Rhode Island news | projo | The Providence Journal | ProjoHomes 

Rhode Island news | projo | The Providence Journal | ProjoHomes

The state's largest real estate association is actively supporting an effort to further limit the growth of property taxes in Rhode Island. arguing that excessively high taxes add to the housing-affordability problem.
Property taxes are a barrier for many young people trying to buy their first house. force some elderly homeowners to sell their houses sooner than they otherwise would. and prompt some baby boomers to leave the state for more tax-friendly havens. according to Susan Arnold. chief executive of the Rhode Island Association of Realtors.
Arnold testified before the House Finance Committee last week in support of a bill sponsored by Rep. Thomas Winfield. that would restrict the growth of state income taxes and local property taxes. Annual increases in property taxes would be limited to 4 percent a year. tightening the current 5.5-percent limit. The bill would also limit the total property tax levy in each city or town to 2.5 percent of the municipality's overall property value. The bill would require a voter-approved constitutional amendment before the spending limits would take effect.
How much do property taxes affect the Rhode Island real estate market? When choosing a community to live in. many factors come into play. such as proximity to the workplace. or the quality of the public schools. for families with children. The property taxes in a particular city or town may not be the deciding factor when choosing a place to live. "it decreases affordability."
Arnold said Rhode Island property taxes are the sixth highest in the country. but the state is only 13th highest in income. "That is not a favorable comparison to our sister states." she said. Connecticut is first in income. and has the eighth-highest property taxes; Massachusetts is number two in income. and has the 17th highest taxes.
"A lot of people don't feel they get the value for their dollars." Arnold said. "The schools. municipal and state services. are not the best in our country. and they should be."
Gretchen Varkonyi. an agent with Keller Williams. said most Rhode Island buyers are "savvy" about the property tax situation and don't express dismay about taxes when they are looking at properties. The tax information on a particular house or condominium is available. online and on printed listing sheets. she said.
For instance. if a bank approves a couple for a purchase of up to $275.000 for a house because they know they'll want to include their property tax payments with their monthly mortgage check. Varkonyi said. And lenders look at the taxes when considering mortgage applications.
In her presentation to legislators. Arnold included a calculation of property taxes as a percentage of monthly mortgage cost for a median-priced house in each of the state's 39 cities and towns (see chart). The house price was based on the median in each community. not the state median.
The town with the smallest property tax bite. according to this calculation. was Little Compton. followed by Barrington at 33.4 percent. The 2005 median house prices in those communities were $260.000 (Barrington).
Why did Little Compton fare so well in this survey? One might point out that house prices are so high in Little Compton that taxes. as a percentage of mortgage cost. would naturally seem lower. But Barrington housing prices are also high. and that town was also rated as a high-tax town. Little Compton Town Council President Robert Mushen says other factors are at play: the town offers few services and has made it a priority to keep spending under control.
"It's a combination of things." Mushen said. There are no municipal water. sewer or trash-pickup services in Little Compton. The town operates only one school. for children in kindergarten through eighth grade. and sends its public high school students to Portsmouth High School.
Also. "we've been quite invested in getting all the town departments together in terms of their needs . . . to try to hold the line on expenses to the extent we can." Mushen said.
"We don't have a large infrastructure to maintain and we try to be very careful in what we spend money on. an elected official. also serves as the town's administrator. meeting a 4-percent cap in annual budget increases would be "a challenge." Mushen said. "I'm an advocate for that as a target." he said. "What I foresee as being the deal-busters are energy costs and health-care costs."
Cranston Finance Director Jerome I. Baron said Cranston's ranking as the highest-tax municipality in Rhode Island means the Realtors association's study is "flawed in the way it's approached" the issue. "They're not comparing it to what you're getting" in services. he said.
In Cranston. a "quality school system. professional public safety and trained emergency response" providers are part of the package. Baron said. There are communities without those services. "but I don't think I want to live there."
Baron said that if the 5.5-percent limit on property tax increases is cut to 4 percent. "we'll cut out education and public safety and reduce taxes. People might not like what is reduced."
Yet. high property taxes "are a problem that needs to be addressed." Baron said. "There is an over-reliance on the property tax throughout New England."
Gary Sasse. executive director of the Rhode Island Public Expenditure Council. a business-backed group. said there are "efficiencies" that can be made on the state and local levels to reduce tax growth. Because education costs are a majority of most municipal budgets. more shared services or regionalization might be explored. he said.
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