Council OKs Residential-Commercial Tax Mix Adjustment

WARWICK, RI — Despite nearly two hours of debate at Monday night’s City Council meeting, the council easily passed, by an 8-1 margin, Mayor Frank Picozzi’s proposal seeking the ability to adjust the residential-commercial tax mix.

Most of the debate took place in the Council’s Intergovernmental Committee meeting on “PCR-35-23 A Resolution requesting the General Assembly to amend R.I.G.L. §44-5-67.2 regarding Property Tax Classification for The City of Warwick to reduce the Minimum Ratio of Class 1 to Class 2 Rates. The committee voted 3-0 to recommend approval of the tax classification change before the full council voted in favor later in the evening.

The residential-commercial tax mix resolution asks the General Assembly to reduce the minimum ratio of Class 1 (residential) to Class 2 (commercial) property tax rates from 75 percent to 57 percent. The request is intended, as written in the resolution, “To allow the City greater flexibility in executing the revaluation and brings this provision closer in line with the general tiered tax statute.”

During the committee meeting, City Auditor Neal Dupuis reiterated a number of times that the proposal would give the city greater flexibility when it comes to the tax rate. While the resolution would allow the city to shift a greater burden onto commercial properties, Dupuis said a potential shift could not occur unless the council approved it.

Dupuis also stated that the goal in being able to adjust the residential-commercial tax mix is not to increase the amount of taxes paid by commercial property owners, but to make sure there is not an unfair shift onto residential taxpayers due to an unstable housing market and an upcoming assessing revaluation of property in the city.

“The intent of this legislation is to provide the city with the flexibility to maintain the existing tax levy classes,” said Dupuis. “Right now, we tax each class based on state enabling legislation, which is one-size fits all. It wasn’t necessarily designed for a city like Warwick, it was designed by the state so that when communities went through revaluation, they had some options to classify their tax rates if there was a burdenship.”

But that one-size-fits-all approach doesn’t designate between smaller communities which have a small commercial base and a larger community like Warwick., which has a much larger commercial base.

“I need to stress from the beginning that we are not looking to increase the taxes on any commercial property owner,” said Dupuis. “We are not looking to increase the amount of the levy that comes from the commercial class.”

Dupuis said the city is looking to maintain the revenue created by each class so that there is no forced burdenship based on the classifications that the city uses.

Ward 5 Councilor Ed Ladouceur cast the lone council vote against the tax classification proposal.

After spending a number of minutes trying to determine how much time Ladouceur would have to speak on the subject in committee, committee chair James McElroy eventually ruled that Ladouceur would be able to read a series of 14 questions he had for the mayor and the mayor’s responses [reported by WarwickPost.com Monday prior to the meeting]  into the record and still have the council’s stipulated 10 minutes to speak on the subject.

Many of Ladouceur’s concerns about the resolution revolved around the potential for an increased burden on small businesses, uncertainty about the financial impact of the resolution heading into budget season, and how future councils and administrations could approach the tax classification.

“One of the concerns I have, you’ve heard me say this on many occasions, is not always particularly with the people who are sitting in government today, whether it be the council, Mr. Dupuis, the administration, or the mayor,” said Ladouceur. “I’m always concerned with the next group of people who are sitting in our seats who are making the change. I’m very concerned with the flexibility that this allows.

“I’m not directing these comments particularly to this administration, but I am concerned about the flexibility it will give for other administrations,” he continued.

Ladouceur said he was skeptical of the legislation, noting that businesses already pay a higher property tax rate, as well as higher water and sewer rates.

“Now we are looking to shift more of the tax burden onto businesses, commercial and industrial,” he said. “We don’t know what the revaluation will look like, and we have no idea how this will change the tax structure.”

Several residents and small business owners expressed concerns about how the ability to change the Residential-Commercial Tax Mix  in the tax classification will impact the commercial tax rates and businesses.

“We acknowledge that property taxes are a significant source of revenue for the city and are needed to provide the services it offers,” said Lauren Slocum, the president of the Central Rhode Island Chamber of Commerce. Slocum said the chamber was representing a number of small businesses that expressed deep concerns about the tax resolution.

“These are the same businesses that offer accommodations, food, and entertainment for our community and our visitors,” Slocum said. “These are the same businesses that provide products, services, and job opportunities for Warwick residents and your constituents.”

While there may be no intent to increase the tax burden on businesses, Slocum said the resolution could open the door to putting an unfair burden on businesses at any time.

“What might seem like a small potential increase cannot be balanced by the wonderful things the city has to offer,” Slocum said. “We believe this will discourage economic growth. We do not need to drive vacancy rates up and real estate values down.”

Ward 2 Councilor Jeremy Rix noted that without the potential for an increased shift in the tax rate, the burden could fall on homeowners.

“We’re concerned about a shock to businesses, and that’s a valid concern, we don’t want to have a tax shock on small businesses or any business, really,” said Rix. “But we also don’t want to have a shock on those folks who are the most vulnerable. This is not about raising taxes on small business or large businesses, this is about trying to maintain some stability so the folks who are most vulnerable don’t get that shock.”