The Town Council is looking at a new tiered residential tax rate, where residents benefit and others pay a little more. The plan has hurdles to clear, but was applauded as a way to make the community more affordable for those who live here.
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CONTACT: Matt Sheley at (401) 712-2221 or msheley@middletownri.com
TIERED TAX TALK TAKES OFF
MIDDLETOWN, R.I. (NOVEMBER 2, 2021) – If you live and vote in Middletown, you might be getting a bit of a tax break down the line.
Late in Monday’s meeting from Town Hall, the Town Council asked Town Administrator Shawn J. Brown to continue to work to create a new tiered residential tax rate, a proposal from Councilwoman Terri Flynn.
The plan, if okayed by the council, would reward those who call Middletown home, while shifting some of the residential tax burden to those who own second homes here.
Based on the preliminary numbers, if the council split the residential tax rate by 67 cents, a resident with a home assessed at the median value of $400,000 stood to save about $110 in taxes a year, while a nonresident could expect to pay $226 more.
“The way I look at it right now, it’s a great proposal,” council President Paul M. Rodrigues said. “I think that it certainly is geared towards helping the full-time residents. As it becomes more and more costly to live here, there’s money that’s coming in and if these folks can afford these houses, then they can afford the tax rate. I hate to say it like that, but it helps our residents.”
Speaking with the council, Brown said the way the tiered residential tax plan was envisioned, a resident would need to meet several criteria to be eligible. Those included:
- Being a registered voter in Middletown.
- Having a primary address in Town.
- Not receiving a real property tax exemption in any other community.
- Successfully completing an annual application with the Town to receive the new exemption.
Despite the enthusiasm for the new plan, there’s quite a bit of work before it gets implemented.
First, Brown said he needed to sit with legal counsel and other Town officials to craft an ordinance to put before the council for adoption. That ordinance would be subject to two public hearings, where anyone could speak on the matter.
Next, the Town would need the General Assembly to approve enabling legislation clearing the way for the tiered residential tax plan. Part of that would need to be a waiver for Middletown to implement the tax, which under state law needs to be put in during years when there’s a property revaluation.
Brown said because of the additional workload on the Tax Assessor’s office, another employee would likely need to be hired as well.
The tiered residential tax plan would not impact or add any taxes to the commercial or motor vehicle tax rates in Town.
Town officials also wanted to make it clear the tiered residential tax plan would not generate new taxes for the community. Instead, it would shift where that pool of residential tax dollars came from. In the current Fiscal 2022 budget, that pool is about $31 million.
“It’s a two-to-one ratio,” Brown said. “For every dollar that you save a qualified residential person, the non-qualified resident would pay $2.”
“I want to make sure that everyone understands that it’s not generating revenue, it’s helping the resident versus the nonresident,” Rodrigues said.
Councilwoman M. Theresa Santos said she liked the plan, but not the annual application process, something Town staff said they’d review.
“The only thing I object to so far (is the annual application to get the exemption),” Councilwoman M. Theresa Santos said. “We don’t apply for our veterans’ exemption or our senior exemption every year. Why do we have to apply for this every year?”
The idea of reforming the Town’s tax policy is not a new one. For at least two decades, a proposal or two – or more – have been floated by seemingly every council.
The last major change took place in 2003, when the council implemented a split residential-commercial tax rate. At the time, council members talked about the need for Middletown to capitalize more on its vibrant, diverse business base to help ease some of the burden on residential homeowners.
Since then, there have been tweaks to the exemptions and other modest changes, but nothing as sweeping as the split residential-commercial tax rate.
Currently, the sitting council is mulling increasing the exemptions for the eligible seniors, military veterans and the blind. That proposal from Councilman Dennis Turano earned high marks at the council’s last meeting.
All told, the Town has about 6,200 taxable properties on the rolls. Overall, the taxable base was more than $3.8 billion in assessments.
Town staff said split tax rates are not uncommon in Rhode Island. For example, Tax Assessor George Durgin said in West Warwick, there are four different tax rates for real property: apartments with six plus units, commercial and industrial, two to five family homes and one family homes.
“Several communities split their commercial and residential rates,” Brown said. “The statute that allows this to happen is the same statute that allows us to split the residential rate. The state’s current legislation allows for it to happen. This is very familiar territory across Rhode Island.”
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