Elorza’s Budget Hits Providence Homeowners, Gives Relief to Car Owners
GoLocalProv News Team and Kate Nagle
Elorza’s Budget Hits Providence Homeowners, Gives Relief to Car Owners
Despite a near consensus that Providence’s financial situation is dire and that rating agencies have downgraded the city’s bonds, Elorza has proposed budget includes no major financial reforms.
It does call for more studies. The budget also calls for $13 million in new taxes from property owners.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“I do know that over the last two years we haven’t raised taxes, we froze the commercial tax rate for three years while a lot of other expenses have gone up during the same time,” said City Council President Luis Aponte, following Elorza's budget address at City Hall on Wednesday evening. “We’ll take full advantage of the new [revaluation] numbers and really look hard at any increases in this proposal and look deeply at what that signifies, and balance that against reports that we have seen in the past few years so that we’re making investments that make sense.”
See the City's Open Budget Tool HERE
Following the city’s recent revaluation in which property values went up roughly ten percent on average, Elorza’s Fiscal Year 2017 budget proposal calls for a two percent residential tax rate reduction of 34 cents and a lowering of the commercial rate by twenty-five cents, which equates to $18.91 per thousand on the residential side (down from $19.25) and $36.50 per thousand on the commercial (down from $36.75).
But not everyone is happy.
“I like the lowering of the rates, except for the commercial rate. They got their cookie three years ago when we said we would freeze the rate for 7 years,” said City Councilman Kevin Jackson. “You can’t have it both ways. We had originally proposed freezing the amount, not the levy, and now that their property taxes have gone up, they want another cookie. I know we’re high nationally but our homeowners and our renters don’t get to have that advantage of getting two shots at it.”
To put in context, a homeowner last year with at $200,000 home paid $3,850 in taxes at the $19.25 per thousand tax rate. If the recent valuation went up 10% to $220,000, at the new $18.91 tax rate, would be a tax bill of $4,160.
And landlords are not pleased about how the budget impacts owner versus non-owner occupied rates -- and specifically the difference between each.
“Providence has one of the highest tax rate differentials in the nation between owner occupied and non-owner occupied homes. This current budget actually increases that differential. Study after study shows Providence as one of the most cost burdened cities for renters,” said Keith Fernandes with the Providence Apartment Association.
“Wages have not kept up with the dramatic increase in rents, which are a direct result of the draconian tax increases on the most vulnerable members of our city. In 2014 the city council overwhelmingly supported lowering the difference of the two rates to no more than 60%. The time for talk is over and the hour of fixing this issue is upon us," said Fernandes.
Homeowners, Car Owners, Tax-Exempts in Focus
Car owners on the lowest end of the spectrum will see relief, however.
Elorza proposes in his budget increasing the car tax exemption from 1,000 to $2,000 at a cost of an estimated $4 million annually, as approximately 6,500 low-value cars would no longer be taxed in Providence, the next 12,5000 with the lowest value would see their bill cut in half, and another 22,500 would see a reduction of 33% or more.
Addressing the car tax issues was a major campaign platform for Elorza when he ran in 2014. Council President Aponte spoke to the $4 million price tag for increasing the exemption.
“I think we’re left to respond to what the state has given us, when the state did away with the car tax,” said Aponte. “They put the burden back on the people least able to pay out.:
Aponte pointed to an issue that Elorza addressed — but has yet to find a resolution — in addressing renegotiation of agreements with tax-exempts in the city.
“It is high time that our partners at the large tax-exempts understand that our futures are linked. There cannot be a successful Brown if there is not a successful Providence, as there can’t be a successful Rhode Island if there isn’t a successful Providence,” said Aponte.
Elorza mentioned working on a uniform PILOT stucture on just one of the areas he intends to tackle -- but has no plan as of now, after recent reports show that the city is poised to spend $176 million more than it can afford in the next ten years if nothing is done.
