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Friday, August 26, 2011

Property Tax Working Group Overview

Structural Problems with property tax in Providence

  • The City of Providence has an extremely high owner-occupied Homestead Exemption (50%) in comparison to other towns/municipalities in Rhode Island
  • As a result of this high Homestead Exemption, it is extremely difficult for the property tax working group to identify ways to restructure that will improve the City's competitiveness, balance, and equity
  • A sharp reduction in the Homestead Exemption from the existing, while maintaining the same levy, would result in a dramatic shift from non-owner occupied property tax rates to owner occupied property tax rates

Typical Property Tax Structure For Providence

  • The typical property tax structure would have features as follows:
    • 10% Homestead Exemption
    • Residential Rate $17.72 ($15.95 effective)
    • Commercial Rate $31.90 (2x effective residential rate
    • Tangible Rate $47.85 (3x effective residential rate)
    • Motor Vehicle Rate $50 (1st $1,000 exempt)
  • Make's Providence much more business competitive, reducing both the commercial tax rate and the tangible tax rate by 13.2% and 14.2% respectively
  • Keeps the owner occupied residential tax rate at $15.95, which is competitive with the other towns and municipalities across Rhode Island
  • Reduces non-owner occupied tax rate by 34.6%, making rates more competitive with other towns and municipalities across Rhode Island, while also encouraging investment
  • Reduces the motor vehicle rate by 16.7%, making it more competitive with other towns and municipalities across Rhode Island
  • Establishes a classification system which increases predictability
  • Improves upon overall competitiveness, balance, and equity of property tax structure
  • Problem: Yield is well below (approximately $43.5 million) the necessary levy

Pragmatic Approach to Restructuring Property Taxes in Providence

  • A more pragmatic approach for a property tax structure would have the following features:
    • 35% Homestead Exemption
    • Residential Rate $25.39 ($16.50 effective)
    • Commercial Rate $33 (2x effective)
    • Tangible Rate $52.80 (3.2x effective)
    • Motor Vehicle $60 (1st $1,000 exempt)
  • Make's Providence much more business competitive, reducing both the commercial tax rate and the tangible tax rate by 10.2% and 5.4% respectively
  • With a 3.45% increase in the owner occupied residential tax rate, Providence would still be competitive with other municipalities and towns in Rhode Island
  • Reduces non-owner occupied tax rate by 6.3%, making rates more competitive with other towns and municipalities across Rhode Island, while also encouraging investment
  • Establishes a classification system which increases predictability
  • Improves upon overall competitiveness, balance, and equity of property tax structure
  • Option requires other working groups to identify additional revenue of approximately $13-$14 million




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