Rhode Island news
New property tax cap raising concerns over budgets across R.I.
01:00 AM EST on Tuesday, March 6, 2007
WARWICK — Questions far outnumbered answers yesterday as more than 200 municipal officials from across the state crowded a meeting room at the Community College of Rhode Island to learn how their communities can live with a new tax cap imposed by the General Assembly.
After more than three hours of comments and answers from state financial leaders — including Auditor General Ernest A. Almonte; Peder Schaefer, chief budget analyst for the state Budget Office; and Garry Sasse, executive director of the Rhode Island Public Expenditures Council — a few points were clear.
The state is firmly committed to enforcing the new 5.25-percent tax levy cap, but also acknowledges that some details have not been worked out. Senate Majority Leader M. Teresa Paiva Weed, one of the key sponsors of the tax cap, which passed last summer, called the tax relief act a work in progress and stressed that the state is committed to helping municipalities work through all their questions.
Despite that assurance, many local officials were left shaking their heads yesterday. They cited the burden of the new levy cap and said they think it was implemented too quickly and without addressing state aid to education and other key factors that affect municipal spending.
“Were my questions answered? No,” said Suzanne McGee-Cienki, chairwoman of the East Greenwich School Committee. “I applaud the state effort to try to control property taxes, which have increased so significantly, but I question as to whether they’ve really gotten to the root of why taxes have continued to go up, and I also don’t think that they studied all the implications the cap will have on school departments and communities.”
Yesterday’s session was organized by the state Senate in an attempt to assist cities and towns, which are struggling with the full implications of the tax cap now that they are starting to assemble their budgets for the coming fiscal year, which begins July 1.
There is also the matter of explaining the cap to residents as they hear talk — particularly at recent school committee meetings in several communities — of looming cuts in staff and services.
The new cap replaces a long-standing limit that only allows a municipality to increase its tax rate by no more than 5.5 percent per year.
The new cap is on the tax levy rather than the tax rate, and it will decline in quarter-point increments until it falls to a 4-percent cap in fiscal 2013.
The tax levy is the total amount a municipality needs to raise in taxes in any given year, and it is part of the equation used to determine a tax rate.
A municipality’s tax rate is calculated by taking its levy and dividing that amount by the total assessed value of all property in a community. In the past, that meant that cities and towns with broader tax bases, such as thriving commercial areas, could raise more money without necessarily raising their tax rates.
Now that the cap is on the levy, the amount a municipality can increase its spending by is forever linked to how much was raised in the previous year. An increase in local property value will not allow a community to spend more as it did under the old tax-rate cap. Only property growth will help reduce taxes, and Sasse and Paiva Weed yesterday said that is exactly what they intended.
Rhode Island’s property taxes are among the highest in the country, they said, and tax relief is desperately needed here. They both said that the new tax cap is long overdue.
They rebutted criticisms that the law was enacted too quickly and was done without other essential measures in place — such as a state aid formula for education.
Sasse and Paiva Weed said that they think the new cap will encourage a formula for state education aid — something the state hasn’t had for about a decade. A special commission is expected to report to the legislature this week on that topic, and Paiva Weed said she is hopeful that a formula will be drafted before lawmakers adjourn at the end of the summer.
Coventry School Supt. Kenneth R. DiPietro, who is also vice chairman of the Rhode Island Association of School Superintendents, said that tax relief, while admirable and desirable, cannot be achieved in a vacuum, and the state definitely should have figured out education aid before imposing the levy cap.
Leaving state aid unresolved only leaves huge inequities in the state, he said, noting that the cost to educate a student varies greatly from town to town, and also there is a huge discrepancy in the aid municipalities get from the state. Some are almost fully funded by state dollars, he said, while others get almost nothing.
“I think there is great merit to property tax levy caps and setting limitations,” DiPietro said. “But this one came about without the necessary planning and became a sledgehammer.”
He said that one of his main concerns is that children will suffer as school departments work to live with the tax cap plus meet increasing unfunded state and federal mandates and, at the same time, try to get students to achieve state testing standards.
Some officials yesterday said the new tax-levy cap discourages development because there won’t be enough money to provide fire protection and other support services. Others, such as Thomas P. Mainville, finance director for Glocester, questioned how the town will be able to pay for the operation of a new senior center since the facility was not included in this year’s budget or tax levy.
State officials said that, to help communities, the number of factors that can be cited in seeking emergency relief have been expanded, but all the details have not been worked out and it will be at the discretion of the auditor general — as it was under the old tax rate cap.
East Greenwich Town Manager William Sequino Jr. said that a lesson can be learned from neighboring Massachusetts, which implemented the tax relief act known as Proposition 2½ in the 1980s. “When that took effect, there was a massive infusion of state aid to the cities and towns so they could implement it,” he said, “but in Rhode Island’s case there is no such opportunity because of state budget deficits. I think a better course of action would have been to fix the state-aid formula to education before implementing a tax cap. Also, the state needs to find a way to allow municipalities to take advantage of growth in the property tax base to pay for new programs or services.”
Sasse said that despite all the concerns raised yesterday, he thinks the tax cap will work fine in Rhode Island, and the end result will be better-managed government.
“We need to provide property tax relief,” he said, “and I think that there was plenty of lead time.
“I am confident that the sun will still rise on July 1, and schools will open in September. Communities will find a way to operate within the cap.”
“I think there is great merit to property tax levy caps and setting limitations. But this one came about without the necessary planning and became a sledgehammer.”
Coventry school superintendent
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