Tuesday, January 21, 2014

Myth of Charlestown’s low taxes takes another hit

GoLocalProv surveys municipalities on property tax hikes
By Will Collette
Tax rates for the past 10 years from Charlestown
Tax Assessor Ken Swain's web page. The CCA Party
has controlled the Town Council since 2008
For years, our town leaders have been praising themselves for their genius in managing town finances and thus keeping Charlestown’s taxes among the lowest in the state. Yes, it’s true that Charlestown’s tax rate is among the lowest (though not the lowest), but that has more to do with offering almost no municipal services. Our tax rate also does not include our Fire District taxes, which are collected separately by the districts.

Each year, town leaders – and since 2008, we’re talking about CCA Party leadership – pat themselves on the back for not raising property taxes as much as they could. State law caps annual rate increases at 4%. They tell us we should say “thank you” that they don’t raise taxes up to that limit every year.

However, that’s a bogus argument aimed at keeping voters from noticing that for the past six years, the CCA Party-controlled Town Council has raised property taxes each and every year even though, each and every year, the Town has run a substantial surplus. Instead of (a) refunding excess amounts collected to taxpayers, (b) reducing tax rates or at least not raising them or (c) instituting a homestead tax credit, our CCA controlled Town Council has raised taxes.


GoLocalProv just did a survey of all 39 Rhode Island cities and towns, ranking each town based on how much their taxes collected increased or decreased in the current year’s budgets. Charlestown ranked dead center at #20, meaning that 19 municipalities imposed higher increases while 19 imposed lower ones.
Screen shot from the GoLocalProv survey article.

Despite Charlestown’s big FY2014 surplus, the town raised our property tax rate by 1.95%. We will see a change in our tax rate for the next fiscal year depending on the outcome of the revaluations that are due to be released soon.

Two Rhode Island municipalities reduced the amount of taxes they plan to collect es this year – Pawtucket and Hopkinton, two places that couldn’t be more different. Pawtucket cut its taxes by 0.68% and Hopkinton cut its taxes by 0.4%.

Westerly, South Kingstown and North Kingstown all came in with tax increases lower than Charlestown’s. Among all South County towns, Block Island, Richmond and Narragansett increased their taxes by higher percentages than Charlestown.

Don’t get me wrong – I am not objecting to paying taxes. As Supreme Court Justice Oliver Wendell Holmes said, “taxes are what we pay for a civil society.” So, no Tea Party tri-corner hat for me.

But taxes should be fair and they should be driven by necessity. That’s where I take issue with the six years of CCA tax hikes.

In 2011, we had a major revaluation, the first after the terrible real estate crash that triggered the Great Recession. The total value of Charlestown’s taxable real estate fell as a result, but the effects were not shared equally. Properties worth one million dollars or more ended up getting a property tax bonus of about 7% less after the assessors decided to mark down the home values of those properties more than they did the more moderately priced homes.

The practical effect was that owners of big ticket homes – the great majority of whom are non-residents – saw their net taxes drop while owners of homes in the $200,000 to $500,000 range got whacked with a big tax increase.

During the past six years, Charlestown used its large surpluses to pay cash for capital improvement projects rather than finance them through low-interest bonds. We also paid off some loans for capital projects before they were due. Each time, we were told that by reducing debt, we were “saving money for the taxpayers.”

Except each year, we raised taxes. So where were the savings? Who were the taxpayers that got them?

Many fiscal conservatives think debt is inherently evil. They say we should never spend more money than we have. They say that government needs to be run like a household.

However, households borrow money all the time often for good and worthy reasons. Like buying a house. Or financing a college education. Or buying a car. Or paying medical bills. Or major home repairs like a new furnace, roof or septic system. Or dealing with any of a number of family emergencies.

During the past six years, Charlestown has lived through the same “family emergency” as the rest of the country, suffering high unemployment and the evaporation of family assets when home values crashed.

In 2009, the first full year of the Recession, Charlestown averaged 10.8% unemployment. We raised property taxes by 3.9%, just 0.1% under the legal limit.

In 2010, our unemployment rate rose to an average of 12.3%. We raised property taxes by 0.5%.

Unemployment averaged 12.2% in 2011. This was the revaluation year where net taxes went up sharply for the middle class but either dropped or stayed close to the same for owners of millionaire properties.

Unemployment eased a little in 2012, dropping to 11.4%. We raised property taxes again, this time by 2.7%.

Our current unemployment rate is 8.7%, which is better than 11.4% but still awful. And, as noted above, we once against raised property taxes by 1.9%.

OK, now that your eyes have glazed over, here’s the punch line – not one of those tax increases were, on their face, necessary. Each year when we carried what the Budget Commission called an
"excess surplus” (i.e. more than the amount of surplus recommended by our outside auditors), we missed an opportunity to provide hard-pressed Charlestown families with tax relief. 

We could have decided that there was more than enough of a cushion in at least one or two of those years to give taxpayers that relief without necessarily requiring an increase in later years to make up for it. But we didn't.

Instead, town leaders, especially Councilor Dan Slattery, told us the lie that there was nothing Charlestown could do to soften the effects of the national economic slump when in fact he, as Council liaison to the Budget Commission, could have fought for the use of our surplus for tax relief, instead of advocating for higher property taxes, as he did.

And he compounded the lie by claiming that Charlestown residents should be grateful that their property taxes didn’t go up by the maximum of 4% even though there was no economic imperative to raise taxes at all.

This is an election year. I have already predicted that this year, the CCA incumbents will not want to raise taxes and face angry voters. Chances are pretty good that the new property revaluations will show an increase in property values and that will naturally lead to a decrease in the tax rate.

Remember, there are two numbers that determine what you pay in property taxes: your assessed property VALUE multiplied by the town’s tax rate. 

Watch to see if the CCA leaders running for re-election attempt to pass off the tax rate drop as if it was a tax cut, when there’s a pretty good chance that the CCA majority will continue its six year pattern of increasing the amount of taxes they collect. Except this time, instead of raising the tax rate, they’ll let the reassessment increases do the dirty work for them.


You can count on Progressive Charlestown to be watching this closely.