“We will be working with our non-profit anchor institutions to come up with a fair framework for PILOT payments,” said Elorza. “A framework that is stable, predictable, and has party among similar institutions. “
Elorza also said on Wednesday in an effort to address the city’s “long-term alliance on property and car taxes,” that he would form a “revenue working group to find alternative sources of revenue.”
And acknowledging the city’s pension system being currently 27% funded, Elorza said he would be “reaching out and engaging the city’s labor unions, retirees, and stakeholders to put the city’s finances on a sustainable path.”
Schools and Public Safety
Elorza’s $717 million budget proposal calls for a $500,000 investment in technology to provide 1200 new computers in classrooms across the city in the coming fiscal year.
The budget calls for an expanded police academy class from 32 to 60 cadets, and opens the application process “to conduct the city’s 51st Fire Academy which will replenish a number of recent and anticipated retirements,” said Elorza.
The city is currently awaiting the outcome of pending litigation regarding Elorza's platoon shift changes made last year, the implications of which will likely be in the millions.
Editor's Note: The story has been updated to reflect that the tax on a $200,000 home under last year's budget would have been $3,850.
10 Biggest Issues Facing Providence in 2016
#10
Firefighters, Con't
The battle that started last year spills over into 2016. After Mayor Elorza announced he was going to reorganize the Fire Department from four platoons to three with a condensed shift schedule, the firefighters took the battle to court — and callback costs soared with injured firefighters out on leave. Elorza said the change could save the city “as much sat $5 million” in the next fiscal year (FY17) -- but the city is currently seeing red. "Through the middle of December, fire fighter "call back" expense has been $4.7 million, which represents almost all of the $5.05 million budgeted for the entire fiscal year," reported Councilman Sam Zurier on Sunday. "Should this trend continue, the cost of this line item could exceed the budget by $5 million by the end of the year."
Now it all rides on the outcome in the courts. If it ends in a negotiated settlement, the crisis could be averted. If not, firefighter union head Paul Doughty has said that Elorza can “hand over the keys to the city" for bankruptcy.
#9
Crime
From the West Side to the East Side, residents across the city in 2015 were organized and mobilized to demand action from the Elorza Administration on crime in the city. GoLocal reported at the end of 2015 that over half of the police department is eligible to retire — and the city still needs to get a new class of officers underway as budgeted. Tensions were high following a Dunkin’ Donuts worker writing #blacklivesmatter on a police officer’s cup (and the Black Major Movement continuing to call for a black major in the department).
Councilman Seth Yurdin announced this week that he is introducing a resolution to establish a special commission to review relations between the Providence Police Department and the community it serves. The Special Commission on Community-Police Relations will review current public safety practices and create opportunity for public input.
#8
Grafitti and Potholes
It’s been a mild winter so far, so perhaps at least one of the two scourges of the city will be mitigated this coming year. But addressing the conditions of the roads continues to be an issue for Providence. Last year, Mayor Elorza made a public display of commitment to addressing problematic potholes, and also pledged to respond to the rampant graffiti issue in the city that has seen the property destruction spread to private houses.
City Councilman Michael Correia recently put up a $1000 reward to find who was tagging properties in his district. Residents of the city want to feel safe, and that includes driving on roads that won’t inflict damage on their cars (or take out runners and bikers) and that their personal property won’t be destroyed. Graffiti continues to crop up, and it needs to be addressed quickly when it does.
#7
Taxes - Commercial
The city’s commercial tax rate might be frozen — for now — but there are a lot of moving pieces. The $36.75 per $1000 rate on commercial properties is among the highest in the country -- a point well-known in RI circles.
“Providence has a problem with the commercial tax rate,” said developer Colin Kane. “With new construction or significant rehab -- the costs aren't supported by current rent.” The property revaluations expected shortly will shed some light how the city will move forward addressing tax rates, but in the meantime, the TSA extensions before the Council are the 600 pound elephant in the room. “The City Council is looking for nickels in the couch cushions because of the fiscal challenges facing the city,” said Kane. “And they weren't caused by this council or mayor, but by the fact that they were kicked down the road. And now we want to malign people like Buff Chace who made the city what it is?”
