Community Concerns

Posted Thursday, July 18, 2013 2:24 pm

Editor’s note: In response to several calls to our office, we asked Councilman Sam Zurier to help explain the rationale for the current tax bills, which have hit the East Side particularly hard. Sam’s most recent letter to his ward constituents does just that. The Councilman also points out perhaps the most important part of it is the last sentences which indicated that the City Council has already met and is considering restoring some or all of the 2012 dollar value of the exemptions affected by this year’s change in tax classification. Sam adds that “there is interest in moving quickly, so conditions may change even before people receive this issue of the magazine.”



In recent decades, the City has charged a lower tax rate for those who occupy their property and a higher rate for those who do not. Instead of having separate rates, however, the City established a “list price” top rate and then allowed exemptions of 50% of the property’s value for homeowners and a lower percentage exemption for non-occupant property owners. In 2012, the “list price” tax rate was $31.89. Homeowners received a 50% exemption for an effective rate of $15.95, while non-occupant owners received a 15% exemption, for an effective rate of $27.11. This system (which we are used to) is confusing for outsiders.

When the State prints a table of each city’s tax rate, it lists Providence at $31.89, the highest rate in the State, with an asterisk noting that there are exemptions. This high rate (which nobody actually paid) discouraged people from learning about the asterisk and moving to Providence. Also, some banks set financing limits based on the $31.89 rate without accounting for the 50% exemption, thereby reducing access to mortgages.

For these reasons, it made more sense for Providence to publish the actual rates the two classes of property paid in tax, rather than a “list price” rate that nobody paid, with exemptions that reduced that rate for the two classes of property. Providence submitted legislation to the General Assembly this year to gain permission for this change.

As a result, the homeowner’s rate in Providence this year is $19.25. This is lower than the $31.89 charged last year, but there no longer is a 50% exemption. Instead, the $19.25 is the effective rate for homeowners, which is slightly more than 20% above the 2012 effective rate of $15.95. As I explained in previous letters, the average residential property in Providence declined in value by 13.2%, so the new tax rate of $19.25 gener- ated a tax increase of around 6% for the average home city-wide. Because property values were more stable on the East Side, taxes increased by a higher amount due to the revaluation, which was the reason I voted against the budget. As mentioned before, I will be working with a committee to study the revaluation process with the goal of recommending changes to prevent the next revaluation from being as disrup- tive as the last three have been.

The new tax rate also had an impact on other miscellaneous exemptions, such as the elderly exemption. Last year, the exemption covered $20,000 at the “list price” rate of $31.89, providing a reduction of $638 from a tax bill. This year, the exemption covers $20,000 at the homeowner’s tax rate of $19.25, providing a $385 reduction. The City Council is considering legislation to increase the size of the elderly exemption and other exemptions to restore the monetary value to property owners that was available in 2012.