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Supplemental tax rolls in ahead of schedule

August 31, 2013

WOONSOCKET – Even though a taxpayers group has challenged the $2.5 million supplemental tax bill, collections of the one-time tax are filling city coffers at roughly the pace officials always expected, if not a little better.

Finance Director Thomas M. Bruce said that at the close of business on Thursday, the due date for the bill, the city had taken in at least $1.25 million.

By Saturday, the last day receipts may be applied to fiscal year 2013, Bruce said he expects receipts to top out between $1.7 and $1.8 million. That’s substantially better than the 60 percent collections rate Bruce had predicted months ago.

“It’s great,” said Bruce. “You don’t see a wholesale payment revolt where taxpayers feel empowered not to pay the bill. That can be a problem.”

Over the course of a year, Bruce said he expects the collections rate on the supplemental to compare favorably with that of ordinary property taxes, which is about 98 percent.

The reason why expectations for the supplemental were scaled so far back is because city officials had so little time to collect it.

Though it was applied to the fiscal year that ended June 30, the bills didn’t go out until nearly a month after that.

State Auditor General Dennis Hoyle told the city it could apply whatever it collected 60 days after the end of the fiscal year to the prior fiscal year, Bruce said. That turned out to be two days after the due date, which was a function of when the bills were issued.
The supplemental tax bill was one of the linchpin components of the Budget Commission’s five-year plan to eradicate crippling deficits that had nudged the city to the brink of bankruptcy.

Like other facets of the plan, it is facing a challenge in Superior Court which, if the plaintiffs prevail, could lead to a fiscally messy settlement that would also be a setback for the city’s financial recovery, according to Bruce.

The plaintiffs include Roland Michaud, a member of the Zoning Board and a frequent critic of local government who has filed papers to run for mayor. Councilman Roger G. Jalette Sr., James Cournoyer, a government watchdog; and state Sen. Marc Cote (D-Dist. 24) are also plaintiffs.

Cote was one of the state lawmakers who wrote the enabling legislation that authorized the city to issue the supplemental tax bills, a core issue in the suit. State lawmakers said the Budget Commission could issue the $2.5 million supplemental tax only if members had realized $3.7 million from other components of the five-year plan, including cuts in retiree benefits and healthcare concessions from active employees. The idea was to guarantee that the burden of closing the city’s revenue hole would be shared equitably by various stakeholder groups.

Lawyer Robert Senville of Providence wants to certify the lawsuit as a class action and is actively seeking more plaintiffs to join the original group.

An information hearing on the suit is scheduled to take place at the Elks Club on Social Street Wednesday at 7 p.m.

“This meeting will provide taxpayers an opportunity to learn about the suit and to consider whether or not they wish to join as plaintiffs in order to protect their legal rights with respect to the supplemental tax,” said Cournoyer. “Taxpayers should bring copies of their supplemental tax bill in the event that they choose to join as plaintiffs.”

Michaud said no one who signs on as a plaintiff will ever receive a bill for legal services. That too, will be explained in more detail at the meeting.

Though the commission claims it had exceeded the threshold by nearly $1 million, the plaintiffs claim the commission violated the law because it included in its figures savings that were merely projected, not realized.

Michaud claims there’s an insult added to the injury outlined in the lawsuit as well: The tax isn’t just illegal – he says it’s also unnecessary because the city would have had enough cash to get through the crisis without it.

“It was clear we didn’t even have to go for the supplemental tax,” he says.

Bruce says the city has about $14 million in cash on hand, a comfortable position to be in, but not unusual at the turn of a fiscal quarter when property tax bills are coming in. But he says the situation is temporary and looks better than it is because the figures have been propped up by a $12.4 million advance in state aid to education.

The 2012 supplemental exempts single-family homeowners, but it was applied to motor vehicles, multifamily dwellings and commercial apartments with 11 or more units. The tax rates for those categories of property, in order, are $8.33, $1.55 and $1.90 per thousand dollars of assessed valuation.

The tricky part of understanding the total impact on taxpayers isn’t the supplemental, but how the supplemental affected regularly scheduled 2014 tax bills, even for single-family properties missed by the supplemental. The $2.5 million was added to the certified levy retroactively. Combined with a 4 percent 2014 increase on all classes of real estate and a sharp rollback in the homestead exemption, most homeowners saw double-digit increases in taxes for the new fiscal year.

The hikes reached 23 percent for single-family homes, because they were among the hardest-hit by the reduction in the homestead exemption.

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