City Council E-newsletter

Taxes Will Decrease for Most Homeowners
Tax Levy Will Mean Lower Tax Bills for Nearly 70% of Residential Properties

Most owner-occupied residential properties in Providence will owe less in taxes this year.

That is the message City Council leaders are sending to Providence homeowners, after the Council voted this week to pass a new tax levy.

"Seventy percent of owner-occupied residential properties will pay less in taxes this year," Council Majority Leader Terrence M. Hassett stated. "It is completely erroneous for anyone to imply that the majority of 'hard-working families' in Providence is going to see their taxes go up," Hassett stated emphatically.

Weeks ago, the Office of the Internal Auditor completed an analysis which shows that:

1) On average, citywide, owner-occupants of single family homes will pay about $400 less in taxes for 2010-2011; and
2) On average, citywide, owners of multi-family homes will pay about $300 less in taxes, for 2010-2011. In addition, if the owner lives in the multi-family home, the average savings will be more.

Finance Chairman John J. Igliozzi (Ward 7) explained the reduction: "Because residential property values citywide on average have decreased by approximately 30 percent, most homeowners will see a decrease in their tax bills, despite the fact that the overall levy is increasing slightly by 3 percent, and despite the fact that the tax rates are increasing."

Igliozzi emphasized the distinction between property tax rates and actual property taxes, stating, "Although there is an increase in the tax rate, it will not translate into a tax increase for the overwhelming majority of residential property owners in Providence."

Many news reports have incorrectly stated that the Council voted to raise residential property taxes by 25%. Hassett clarified, "In fact, it is the tax rate that will increase, not actual taxes. The one exception to this is that tax bills on some non-owner-occupied properties will be higher." The increase is a result of the elimination of a 33% exemption for non-owner-occupied residential property, as proposed by the current administration, and incorporated in the Council's levy.

While the Mayor's initial proposed budget did not include elimination of the non-owner-occupied exemption, administration officials subsequently recommended it be removed, based on what they said was an opinion from the City Solicitor's office that the exemption was illegal. "The vehement opposition by the administration to the proposal comes as a complete surprise," Igliozzi said, "given the fact that it was the administration that recommended the removal of the 33% exemption, and prepared the revised ordinance which eliminated the exemption."

Below is a table comparing the tax rate for residential property approved by the Council, the rates proposed by the Mayor, and last year's tax rates. No changes have been made to the owner-occupied homestead exemption of 50 percent.

Applying those rates to a typical owner-occupied residential property, whose value decreased by approximately 30%, the annual tax bill would be as follows:

The above table clearly depicts the median decrease in property taxes for owner-occupied property, as projected in the Internal Auditor's analysis. The residential property in this example will receive an annual tax bill of $343 less than last year's tax bill. Additionally, the tax bill will be only $80 higher than it would be under the Mayor's proposed rate.

"Due to deflated property values citywide, the average, working class family in Providence, who owns and lives in their own home, will see a decrease in their tax bill. It's that plain and simple," said Hassett. "The only exception to this is properties whose values remained steady or were only slightly devalued, and those properties that are not owner-occupied."

Igliozzi added, "It's not about pitting neighborhoods against one another. However, due to the reality of revaluation, some neighborhoods will be paying more in taxes than others. There's no way around it. Three years ago, neighborhoods like Olneyville, Federal Hill, Silver Lake, South Providence, Elmwood, Smith Hill, and others, saw their property values and their tax bills increase significantly, based on the revaluation. Those same neighborhoods now are seeing their property values go down, along with their taxes, based on this year's revaluation."

Both councilmen agreed that the long-term solution to the see-saw effect of property tax burdens from neighborhood-to-neighborhood is reducing the reliance on property taxes, and reigning in budget expenditures. "Stay-tuned for action from the Finance Committee and Council as we examine opportunities for enabling legislation from the General Assembly that will provide revenue streams for Providence, other than property taxes," Hassett said.