#6
Taxes - Residential
The owner occupied residential tax rate could be in the crosshairs as the city looks to address revenue issues in the coming year. “Everything’s on the table,” Aponte told GoLocal. And with the revaluation, things could be in flux for the current owner-occupied rate of $19.25 per $1000 .
“Suppose you had a city where there was a wild appreciation of real estate values — that used to happen here, Providence has seen 10% before. State law says you can only increase the levy unilaterally by 4 and a quarter,” said City Counciman Sam Zurier. “So supposed you have a situation where your values go up 10% and you want to collect 4 — you have to reduce the rate by 6%. "
"If values go up enough — even 5% - then the city will get additional money without raising the rate. During a [revaluation] year - you have to get into tax bills versus rates. And when you factor in commercial and non-owner occupied values and rates, it’s tricky.
#5
Schools
Providence Schools face a tall order ahead of them. The search is on for a new superintendent following the departure of Dr. Susan Lusi. The current School Board President is stepping down at the end of the month. Providence High Schools scored among the worst in the state following the release of the first year of PARCC test scores. Current School Board member Nick Hemond is slated replace outgoing President Keith Oliveira, but question remains for the choice of the new super. Council President Aponte told GoLocal this week that stability in leadership in the school department is one of the greatest challenges facing the city moving forward. Can that be achieved in 2016?
#4
Superman
Lights have been spotted on recently in the Superman Building - i.e. Industrial National Bank Builcing — but the fact remains that the city’s iconic skyscraper remains vacant, which former Mayor Joseph Paolino called one of the biggest issues facing the city (stating that the fact that it remains empty cost him a mortgage from a top bank for an adjacent property).
Citizens Bank is eyeing a new corporate campus somewhere in Rhode Island, and while indications point to one most likely going in the suburbs, a number of business and community leaders are hoping Superman isn’t ruled out completely. Previous efforts to get state support to turn the building into apartments fell flat, and Providence residents are gun-shy about any project looking for public support. But the fact remains that the empty anchor is an eyesore for the city, and getting a tenant — or tenants — in should be a top priority in 2016.
#3
Lack of Development
Providence needs more cranes. The city has seen its first one in a while by the Jewelry District with developments at Johnson and Wales, which is a good sign — but the city needs more.
“Owners and property developers want to be treated fairly and play on a level field. Providence does not have a business friendly reputation. This is why there are few cranes in the sky in Providence and very few new businesses coming to the city or planning to expand in the city,” URI Distinguished Professor of Business Edward Mazze told GoLocal earlier. So in order to get the construction equipment in — Providence has to figure out how best to lure businesses here in the first place.
#2
Leadership
Providence needs a win — or a least a path to victory. Whether that be getting a tenant in Superman, bringing in a notable business, or articulating a concrete plan to move Providence forward, residents want to feel that the city is on the right track.
The City Council recently announced that it received the results of its cluster analysis study to identify where opportunities lie — and now we need to see results. The Mayor made multiple trips abroad in 2015. He campaigned on a promise of doubling exports from Providence in five years. What results will we see from those overseas meetings? Providence wants a concrete vision moving forward.
#1
Bankruptcy
“Absolutely not,” said City Council President Luis Aponte, as to whether the city could go into receivership in light of its current precarious financial condition.
“If the city loses, Elorza can hand over the keys, because the city will go bankrupt,” has said firefighter union head Paul Doughty regarding the firefighters legal battle over the Mayor’s platoon reduction.
Financial advisor and GoLocal MINDSETTER Michael Riley said receivership is almost a certainty.
“Essentially Providence is bankrupt and insolvent. It is only by illegally borrowing from the pension fund the last 10 to 15 years that have saved them from being sued by creditors, and the lies continue,” said Riley. “Until Providence goes into receivership nothing else can happen — no railroads, no Superman, they are sunk. I consider everything else irrelevant.”
