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Statehouse pols tight-lipped on tax plan

May 13, 2013

WOONSOCKET – Though the Budget Commission has informed state lawmakers that they must have a bill authorizing the city to levy $2.5 million in supplemental taxes passed and signed by the governor no later than tomorrow, the fate of the measure is looking more uncertain than ever.

Last Thursday, on the same day the Senate passed a form of the bill requested by the commission, an alternative proposal was introduced for the first time in the House, with State Rep. Lisa Baldelli Hunt (D- Woonsocket) as chief sponsor. State Rep. Robert Phillips (D-Woonsocket, Cumberland) and State Rep. Stephen Casey (D-Woonsocket), signed on as co-sponsors.

“We find that in a situation that can never be equitable and completely fair, this is the lesser of all evils,” said Hunt.

But Hunt, who announced two weeks ago that she plans to run in the general election against Mayor Leo T. Fontaine, a member of the budget commission, declined to say whether she will ultimately support the enactment of either of the supplemental tax proposals – the House or the Senate version.

Previously there appeared to be a general consensus among state lawmakers that they would approve a supplemental tax bill, provided the city’s employees’ unions also shared the financial sacrifice by providing concessions on wages and benefits. The idea was that the bills would be approved but not passed along to the governor for his signature until negotiations had been successfully concluded.

Commission members have all but conceded the point that they will not achieve the desired concessions through collective bargaining. Though negotiations continue, the commission rolled out a $129 million, 2014 budget last week that envisions about $1.8 million in personnel cuts, effective July 1, through “commission enactments” that require no collective bargaining.

Asked whether obtaining cuts in such a manner would satisfy the conditions necessary for her to support a supplemental tax bill, Hunt said Monday that it is too soon to answer.

The first step, she said, would be to schedule the new House proposal for a hearing in the Municipal Government Committee. She said she would decide from the testimony at that point whether to support the Senate version or the House version and that she would vote to pass one or the other.

But whether she agrees to pass either along to governor depends on what the commission ultimately has to say about the progress it has made toward implementing its five-year plan to resolve the city’s deficit, projected to reach roughly $100 million by 2017 if nothing is done.

“The entire delegation is supporting one or the other of the two bills,” she said. “How we accomplish moving the bill depends on the budget commission updating us on the progress of the five-year plan,” she said.

Meanwhile, at City Hall Monday, Fontaine said the introduction of an alternative House bill can only make passing a supplemental bill more time consuming and complicated.

Fontaine and Budget Commission Chairman William Sequino framed the situation in a letter to state lawmakers on May 8. That was the same day Hunt and other state lawmakers met with Gov. Chafee and State Revenue Director Rosemarie Booth Gallogly about the urgency of the city’s fiscal crisis, and it was the day before the Senate passed the supplemental tax measure.

The commission, Fontaine said, hopes to bridge a cash crunch coming by the end of the fiscal year in two principal ways. One is by obtaining relief from major creditors until new revenue starts rolling in, partly from a supplemental tax bill, and also by borrowing short-term bank notes known as TANs, or tax anticipation notes, against the expected receipt of supplemental tax revenues.

“We write to urge passage of the legislation authorizing the City of Woonsocket to issue a supplementary tax bill for fiscal year 2012-2013, which is in its final weeks,” the letter says. “Time is of the essence as the city is facing significant cash flow concerns with respect to normal operation and is surviving only due to its creditors’ tolerance of the emergency plan now in effect.”

With respect to the TANs, the letter says, the city has tentative deals with two banks to supply $2 million to remedy the upcoming cash shortfall.

But “the supplemental tax legislation must be signed into law by May 15 in order for the proceeds from the TANs to be received by the city by June 1. June 1 is our deadline for mailing bills to the community so that the due date can be set for June 30,” the last day of the fiscal year.

Fontaine acknowledged that it appears unlikely the legislature will satisfy the commission’s desire to meet the deadline of May 15, which is tomorrow. He said that raises the possibility of disrupting the five-year plan because revenue from supplemental taxes will come in too late to apply to fiscal 2013, but it won’t eliminate the root problem.

He said creditors, including school transportation providers, National Grid, Blue Cross Blue Shield of Rhode Island, and others, might withdraw their willingness to wait for payment on overdue accounts. That would exacerbate the city’s cash crunch.

While the city is projecting a deficit of $8.9 million for the current fiscal year, Fontaine said the city’s ability to get through the fiscal year with cash on hand to keep operating normally depends on the continued willingness of creditors to wait to get paid, in tandem with temporary revenue from TANS. He said the city’s cash position will be so tenuous in the coming weeks that he has asked Finance Director Thomas M. Bruce III for daily cash flow analysis reports.

As for the competing supplemental tax bills, both would raise $2.5 million in revenue. The Senate version does it by raising $1.5 million on real estate and $1 million on motor vehicles. The House version does just the opposite, raising $1.5 million from motor vehicles and $1 million from real estate, with the proviso that all owner-occupied single-family homes and condos would be exempt.

Hunt said the bill is designed to shield the latter group from absorbing at least one of three tax hits envisioned by the commission. In addition to supplemental taxes, single-family homeowners would also face a normal tax hike of 4 percent by July 1, plus a rollback in the homestead exemption from 39 to 30 percent. That would result in tax increase of 23 percent on the average single-family homeowner in the span of just a few weeks.

The state lawmaker says her bill is an attempt to provide some relief from the triple-whammy.

“With the four-percent increase in the new fiscal year and rollback in the homestead, they’re already getting hit with two tax hikes,” she said. “They shouldn’t be taking a hit from the supplemental, too.”

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