Elorza proposes $567M budget amid rising home values in Providence

PROVIDENCE, R.I. (WPRI) — Providence Mayor Jorge Elorza has submitted his final tax-and-spending plan before leaving office, during an unusual year when the city is flush with federal cash and home values are rising, leading to concerns about higher tax bills.

The mayor delivered his final budget address to the City Council on Tuesday evening, getting emotional at times as he reflected on his seven years in office. He vowed to “sprint to the finish line” before he leaves office in January.

“I pledge to bring the same intensity and dedication to my job over these last eight months as I have brought for seven full years,” said Elorza, a Democrat who is barred from running again due to term limits.

Elorza’s $567 million proposal, which is for the 2022-23 fiscal year that starts July 1, will be vetted by the City Council Finance Committee over the next two months, and must be approved by the full council.

In order to keep the overall increase in tax revenue below the state-mandated annual cap of 4%, Elorza’s plan decreases the residential property tax rate to reflect the reassessment of city property values that took place this spring.

Despite the cut to the rate, tax bills will still increase overall for many homeowners who saw big increases in value. Elorza’s office could not immediately provide an estimate for the overall percentage of property owners who will see an increased tax bill this year.

But an analysis provided by the mayor’s office shows owners of multifamily homes are more likely to see tax increases under his proposal than those who live in single-family owner-occupied homes, though it varies by neighborhood.

Most landlords who own residential properties and don’t live in them would see an increase in taxes.

“It depends on how much your property increased in value,” Elorza said in an interview after the speech. “And very much it depends on whether you live in the property or not.”

Under the mayor’s proposal, the residential tax rate would be $18.50 per $1,000 of assessed value. Property owners who live in their homes would get a 45% homestead exemption, an increase from the current 40% of property value exempted from taxation. (The current tax rate is $24.56 per $1,000, with a 40% homestead exemption.)

Council President John Igliozzi said the council would analyze the mayor’s plan and discuss whether the tax rate and homestead exemption could be tweaked before passage to “lessen the impact” of the revaluation.

“Is this the sweet spot, or is there a better place to put the rate? Is there a better place to put the homestead?” Igliozzi said. “We don’t know yet.”

For commercial properties, the tax rate would decrease to $33.85 per $1,000; the tangible tax rate would be $55.55 per $1,000; and the car tax rate would continue to decrease per the state’s phaseout plan, resulting in a new rate of $20 per $1,000. The first $6,000 of a vehicle’s value would be exempt from the tax, and businesses with less than $10,000 in tangible property don’t need to pay the tangible tax.

(Senate President Dominick Ruggerio has proposed eliminating the car tax entirely for the new fiscal year, which would be a year sooner than scheduled under current law. But it’s unclear whether that idea will clear the General Assembly this spring.)

In all, Elorza’s plan would collect roughly $14 million more in taxes from property owners than the current year, for a total tax levy of $377 million.

The new budget includes $1.5 million to hire and train 50 new Providence police officers in a new academy scheduled to begin in the fall or winter, and $300,000 to recruit the next class of firefighters.

There is also $721,000 proposed for the new program to divert certain 911 calls away from police and to social service agencies that handle mental health and substance abuse issues. The city is in the middle of reviewing a bid from the Providence Center to provide clinicians to join the city’s dispatch center and to ride along with firefighters to respond to such calls. (No other organizations submitted a proposal.)

An additional $330,000 is proposed to do outreach to people with behavioral health issues or who are experiencing homelessness.

The city’s planned $5 million appropriation for the massive Superman building development deal announced earlier this month is not included in the budget, potentially punting that decision to the next mayor and the next City Council, which will have many new faces in 2023 due to term limits. (The massive public-private financing deal calls for the $5 million from the city to be provided once the long-vacant building has a certificate of occupancy.)

But Igliozzi said after Elorza’s speech that he still anticipates the Superman money being appropriated this year. It was not yet clear whether the council would add that funding before passing the budget, or would amend the budget later.

“That’s probably all going to happen before the end of the term,” Igliozzi said. “We’ll make the hard decision if the future council, future mayors don’t want to.”

Elorza’s budget proposes to send $130 million to the Providence Public School District, the same amount as last year. The state-controlled district believes it is owed more under state law, a matter that is currently being litigated in court between Elorza and R.I. Education Commissioner Angélica Infante-Green.

The mayor referenced the funding issue in his speech.

“The dirty secret is that if we really — and I mean really — want to turn public education around, it requires a radical transformation,” he said. “Changing personnel, reorganizing departments, and simply spending more money will not do.”

The annual payment to the city’s pension fund — determined by actuaries — increases to $100 million in the new budget, up from $93 million in the current year. The long-term retirement obligations, often promised to public employees decades ago, are an increasing drain on the city’s annual operating budget.

Elorza has separately proposed a $515 million pension obligation bond to shore up the pension fund, which must be approved by the General Assembly and is separately being put before voters on June 7.

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Elorza’s office noted he’s level-funding many of his priorities including PVDFest, youth programming, summer jobs and after-school programs.

But the new plan lacks the usual list of new initiatives proposed by the mayor, as many of those items — such as a new reparations program — are contained in a separate $124 million ordinance to spend the city’s share of federal money provided by Congress last year under the American Rescue Plan Act (ARPA). The ARPA ordinance was approved by the Council Finance Committee last week.

There is some ARPA money in the general city budget, however. Elorza included $25 million in “revenue recovery” dollars from the ARPA funds to make up for lost revenue due to the pandemic. Of that, $16 million is set aside to “stabilize” the general fund, according to the mayor’s office, and nearly $9 million is slated for repairs to the Fox Point Hurricane Barrier, capital investments at Roger Williams Park Zoo, sidewalk investments and parks.

The budget includes a 2.5% salary increases for both union and non-union City Hall staffers, following a new tentative contract deal reached with the Local 1033 Laborer’s Union.