WOONSOCKET – The Budget Commission voted 4-0on Monday afternoon to implement the $2.5 million supplemental tax bill, acting on the authority provided by state lawmakers.
The supplemental bills for fiscal 2013 are due to be issued retroactively on July 26, raising an extra 18.7 percent on motor vehicles and 4.7 percent on real estate, excluding single-family homes and condos.
But two regularly scheduled tax bills for fiscal 2014 will be issued before then, one for motor vehicles on July 11 and another for real estate sometime the following week. Even though the supplemental is to be issued later, its effects, compounded by a sharp rollback in the homestead exemption, will also be readily apparent in the earlier real estate bills, according to Tax Assessor Christopher Celeste.
Not counting the impact of the supplemental on motor vehicles, the owner of a home worth $150,000 could see taxes jump from the $2,950 of 2013 to $3,628, an increase of about 23 percent, he said. That will include single-family homes and condos, which are exempt from the supplemental only.
Part of the reason for this is that the supplemental was designed, in part, to build up the city’s tax base. That’s a way of bolstering the effect of the regular 4 percent increase in taxes, the maximum allowed by law, that the commission also envisions levying for each year through fiscal 2017. That includes the fiscal year that began July 1, which also factors into the 23 percent equation for regular tax bills.
Because motor vehicle tax rates are fixed by law, the temporary boost from the supplemental on that portion of the tax base cannot be carried over into the new fiscal year. Instead, it filters through the rest of the tax base, including the single-family homes and condos that were excluded from the supplemental bill by the design of the legislature.
“This is a tough, tough, time for people,” said Mayor Leo T. Fontaine, a member of the commission. “The impacts are likely to vary widely among individuals but no matter how you look at it this is not a great situation to be in.”
If there is any good news in the situation, Fontaine said it’s that the commission’s five-year plan to wipe out the city’s massive deficits is largely in place.
By 2017, he said, the city should return to the black, wiping out a structural deficit pegged to be as high as $14 million.
A couple of sign-carrying spectators in Harris Hall yesterday obviously had a less charitable view. One sign said, “Bankruptcy only a breath a way” along with the image of an angry storm cloud blowing dollar-signs into the wind. Another said, “You can’t fix stupid but you can vote it out!!!”
The commission approved the supplemental bill after State Revenue Director Rosemary Booth Gallogly made it clear that the panel’s five-year plan met all the metrics state lawmakers established for moving forward.
As a condition of issuing the bills, state lawmakers said the commission would have show at least $3.75 million worth of savings from other components of the five-year plan, including concessions on health care from active employees, retirees, departmental reorganizations and other cuts. State lawmakers said they wouldn’t approve a bill that heaped an unfair share of the burden of balancing the city’s budgets on taxpayers alone.
Gallogly said the commission had more than met the lawmakers’ benchmarks. During fiscal 2014 alone, she said, the five-year plan is on track to yield about $1.25 million from concessions on health care made by active employees, in addition to “enactments” essentially imposing similar concessions on employee groups that did not approve them, including the police.
Another $2.35 million in savings are projected to come from similar savings resulting from non-negotiated enactments on health care from various groups of retirees, plus $1.14 million from the suspension of COLAS for member of the local pension system for public safety workers and departmental reorganizations.
“I’m comfortable we’ve me the test for the supplemental tax,” said Commissioner Peder Schaefer.
Gallogly publicly thanked the legislators for finding a middle ground with the budget commission, overcoming their concerns about unfairly heaping the burden on property owners.
“We’ve worked very hard to convince them the supplemental tax was needed,” she said. “They worked well into the night on this for a couple of nights.”
What she did not say is that the retiree enactments are now the subject of a legal challenge. A former policeman is asking a Superior Court judge to freeze that portion of the five-year plan. A hearing is scheduled for Thursday.
Though the supplemental is structured to raise $2.5 million, Finance Director Thomas Bruce said he’s conservatively estimating the city will collect only about $1.5 million in time to apply it to fiscal 2013.
To do so, the proceeds have to be collected by Aug. 29, or no later than 60 days after the end of the fiscal year. Payments will be considered delinquent after Aug. 31 and thereby subject to an interest penalty of 15 percent a year.
“We actually have no experience with this type of a bill,” he said.
The bills will be printed in a bright color that doesn’t look like a normal tax bill and be clearly marked as a supplemental. Officials are recommending that if property owners have an escrow company that usually pays their taxes, they pass the bill along to the company. The best course of action to avoid confusion with escrow companies who might not be expecting a supplemental is to pay it out of pocket, officials say.
“It’s going to look different than all the other bills that go out,” said Celeste.