Study: Providence commercial taxes again highest in the US

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By Ted Nesi

PROVIDENCE, R.I. (WPRI) – Detroit leaders say they raised taxes there to the max before finally being forced into bankruptcy this summer, yet the beleaguered Michigan city still wasn’t charging as much as Rhode Island’s capital.

Taxpayers in Providence paid the highest commercial property taxes charged in any of the nation’s 53 biggest cities for the second year in a row in 2012, according to the latest edition of a widely cited comparative study compiled by the Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence.

Rhode Island’s cash-strapped capital slapped a tax bill of $5,085 on commercial property worth $100,000 last year, $160 more than second-highest Detroit and $242 more than third-highest Des Moines, Iowa. The study shows Providence is the only city that charged more than $5,000, with an effective tax rate of 4.238%.

Commercial property taxes in Providence are more than double the national average for the 53 largest U.S. cities, which is $2,528 on a property valued at $100,000. The estimates also include $20,000 in fixtures.

By comparison, at the low end of the tax rankings 53rd-ranked Cheyenne, Wyo., charged $797, or $4,288 less than Providence; No. 52 Seattle charged $1,133, or $3,952 less than Providence; and No. 51 Honolulu charged $1,188, or $3,897 less than Providence.

The 2010 edition of the much-cited Lincoln-Minnesota study, which listed Providence as having the second-highest commercial property tax rate for a major city, received widespread attention locally after Gov. Lincoln Chafee cited it publicly and later had his research confirmed by PolitiFact.

The tax burden on commercial property continued to grow in 2011 as Mayor Angel Taveras took office and announced the city was facing a “category five” financial hurricane; that year’s edition of the Lincoln-Minnesota study declared Providence the highest-tax city for commercial property in the United States. The new study shows the top ranking continued in 2012, when Providence flirted with bankruptcy.

Taveras has said he thinks commercial property taxes are too high in Providence, but he’s also said the city’s finances are still too strained to consider lowering them. The mayor did convince the City Council to freeze rates at their current level this year, which led to a significant increase in tax bills for some homeowners.

“Freezing the commercial tax rate is one of the mayor’s top priorities,” Taveras spokesman Liz White told WPRI.com in an email. “We froze the commercial tax rate in FY2013 and FY2014 and will continue the work to attract new businesses and create new jobs in Providence.”

Taveras administration officials say they’re confident Providence finished the 2012-13 fiscal year that ended June 30 with a balanced budget, after ending the prior year with a deficit of $15 million. They say they’ll have a better sense once the Aug. 31 deadline to book revenue toward the 2012-13 financial year passes.

The new Lincoln-Minnesota study shows Providence’s taxes on apartments are also among the highest in the country.

Providence charged the fourth-highest taxes on apartment buildings in 2012 among the 53 largest cities, up from fifth-highest in 2011, according to the study. Providence’s apartment tax was $22,339 on a $600,000 property, an effective tax rate of 3.546%, behind only Des Moines ($29,057), Detroit ($26,580) and New York City ($23,986).

In addition, Providence ranked 13th-highest among the 53 large cities for homestead property taxes on the median-value home in 2012, though that was down from 11th-highest in 2011. Providence’s net tax was $3,745 on a home valued at $217,500, for an effective tax rate of 1.722%.

Yet the study argues Providence homeowners’ tax bills are subsidized significantly by those who own commercial property and renters who live in apartments.

While the average large U.S. city charges commercial-property owners an estimated 1.791 times more than residential homeowners, Providence charges commercial taxpayers 2.305 times more than residential ones, the 12th-biggest penalty in the country. Providence’s effective tax rate on apartments is also twice as high as the rate on homesteads, according to the study.

Ted Nesi (tnesi@wpri.com) covers politics and the economy for WPRI.com. He hosts Executive Suite and writes the Nesi’s Notes blog. Follow him on Twitter: @tednesi

• Related: Analysis: Taveras cut pension deal in a bid to avoid bankruptcy (April 12)

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