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
	Providence's Taxes 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.

JUST LIKE HOMEOWNERS bracing for a hurricane, Providence residents waited in dread this year for their new city tax bills, which they knew had the potential to devastate their finances. "I was worried. I was extremely worried," says Marilynne J. Connor, who lives with her three children in a bungalow-style home in the city’s Mount Pleasant section. She had plenty of reason to fear what the mail would bring. Earlier, experts had recalculated the value of all property in the capital city, and every neighborhood experienced major increases. Connor’s Beaufort Street home, for example, increased an astounding 84 percent, from an estimated assessment of $90,800 to $166,600.

But when Connor got her bill a few weeks ago, her taxes had gone up only about the price of a cheap TV set, $120.32. "It wasn’t a huge jump at all," says Connor, who works in quality control at a Cranston factory. In fact, the five percent hike, which produced an annual bill of $2469, sounded too good to be true. "I hope they’ve done it correctly," she says.

Overall, the administration of Mayor David N. Cicilline, estimates that as many as half of the city’s residential taxpayers may have escaped with minor tax increases, or even seen their bills drop.

This means that for this year, many residents of a city with notoriously high local taxes — in a state with famously high local taxes — has apparently dodged the full brunt of a financial typhoon. It’s a considerable achievement for Cicilline, now in his second year as mayor and still contending with the afterglow of his charismatic, if disgraced, predecessor, Vincent A. "Buddy" Cianci Jr.

Through a series of deft moves — setting different tax rates for business and residences, and plugging in so-called homestead exemptions that reduce the amount of taxed property values — Cicilline deflected the potential impact of rising prices.

Further, the administration says that a range of budget curbs, including managerial pay freezes, scaling back the number of city employees, and new medical plans for some workers, produced a modest spending increase of about 1.5 percent from last year. Officials call it the smallest such hike in 20 years.

But the Cicilline administration is somewhat muted about its accomplishment for very practical reasons, one being that if some homeowners’ taxes fell, others still rose. More to the point, some businesses are howling about their tax bills, claiming that the administration unfairly shifted the burden of taxes onto them to mollify resident voters — something the administration disputes.

But the main reason for not bragging too loudly about this year’s achievement is that property taxes remain perilously high for Providence residents, and if the tax hurricane veered out to sea this time, the Big One may occur any time.

The serious problems caused by an exaggerated reliance on property taxes extend throughout Rhode Island. For many communities, they create the worst of two worlds — imposing a burden on the people who pay them, without adequately funding local services, particularly schools. Further, because local governments remain so dependent on property taxes, communities are tempted to make tax-generating, landscape-spoiling decisions — such as welcoming roadside shopping malls — while frowning on affordable housing developments, which strain local resources by bringing new school students to town.

Property taxes have a unique ability to make cities, and even suburban communities, unaffordable, because, unlike other kinds of taxes, they have little to do with whether individual taxpayers can afford them. As John Simmons, director of administration for Cicilline and architect of his tax plan, puts it, "The property tax is not concerned with who owns [a house] or their ability to pay."

By contrast, income taxes expand or contract according to the taxpayer’s fortunes. And the sales tax presumably reflects taxpayers’ voluntary spending decisions, especially in Rhode Island, where many critical items, such as food and clothing, are off-limits to the sales tax. Moreover, Rhode Island’s property taxes are unusually high, compared to those in most other states, in part because local governments are responsible for a big portion of public school costs.

About 40 percent of state and local taxes come from the property tax, according to the Rhode Island Public Expenditure Council (RIPEC), a business-backed government-monitoring group. That’s about $1369 for every Rhode Island resident, compared to about 31 percent of local revenues from property taxes nationally, or $971 per capita.

Cicilline and many other politicians believe this means the property tax is out of balance in Rhode Island, and that if current trends continue, the communities with the highest taxes will become unaffordable. Senate and House leaders are supposed to name a new joint legislative committee to reform the system. But even supporters suspect a solution may be years away, and the panel isn’t expected to make its recommendations until after 2005 General Assembly session.

Walter McLaughlin, operator of McLaughlin Automotive Stores, an independent auto supply and parts chain, headquartered on Narragansett Avenue in Providence, feels the state is already becoming unaffordable to businesses. Taxes on one of his Providence buildings jumped 50 percent, and his headquarters property, in a nearly 16 percent jump, went from $67,000 to about $77,600. "It’s a formula for disaster," McLaughlin says. "Quite frankly, I spoke with a Realtor and told him: ‘If you can get me what people are telling me my building is worth, I shall move out of the city of Providence.’ "

A short time later, McLaughlin steps back slightly, saying he "may" move out of his native city, where he founded his business 30 years ago, and for which he claims personal affection. But he worries that business people similar to him are having the same, dark thoughts.

"I really think that, quite frankly, entrepreneurial people, they are going to find a solution to business problems — and this is a business problem, this is affecting the bottom line," McLaughlin says. "Because we cannot continue, quite frankly, to be having our pockets picked every time the city runs short of money."