With property values skyrocketing, many Providence residents will see tax hike

Providence City HallLane Turner/Globe Staff

PROVIDENCE — If you own a single-family home in Providence (and actually live there), there’s a good chance that you’ll be seeing a property tax reduction come July.

If you own rental property in the city, you’re almost certainly going to be paying more taxes. Which could mean higher monthly rents.

That’s the major takeaway from the $567.3 million budget proposal unveiled Tuesday by Mayor Jorge Elorza. It’s the final tax-and-spending plan to come from the term-limited Democrat, who will leave office midway through the fiscal year in January 2023.

The budget still must be vetted and approved by the City Council, but Elorza’s proposal sets the residential tax rate at $18.50 per $1,000 of assessed value (and a 45 percent homestead exemption) and the commercial tax rate at $33.85 per $1,000.

The property tax rates are being reduced dramatically, but property values have risen so much that many homeowners are set to see net increases on the amount they actually pay in taxes. State law prohibits municipalities from increasing their total tax levy by more than 4 percent in a single year, so the lower tax rates will bring the city into compliance.

“Property values have grown so much in the past three years that many property owners will indeed pay more in taxes but we were able to minimize the increase by lowering the residential and commercial tax rates by 25 percent and 8 percent, respectively,” Elorza said during his budget address.

There are wide differences in the average anticipated tax bills depending on neighborhoods, but here are a few examples, according to data provided by the city:

• The average single-family, owner-occupied home in Providence is now worth $424,276, and the average homeowner will receive an annual tax reduction of $306. Single-family homeowners from parts of the more affluent East Side will see their taxes go down by more than $1,000, while the average single-family homeowner in Silver Lake, the neighborhood represented by Council President John Igliozzi, will see a $67 increase.
• The owner of a single-family rental property in Providence will see their bills increase by $447.75 on average, and those amounts also vary widely by neighborhood.
• The average two-family rental property owner is expected to pay an additional $1,067 in property taxes, while three-family owners will pay $1,216 more on average, and four-and-five-family owners will pay an additional $1,788. Owners who live in one of the units in their rental property are eligible for a homestead exemption.
• The average commercial property owner in the city is slated to pay an additional $1,727 in taxes, although the amounts vary depending on the size and use of those buildings. Apartment complexes have risen in value while large offices have decreased.

As for the rest of Elorza’s budget proposal, the motor vehicle excise tax rate will be $20 per $1,000 (the first $6,000 of value is exempt for everyone) and the tangible tax rate (think office property) will be $55.55 per $1,000. The state is in the process of phasing out the car tax altogether by 2024.

For the first time, the city’s annual pension contribution to cover retiree benefits will top $100 million. On June 7, city voters will consider allowing the city to borrow $515 million to shore up the depleted pension fund. The bond also requires General Assembly approval.

Elorza’s proposal also includes funding for 50 new police officers, another class of firefighters, and $800,000 for the recreation department to hire youth workers during the summer and pay them $15 an hour.

The budget contributes $130 million from the city to the school department, even though the state controls Providence schools. The state is asking for additional $10 million, and the two sides are tied in a legal battle over those funds.

Although Elorza has long had a contentious relationship with the Providence Teachers Union, he struck a more balanced tone in his budget address, declaring that the failing of the district “are not due to any individual or group, and therefore cannot be resolved by any individual or group.”

“The failings of PPSD are structural,” Elorza said. “Superintendents and principals do not control the district or the schools and the seniority system does not incentivize teachers in the right way. The dirty secret is that if we really, and I mean really, want to turn public education around, it requires a radical transformation. Changing personnel, reorganizing departments, and simply spending more money will not do.”

Near the end of his speech, Elorza vowed to “sprint to the finish line” in his final eight months leading the city.

“As we all prepare to pass the baton to the next generation of city leaders, I am excited to look back on what we’ve done but I’m even more excited to look forward to the new and different directions that they will take our city,” Elorza said.