Shell game Critics charge that Providence avoided bigger tax hikes by shifting the burden to business BY BRIAN C. JONES
	Taxing times The capital city ranks in the middle in a survey of local property taxes PROVIDENCE MAY NOT have the state’s highest taxes, at least measured by some comparisons. The Phoenix estimated hypothetical tax bills for seven communities, for a house assessed at $250,000 — the median selling price in the state for first half of the year. The results: 1) Cranston: $5808 2) East Greenwich: $4898 3) Cumberland: $4183 4) Providence: $3706 5) Newport: $3430 6) South Kingstown: $3145 7) Jamestown: $2173 (Comparisons are difficult because current tax rates are based on assessments that don’t reflect current sale prices.) — B.C.J. Are property taxes killing providence? An over-reliance on such fees exacts a heavy toll, and reform remains a distant prospect. BY BRIAN C. JONES. Shell game: Critics charge that Providence avoided bigger tax hikes by shifting the burden to business. BY BRIAN C. JONES.

PROVIDENCE AVOIDED a potentially massive tax hike for homeowners this year, in part by recalculating the way that homes and businesses are taxed. But this has also sparked charges that commercial firms got an unfair share of the tax bill.

"What they did," says Joseph R. Paolino Jr., "was shift the property tax from the homeowner to the commercial property owner, the people who own stores and office buildings. What they did was shift the problem — they didn’t fix it." Paolino who speaks as a former mayor and a major commercial property owner, is not alone in his worry about the impact of this year’s round of city tax bills.

Jerry Ryan, owner of the AlphaGraphics printing business, says that homeowners on average saw steady taxes, but that business taxes like his went up 10 percent, an unfair result. "I’m not looking for any special favors — just an even playing field," says Ryan, who says he can’t automatically raise his prices every time there’s a tax hike. Further, he fears if taxes drive out other businesses, he’ll lose them as customers.

But Mayor David N. Cicilline, and his director of administration, John Simmons, dispute that there was a shift. Instead, they say, the administration acted to maintain the previous share of taxes raised from both homeowners and businesses. Simmons says homeowners and businesses are each shouldering roughly the same percentage of the overall tax bill — about 42 percent each. The city’s figures show commercial properties paying about $108 million, and residences about $109 million, of the total $257 million raised in taxes this year.

But it’s the city did make major changes this year in the tax structure — including calculating a higher tax rate for business than for residential property. Further, the recent recalculation or "revaluation" of property values — mandated and paid for by the state — shows a much bigger growth for residential properties than for businesses. Residential values rose 72 percent for single-family homes, but values for the largest commercial sector rose just nine percent. "What should have happened was that our tax burden should have decreased, because the growth of commercial properties did not increase," says Paolino.

But Cicilline says otherwise, that it was important to ensure that both sectors maintained their contribution levels — which would have happened had the city simply followed the real estate market trends. "I thought it was very important to maintain the ratio between commercial property and residential property that has existed in the city for as long as anybody can remember," Cicilline says.

Here’s what happened:

Rhode Island’s residential real estate market has been super-heated in recent years, a result of too few homes for too many buyers. When Providence conducted its revaluation last year, homes and apartment values had skyrocketed, nearly doubling in many cases. Some 34,000 residential properties now have a cumulative worth of $6.7 billion; 5400 commercial properties total about $2.1 billion in value.

To maintain what Simmons calls an even tax "burden" or payment between the two groups, the city received General Assembly permission to change its tax structure to make sure residences and business contributed similar amounts of money. Two things resulted:

• Instead of last year’s single property tax rate of $38.82, the city this year set the residential rate at $29.65, and the commercial rate at $37.

• Further, the city changed the "homestead exemption" on residences. This tax break allows the city to lower the assessed value of a property before applying the tax rate. Last year the homestead exemption subtracted one-third of the assessed value; this year, it takes off 50 percent. For tax purposes, this now means an owner-occupied home is taxed at half its actual value.

When plugged in, here’s how the new assessments, the new tax rate, and the new homestead levels work, using what city records show for a home in the city’s Mount Pleasant neighborhood: Last year, the home was valued at $80,300, and after discounting about 33 percent of the value, the tax bill under the old tax rate was about $2078. This year, revaluation pushed the value up nearly 86 percent, to $149,300. But with the new 50 percent homestead exemption and the new tax rate, the bill came to $2213 — about $135 more than the year before.

The total tax picture is more complicated. There’s a hybrid category of buildings — apartment complexes with more than five living units, and buildings that have both stores and apartments. These buildings get the homestead exemption, but are taxed at the commercial rate. Further, residential properties where the owner lives get the full 50 percent homestead exemption; those whose owners live elsewhere get a 33 percent rate. In addition, the city collects money for desks, computers, and other equipment owned by businesses, which the city calculates as part of the business tax "burden."

Paolino and Ryan say that they respect Cicilline, and understand the difficulties of the city and its tax needs. But they worry that taxes could force some businesses out, hurting the city overall. Says Paolino, "There’s going to be an erosion."