Yes, Providence residents for too long have borne a heavy property tax burden. And, yes, something needs to be done about that. Because as much as anything else it needs, the capital city needs young people to buy houses and build neighborhoods. It needs them to become truly invested in the public school system.
But in finding a way to achieve this goal of lessening its property tax burden, city officials must be careful not to lean too heavily on business owners.
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It is true that the vast majority of business leaders in Providence do not vote on issues that directly impact how and at what cost they do business. That is left solely in the hands of residents. Providence business owners, in fact, live all over Rhode Island. They live in communities like Barrington, East Greenwich, Lincoln or – with increasing frequency – in South County. Some live in Massachusetts.
But while they may not vote, they do make the decisions as to whether it makes sense to operate in Providence, or whether it might be more cost-effective to be somewhere else.
On more than one occasion in recent weeks, I have attended functions in the city and the topic of conversation has turned to the so-called “split tax” proposal. It is Mayor David N. Cicilline’s plan to “decouple” residential and commercial property tax rates, thus giving the city more flexibility in raising revenues.
The mayor, on the city’s official Web site, describes the tax proposal, suggesting the new approach should not result in higher taxes for commercial/industrial property owners: “Owners of commercial property can rest assured that the overall commercial tax burden will not go up as a result of this measure. In fact, the commercial tax rate will go down. The intent of this legislation is to maintain the current tax burden relationship that has existed for years between commercial and residential property – not change it. …
“Since the commercial and residential property markets are fundamentally different, common sense dictates that their tax rates should not be bound together. But what makes this issue especially pressing is the citywide boom in property values. The recent revaluation proved that the market embraced all Providence property, but residential values went up at a significantly higher proportion. By decoupling the rates and lowering each in proportion to their bump in value, we can retain the balance and stabilize the tax burden of all property owners.”
But lots of businesspeople aren’t buying it. They are expecting to pay more in taxes – much more.
Jim Hagan, president of the Greater Providence Chamber of Commerce, sounds worried. He’s heard from Chamber members who are worried.
“They claim that the commercial/industrial side won’t see an increase in the tax rate … but potentially you are giving the city the right to double – to more than double,” he said. “In the end, people are going to look at the bottom line. And when they compare a North Kingstown to Providence, they are going to ask, ‘What is it going to cost us?’”
Hagan points out that the capital city has seen just a 1 percent growth in employment over the past decade.
“By creating this new tax classification, it will continue to make it hard to attract new business to the city,” he said.
And that’s just the point. There is perception out there among business and property owners that they are about to get whacked. And so they will once again scrutinize the bottom line.
And you can bet that if it makes more sense to be in an office park in Lincoln or East Providence or anywhere else, that is where they will be. And that will not do Providence taxpayers any good at all.
The city has already secured enabling legislation from the General Assembly. It appears now that the thing left to do is work out the details.
Gary Sasse, executive director of the Rhode Island Public Expenditure Council, said he needs to see those details before opining on the subject.
The issue at hand, he said, is striking a balance. Tax policy for any city must be balanced, he said, so that people can afford to live there.
But, adds Sasse, create an imbalance in which businesses are asked to pay more than what they consider to be their fair share – and their businesses and the jobs they provide, go elsewhere.
“It could be a problem for business, we’ll have to see,” said Sasse.
Maybe, somehow, this split tax proposal will work, but not if all it does is cause businesses to split.
