TAX NEWS - June 2010
Rhode Island Tax: No tax increase in Pawtucket city budget
At a special session, the City Council voted 6 to 3 to approve an amended operating budget that will require no increase in the residential property tax rate, but will add 66 cents to the current commercial/industrial/mixed use property tax rate.
The budget was changed from the one originally proposed by Mayor James E. Doyle that centered around an almost 4.5 percent increase and called for an additional 84 cents on the residential tax rate and an additional $1.82 in the commercial rate.
A public hearing on the amended budget is scheduled for Wednesday, June 23, at 7 p.m. at City Hall.
The City Council approved a set of budget amendments that decrease the expenditures for city and schools by a total of almost $5.9 million. This includes a decrease of $43,200 in the budget that is expected to come from reduced "tipping fees" for trash removal that will result from the switch to a "no bin, no pick-up" program to be instituted this fall.
It also includes a decrease of $2.9 million from the expenditures that the city provides the School Department from the operating budget. This figure includes $1.3 million which reflects a 5 percent reduction in school aid and almost $1.6 million in cuts due to a projected decrease in enrollment.
The amended budget also depends on a projected increase in city revenue of $636,512 that would result from increases in various zoning fines and the implementation of a new fee for "absentee landlord registration." This fee alone, on out-of-town owners of investment property in the city, is expected to generate $455,000 in new revenue for the city.
However, still looming is the issue of the city's loss of approximately $9 million in revenue from motor vehicle excise tax reimbursements from the state that came about in recent weeks with the passage of a new state budget by the General Assembly. With the city's current fiscal year ending on June 30, and with it, the deadline to pass a balanced budget for the new fiscal year that begins July 1, city officials admitted they were at a loss on how to deal with this whopping drop in anticipated revenue.
When consulted about the legality of the amended budget, City Solicitor Margaret Lynch-Gadaleta characterized it as being somewhat "a gray area," but said she believes that since city officials are acting "in good faith" that they will be able to come up with additional revenue or cost-cutting plans to balance the budget in the near future, she considers it to be legal.
As part of the new budget, no motor vehicle tax bills will be going out at this time. Finance Director Ronald Wunschel said he is holding out hope that the the state will receive additional federal funding, possibly of up to $100 million that is being discussed, which would mean that the city would be given at least some reimbursement for motor vehicle excise taxes. He said he is also depending on more concessions by the city's unions, and particularly the School Department, to achieve greater savings.
Wunschel admitted, however, that additional car tax bills — going out to residents who own a vehicle valued at less than $6,000 as the state now allows--or a supplemental property tax increase, will likely be necessary at some point if these factors don't play out. As to the legality of the amended budget, Wunschel stated, "I'm doing the best I can for the taxpayers and in keeping the city from going to junk bond status."
City Council President Henry Kinch Jr., who is running for mayor, said that as he has been out campaigning, he has encountered resident after resident who pleaded with him for no tax increase. He added, however, that solving the budget problem will require a "summit" between city and school leaders. "This problem is so gargantuan, it is unrealistic to think it will just be settled on the municipal side of the budget. We can't solve a $9 million problem in 10 days."
Councilor David Moran agreed, saying the budget is "a work in progress." Referring to both unions and department heads, he said, " We've got to bring everybody to the table," while Councilor Mark Wildenhain said he felt he had to support the budget to keep the city operating and from losing its bond rating.
However, Councilor Jean Philippe Barros, who voted against the amended budget along with Councilors Thomas Hodge and Albert Vitali, repeatedly chastised Wunschel and the administration for not being "better prepared" to deal with the deep cuts in state aid. "We need to get the unions together and ask them how to help."
Vitali went further, calling the budget "a sham" and saying it is "tantamount to lying to taxpayers." He pointed out that the $9 million in motor vehicle excise tax revenue is going to have to be brought back at some point. "Let's not play stupid here," he said, prior to the vote.
Before the adoption of the amended budget, Councilor Thomas Hodge had argued that the council should instead keep the current fiscal year's budget in place and send out the car tax bills as usual under the existing rates and exemptions, until the situation is resolved. He noted that this scenario is allowable under state law if a new budget can not be adopted by the June 30 deadline. However, Wunschel said it would be better to have the amended proposed budget to work from because it includes more realistic numbers, even without the car tax revenue.
During the public input session prior to the meeting, only one resident, Lou Soares, spoke about city residents being in no mood to handle another tax increase. He noted that it is an election year and warned councilors that any tax increase must be "zero, zero, zero, or you will not be here."
In the wake of the council's vote, mayoral candidate and former city councilor Donald Grebien told the TIMES that he considers the amended budget "clearly irresponsible and illegal." He noted that the $9 million in lost car tax revenue has just been "pushed out," and said it is apparent that city officials will have to come back to taxpayers with either a supplemental budget or additional car tax bills. "They are trying to just play politics with smoke and mirrors," he stated.
Grebien said that in the business world, the budget that was approved by the council would not be considered as balanced, and criticized current city leaders for having "no plan, no leadership." He said he knows there is a deficit of $10 million to $18 million and he will soon begin to identify what his plans are to balance the budget. He further noted that, if he wins the race for mayor, "I'm going to have to deal with this."
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