WOONSOCKET – The city has launched a review of some $256 million worth of real estate to make sure it’s properly classified as tax exempt and, if not, restore it to the tax rolls.
A separate review is under way to make sure the city is capturing all of the taxes it is owed on so-called tangible property, which includes business equipment, fixtures and furnishings, said Tax Assessor Christopher Celeste.
In part, the financially stressed city is taking a cue from East Providence, which is operating under state fiscal intervention and announced last week that it had found nearly $700,000 in new revenue from its stock of tax-exempt properties. An audit revealed that some of the properties were improperly classified or that others were only partially tax exempt.
“I seriously doubt we’ll generate $400,000 or even $300,000 as a result of this process,” said Mayor Leo T. Fontaine. “But even if we get $100,000 or $75,000 it’s still revenue we need at this point.”
The issue of what Fontaine calls “equity” is also another factor that’s driving the in-house audit, said Fontaine. As state aid and other revenue sources have grown increasingly scarce, the pressure has risen to make up the difference from residential property owners.
“Under those circumstances the city has an obligation to make sure that everybody is paying their fair share,” said the mayor.
Celeste said there are about 600 properties on the tax rolls listed as exempt from property taxes. Some, like churches, which hold some $42 million worth of real estate, are clearly tax exempt, said Celeste, and therefore he doesn’t feel it’s necessary to reevaluate their status. The same holds true of cemeteries, municipal buildings, state property and a few other categories.
For others, the line may be fuzzier.
Acknowledging he’s erring on the side of caution, Celeste said he will send letters to “at least half” of all tax exempt properties asking owners to justify their status. Just as East Providence discovered, Celeste believes the city will find that that some entities currently listed as tax exempt, or at least a portion of their operations, are subject to property taxes.
“We want to make sure that everyone who is getting an exemption truly deserves it and we want to make sure we’re being fair to everybody,” he said.
Real estate may be deemed tax exempt in only two ways, either through an act of the legislature or by decree of the City Council, according to Celeste. Still, some exemptions may be obsolete because they were drafted with specific limits on tax-waived dollar amounts.
For example, said Celeste, the council may have fully exempted an organization worth $200,000 twenty years ago. Today that organization’s holdings could be worth many times that amount, but under the law only $200,000 of its assessed real estate value is legally exempt.
One focus of the review will be on so-called 501c(3) organizations, a federal designation that covers a wide range of social service agencies, charitable groups and cultural organizations, from the American French Genealogical Society to Family Resources Community Action Program.
“The conventional wisdom out there is that 501c(3) status translates into an automatic exemption from property taxes,” says Celeste. “That’s a misconception. It’s what I thought and I’ve since learned otherwise.”
The letter that will go out to the owners of tax exempt properties within several weeks will make it clear that the burden falls on the recipients to prove their status is warranted.
“We don’t have to prove to them that they are not tax exempt,” Celeste said. “They have to prove to us that they are.”
On another front that could yield more tax revenue for cash-parched city coffers, Celeste said he has hired North Andover, Mass.-based Real Estate Research Consultants, Inc. to update the registry of taxable tangible assets held by commercial and business property owners.
Celeste said the best guesstimate of the net taxable worth of the city’s tangibles is about $75 million. But one reason for hiring the consulting firm is to determine how accurate that is, and how much might be slipping through the cracks.
Actually, Celeste’s concerns about tangibles cropped up about a year ago. Not long after he was appointed tax assessor, Celeste said it soon became apparent that the longstanding tradition in the department was to send out bills to the same 300-400 business owners each year, with no attempt to verify whether the worth of their holdings was accurate.
“This is something I’ve been working on since last year when I realized how many bad accounts we had,” said Celeste. “You have no idea how many tax bills were were sending out to dead people, defunct businesses...”
The number of commercial entities that are potentially liable for tangible properties isn’t 300 or 400, said Celeste, but closer to 1,500.
Many of those entities have already been visited by personnel from RRC for the purpose of conducting preliminary appraisals, said Celeste. In the coming weeks, all will receive a special form in the mail asking for an inventory of their furnishings, business equipment and fixtures.
After the city receives their responses, the city will counter with an “impact notice,” which is basically a forecast of their tangible property tax bill. If the property owners want to dispute the value, they’ll be given the opportunity do so, either through administrative channels or, if necessary, by petitioning the Tax Assessment Board of Review for relief.
Celeste said the goal is to resolve the appeals process before the new values for tangible property take effect July 1.
Celeste envisions a net gain from the initiative on tangibles, but not necessarily a windfall. Whatever new revenue results from the process will be welcome, he said, but it’s just as important to purge defunct accounts from the list and record new ones which may be slipping through the cracks.