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Group threatens legal action over tax

July 23, 2013

WOONSOCKET – Just when it seemed like the torturous journey of the 2013 supplemental tax bill was coming to an end, another twist in the road lies ahead for the controversial budget-balancer.
An organized protest group that contends the city is planning to collect the tax in violation of the conditions established by state law now promises it will challenge the $2.5 million supplemental tax in Superior Court.
“If they go forward with this, yes, more than likely we will take legal action,” said James Cournoyer. “What the result of that will be, who knows? Let the chips fall where they may.”
Finance Director Thomas M. Bruce III sees chaos and confusion on the horizon if the promised legal challenge succeeds.
“Administratively it would be the worst mess I’ve ever seen,” he said. “It could be a severely crippling problem.”
If tax protesters prevailed in court, the city would presumably be forced to develop some plan of reparations for aggrieved taxpayers. It might involve crediting taxpayers prospectively if they’ve already paid their bills, or refunds. The repercussions could wreak havoc on both fiscal 2013 and 2014 budgets, because the supplemental is applied to the tax base for both years.
Roland Michaud, a member of the Zoning Board of Review who is credited with proposing the legal challenge, says the city could never afford to pay taxpayers back.
“That’s why I’m urging everyone to delay paying their taxes as long as possible, until just prior to when they’re due,” he said. “The city can’t pay its bills now. They’re not going to be able to repay taxpayers if it’s determined this tax was collected improperly.”
Michaud and Cournoyer, both frequent critics of local government, teamed up with Dick Bouchard, part-owner of radio station WNRI and a self-proclaimed small-government advocate, to launch the Woonsocket Legal Defense Fund to raise money for the challenge. Michaud thinks the kitty has broken the $3,000 mark now, but Cournoyer says he’ll use his own money to fight the supplemental tax if he has to.
“I’m not going to stand by and continue to accept this madness,” he said.
Michaud parked his truck in front of City Hall for four hours Monday with a sign attached to it imploring citizens to “Stop The Madness Now” by donating to the campaign.
Ultimately, says Michaud, the legal challenge is designed to pressure state Revenue Director Rosemary Booth Gallogly to replace the state-appointed Budget Commission with a receiver empowered to push the city into Chapter 9 bankruptcy. Only a receiver has the authority to do what needs to be done to save tapped-out taxpayers from shouldering an unfairly large portion of the burden of righting the city’s financial ship, by dismantling labor agreements and other contractually-guaranteed benefits, Michaud argues.
Tax Assessor Christopher Celeste says a legal challenge would be a setback for the city, but he’s confident the supplemental tax plan is solid enough to withstand judicial scrutiny.
“We hope it doesn’t come to that, but we’ll fight it if it does,” he said. “If we do get sued it’s going to hurt our financial position even more. It’s going to make us spend money on lawyers and we’re probably going to win anyway.”
The supplemental tax is a linchpin of the budget commission’s five-year plan to vanquish a projected deficit in excess of $100 million through 2017, including pension obligations, health care commitments to retirees and other personnel costs. In addition to levying the supplemental tax, they’ve also persuaded five of the city’s largest employees unions to accept rollbacks on health care benefits; shrunk the homestead exemption for single-family homes by some 25 percent; and suspended COLAs for retired police and firefighters. They’ve also shifted hundreds of other age-eligible retirees from private health plans to Medicare, effective July 1, and unilaterally put younger retirees on cheaper health plans similar to those of active workers.
The latter move has already been challenged in Superior Court, representing another potential blow to the five-year plan. The suit is pending.
The supplemental tax revolt pivots around some fine print inserted into the enabling legislation lawmakers passed recently to allow the city to collect the tax, with certain strings attached. The law says the commission may collect the tax only on condition that the commission chalks up no less than $3.75 million in combined savings from employee and retiree concessions in the first year of the five-year plan.
Although the commission passed a resolution asserting that the savings top out at $4.7 million, Cournoyer and others contend the state panel surpasses the legislative benchmark only by counting savings it hasn’t realized yet.
Cournoyer said the prospect of a supplemental tax bill wouldn’t bother him so much if the city’s past efforts to balance the budget hadn’t collapsed.
In 2011, he said, the city passed an $11.5 million deficit elimination bond that was supposed to solve the problem, but things only got worse.
“If they didn’t have a history of failure, I might feel differently,” he said.
City officials say the supplemental bills won’t be mailed until Monday or Tuesday at the earliest, but no later than the end of the month. Payments are due by Aug. 29.
The tax protesters say they won’t file suit until after the bills go out, citing the difficulty in persuading the courts to block an action before it can be shown to have caused actual harm. But Cournoyer says there have been extensive discussions with a lawyer about the feasibility of the suit. He declined to identify the attorney, however, saying it’s still premature.
The supplemental tax bill will come with a tax rate of $1.55 per thousand for applicable real estate and $8.73 for motor vehicles – hikes of of 4.8 percent and 14.7 percent, respectively. Because the envisioned revenues were added to the tax base for 2014 retroactively, however, the regularly scheduled property tax bills that have already been mailed out reflect not only those increases, but the multiplier effects of a sharp rollback in the homestead exemption and a regularly scheduled increase in taxes of 4 percent.
The net result for the owner of the average single-family home was a tax hike of 23 percent for 2014, and that’s not counting the coming supplemental bills for 2013.
Not surprisingly, property owners have been peppering radio call-in shows with a host of complaints. Many raise questions about the continued affordability of home ownership in the city.
Follow Russ Olivo on Twitter @russolivo

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