PROVIDENCE, R.I. (WPRI) — Providence City Council leadership announced a new tax plan for residential properties Thursday morning that calls for bringing back the homestead exemption, despite strong opposition from the mayor.
The proposal, which still needs to be considered by the Finance Committee and the full all-Democratic council, would create a single tax rate of $24.56 per $1,000 of property value, with a homestead exemption of 40% for owner-occupied homes valued up to $350,000, and a 28% exemption for homes above $350,000.
The exemption would be progressive, so homeowners who have more expensive homes would get the 40% exemption on their taxes for the first $350,000 in value, and would pay the 28% for value above that.
City Council President Sabina Matos and Council Finance Chairman John Igliozzi announced the plan at a last-minute early-morning press conference Thursday, flanked by several other councilors.
“The budget process is never easy, but we are at a tipping point in the city of Providence,” Matos said. “We need to make cuts and, unfortunately, raise taxes.”
The proposal differs from the one put forward by Mayor Jorge Elorza in his own budget proposal in April, though his would also raise taxes as a result of a revaluation done this year that sent some home values skyrocketing.
Matos and Igliozzi said Elorza’s proposal — which cut tax rates in order to stay below the state’s 4% cap on annual property tax increases — would disproportionately affect lower-income residents whose assessed home values went way up in the revaluation.
“The people who experienced the greatest increase in taxes were the most vulnerable among us,” Matos said.
Elorza, a Democrat re-elected last fall, quickly came out against the proposal, which triggered a backlash among homeowners on the wealthy East Side even before it was announced.
“The City Council Leadership has been advised that their proposal is illegal and that no other city in the state has such a structure,” the mayor said in a statement. “It is reckless for them to propose this change at the 11th hour and knowingly create significant liability for the city.”
“We’ve told the council repeatedly that we are open to a progressive and responsive tax structure but not one that intentionally and divisively targets one community,” he continued. “I remain committed to working with the council to find a solution but I am strongly opposed to their current plan and the way they have gone about it.”
The city’s legal department has already issued an opinion stating that the proposal needs General Assembly approval and could be unconstitutional because of the graduated rate. The opinion cites an article of the state constitution which requires that “the burdens of the state ought to be fairly distributed among its citizens.”
Igliozzi dismissed the argument at Thursday’s press conference. “This is legally sound and we can do it,” he asserted. “Every other city and town has a homestead, why can’t Providence do it?
He also criticized Elorza’s budget, which he said includes too much money for “jobs, pay raises and parties” and other “fluff” while taxpayers face a “devastating increase” in their taxes.
The council’s financial team says its calculations show 86% of people who live in their homes will see a lower tax increase under the council’s new plan than they would under Elorza’s proposal. However, most of those people will still get a higher tax bill than they did last year.
The other 14% would see an increase in their tax bill compared to Elorza’s proposal, but roughly half of those homeowners would still get a lower tax bill than last year. The other half, about 1,478 homeowners, would get a tax increase this year compared to last year.
Tax bills could go out as early as July.
Talk of the new proposal has riled East Siders over the past week, as word spread that the council might go to a homestead exemption with a tiered model that gives less of an exemption for more expensive homes. Some of the more affluent parts of the East Side saw only modest increases in assessed home values under the revaluation, which would lead to a tax cut under Elorza’s plan to lower tax rates.
Igliozzi argues it is unfair for one community to get a tax cut while homeowners in South Providence or the West End see big hikes.
“What we’re looking to do is smooth it out,” he said.
A group of real estate firms came out against the proposal Thursday, saying the “lack of transparency is creating uncertainty and anxiety for Providence homeowners.”
“Councilman Igliozzi is proposing a structure that will place an unfair and unpredictable burden on homeowners, homesellers, and homebuyers across the city,” the statement from Residential Properties Ltd., William Raveis Real Estate, and Lila Delman Real Estate said.
East Side Councilwoman Helen Anthony, who represents Ward 2, sent a letter to constituents Wednesday opposing the proposal.
“It disproportionately affects the East Side, where home values are higher than in most other areas of the city,” Anthony wrote. “As you all know, the folks in this Ward already pay their fair share of the City’s taxes. The purpose of a revaluation is not to ‘equalize’ taxes across the City, yet a graduated homestead exemption would allow the City Council to do exactly that — each time a revaluation occurs.”
Reached by phone, Anthony said she wants there to be a “thorough analysis and public comment.” She is a member of the Finance Committee and said the new proposal has not yet been discussed in a public meeting.
“I am a new member, and I naively thought it was going to be discussed at some point,” Anthony said.
Councilwoman Nirva LaFortune, who represents part of the East Side including Mount Hope, say Wednesday she couldn’t support a proposal that hasn’t been “properly vetted” and received a public hearing.
The Finance Committee did hold a public hearing last week on Elorza’s proposal, but has not scheduled a second hearing on the new proposal.
The committee has been meeting publicly several nights a week, and council leaders said members of the public are welcome to come testify at any of those meetings. The next meeting is Thursday at 5 p.m.
“I am not opposed to doing another public hearing,” said Council Majority Leader Jo-Ann Ryan, who represents Ward 5. “We think it’s more productive if people come to our Finance Committee meetings.”
Providence previously had a homestead exemption, but did away with it in 2013 in favor of the current two-pronged tax rate, under which owner-occupied homeowners pay significantly less than non-owner occupied property owners.
The council is not proposing a change to the non-owner occupied rate from what Elorza proposed.