averages in 2019, rather than looking at an entire decade to see how changes ebb and flow.
After reviewing records from 2010 to 2019, and comparing 14,195 single-family homes, I arrived at three conclusions:
• A decade exposes a complete story: In 2013, properties in the 02906 ZIP code, most of the East Side, suffered an outsized tax hike, including an 18% increase for one neighborhood. As a result, taxpayers in 02906 carried a greater relative tax load from 2013 to 2019. This pendulum swings back in 2020.
In 2013, City Councilman Sam Zurier proposed a three-year phase-in to blunt tax shock hitting 02906, and any other ZIP code in the future. It was blocked. The Council didn’t care about the taxpayers in 02906.
• Averages obscure per-house data. Reviewing data per house rather than averaging across a ZIP code builds out the story. In 2019, over 25% of homes saw tax increases of 11% or higher, mostly outside of 02906. That’s too much to tolerate. That change was small, however, compared with 25% of homes with greater than 31% increases in 2013. In 2013, the burden fell mostly on 02906.
Looking at longitudinal data tells a more balanced story.
Looking at longitudinal data tells a more balanced story than focusing on one change, in one year, and using that narrow data set to shove a big change down the throat of one ZIP code.
• A progressive solution? Matos’ two-tiered structure sought a solution generally targeting 02906 homeowners. However, 02906 has just 25% of the single-family homes in Providence while already paying 50% of the taxes. Furthermore, homeowners in 02906 pay twice the tax per foot of living area as compared with other ZIP codes. Paying twice as much for the same product [per foot] is amply progressive. There’s also data suggesting most 02906ers already spend a greater share of income on real estate tax.
The City Council needs to consider the blunt consequences of tax increases, and a host of other issues that complicate revaluation and unfairly stifle the appeal process.
Here are problems and solutions to jump-start the process:
Problem: Property assessment swings affecting particular neighborhoods cause wallet shock at scale. When residents have loans, small tax shifts create substantial financial challenges. Our city suffers when residents face impossible choices.
Solution: Zurier’s three-year phase-in idea was a great way to smooth tax-increase impact.
Problem: Using averages when examining changes obscures the real pain that hits homeowners on the wrong end of the average, where impact is greatest. In 2013 and 2019, 15.5% and 5.5% of homes, respectively, saw tax increases greater than 50%. That’s a punch in the gut.
Solution: Match the spirit of 4% maximum citywide tax-increase limits by capping increases at 12.5% per property over a three-year cycle. Outliers could also be kicked out for review without appeal.
Problem: Following the 2013 revaluation, I reviewed 180 homes sold within months of the revaluation. The analysis was surprising:
• 15% were assessed at 10% higher than their own sale price. Extrapolation implies more than 2,000 homes were significantly over-assessed.
• To balance, 13% were under-assessed by more than 10%.
Solution: Given the revaluation process is not accurate and produces punitive, inaccurate results to significant numbers of homeowners, the City Council should consider abandoning or overhauling the current method.
Problem: Residents, the City Council and other stakeholders lack visibility into data driving the revaluation process.
Solution: Better visibility provides knowledge of whether an assessment is worth appealing. This requires visibility into the model generating the assessments, relevant data per house and explanation of property card values.
Problem: Finding comparable sales is time consuming, as is appearing at appeal hearings. A successful appeal can require a lawyer and appraiser, often costing more than the savings.
Solution: Provide residents online data to identify comparable sales and provide means to compare across key variables. Quality of appeals will increase.
Problem: The revaluation method is confusing and inaccurate on a per-home basis.
Solution: Assess acreage by location. This takes guesswork out of the process, while encouraging home improvements on homes without tax “penalty.” Alternately, we could look to older tax models such as road frontage or count of windows.
Residents should be dancing in the streets when home values rise, with one hand on their wallet.
The stark reality is that residents aren’t selling tomorrow, while tax bills are due today.
As the City Council moves forward in 2020, let’s hope it understands the real problems are tax shock, an opaque assessment process and a complex appeal process – not the tax structure itself.
Jordan Frank is a Providence resident.
Jordan, thank you very much for weighing in on property tax reform. I am glad to see you talking about longitudinal studies. I agree, the history of the issue is much older than last year’s revaluation and 11th hour attempted, opaque change. After the financial crisis, the East Side shouldered a major shift in the tax burden, and it is seems like that is absent from the memory and missing from the conversation.