"The commercial property tax [in Providence] is second highest in the country behind Detroit."
Lincoln Chafee on Friday, February 3rd, 2012 in a news show
Rhode Island Governor Lincoln Chafee says that the commercial property tax in Providence is second-highest in the nation behind only Detroit
In his State of the State speech, Governor Lincoln Chafee declared this "the year of the cities and towns" and promised to work to relieve the burden on property taxpayers.
"People who have worked hard and played by the rules their entire lives are worried because they may be one property tax payment away from losing their home or business," he said in the Jan. 31 speech. "We must reverse this trend."
In the days afterward, the governor reiterated this commitment. During a Feb. 3 appearance on Channel 12’s "Newsmakers," Chafee pointed to the negative effects of an increasing reliance on property taxes in Rhode Island’s economically distressed communities -- Central Falls, West Warwick, Pawtucket and, of course, Providence.
"And no wonder there’s empty stores in Providence," he said. "The commercial property tax is second highest in the country behind Detroit."
The issue of property taxes has come to the fore in Providence with the ongoing fight between the financially struggling city and its tax-exempt nonprofits. Providence leans heavily on tax payments from businesses and residents to raise revenue. But is the city’s commercial property tax really the nation’s second highest?
Chafee’s spokeswoman referred us to a report released last month by a financial panel advising Providence. The report, "A System Out of Balance," from the Commission on Revenue, Sustainability and Efficiency, recommended a series of changes to raise money for the city, including higher sales tax receipts, more state aid and larger contributions from Providence’s nine colleges and hospitals.
To put the issue in context, the report included a comparison of commercial property tax burdens in Providence and other major cities across the country, taken from a joint study in 2010 by the nonpartisan Minnesota Taxpayers Association and the Lincoln Institute of Land Policy, a Cambridge, Mass.-based nonprofit think-tank.
The "50-State Property Tax Comparison Study," which has been done periodically since 1995, examines property taxes across the country in three ways: by comparing taxes in the largest city in each of the 50 states and the District of Columbia, as well as the second-largest cities in Illinois and New York because Chicago and New York City have such idiosyncratic tax systems (so 53 cities in all); by comparing taxes in the 50 largest cities by population in the country; and by comparing the taxes in a single rural community in each of the 50 states.
Providence was considered among the first group of 53 cities. It did indeed rank second for the highest commercial property taxes, behind only Detroit. Des Moines was third, Philadelphia fourth and New York City fifth.
According to the study, for a commercial property valued at $1 million and with $200,000 in fixtures, the net property taxes in Providence would be $47,695 a year. The effective tax rate, which factors in statutory exemptions and assessment practices, would be 3.975 percent.
The same property in Detroit would pay $48,141 for a rate of 4.012 percent. In contrast, that property in Cheyenne, Wyo., which ranked 53rd in the study, would pay $7,824 under a 0.652-percent rate.
Providence is not included in the second group of the 50 largest cities in the country. (With 178,042 people, Rhode Island’s capital ranks 131st, according to the 2010 census.) If it were, it would still be second for commercial property taxes, again behind Detroit.
If Providence were included in the third group of rural communities, it would rank second for commercial property taxes, behind Iola, Kan.
Providence has moved up the list as its financial crisis has deepened in recent years: in 2007, the city ranked 16th for commercial property taxes. In 2009, it ranked sixth. It moved to second in 2010.
So Providence does have the second-highest commercial property taxes in the most recent 50-state study. But although that study is certainly comprehensive, it is not exhaustive. It did not look at every city in the country. We looked for more research.
Our first call was to the Tax Foundation, a business-backed tax policy group based in Washington, D.C., that does state-by-state comparisons of tax issues. Joseph Henchman, director of state projects, referred us to a draft report that compared the tax burdens that identical hypothetical corporations would have in about 100 U.S. cities. (The study looked at two cities in most states; it looked at only one city in Rhode Island and other small states.)
In that study, which has yet to be released, Providence would have the third-highest commercial property taxes for a corporate headquarters, according to Henchman, behind Des Moines and Columbia, S.C.
"It’s looking like no matter how you do it, Rhode Island is not coming up real good," said Henchman.
Chafee said that Providence has the second-highest commercial property tax in the nation, citing a City of Providence report that cites the Minnesota report. Neither report makes that definitive claim.
But the Minnesota report does say Providence is second highest in its comparison of 53 cities. And if Providence were included in comparisons of the nation’s largest cities, it would also rank second.
A Tax Foundation study ranks Providence third for commercial property taxes by one measurement, but different ways of comparing tax burdens could account for the difference.
It’s possible there are other cities with higher commercial property taxes, but we couldn’t find any.
Although Chafee went a step too far in saying definitively that Providence’s commercial property tax is the second-highest in the country, there is ample evidence to support his statement and little that contradicts it.
We rate the claim Mostly True.
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Published: Friday, February 10th, 2012 at 6:00 a.m.
Interviews and email, Christine Hunsinger, spokeswoman, Governor Lincoln Chafee, Feb. 7,8, 2012
Interview, Joseph Henchman, director of state projects, Tax Foundation, Feb. 8, 2012
News.ProvidenceJournal.com, "State of the State Message: ‘The Year of the Cities and Towns,’ " Governor Lincoln Chafee, Jan. 31, 2012, accessed Feb. 6, 2012
RhodeIsland.OnPolitix.com, "Newsmakers 2/3: Chafee, Mullaney," Channel 12, taped Feb. 3, 2012, accessed Feb. 6, 2012
News.ProvidenceJournal.com, "A System Out of Balance," Providence Commission on Revenue, Sustainability and Efficiency, Jan. 9, 2012, accessed Feb. 6, 2012
LincolnInst.edu, "50-State Property Tax Comparison Study 2010," Minnesota Taxpayers Association and the Lincoln Institute of Land Policy, April 2011, accessed Feb. 6, 2012
COST.org, "Total State and Local Business Taxes," Council on State Taxation, July 2011, accessed Feb. 8, 2012
COST.org, "The Best and Worst of Property Tax Administration," Council on State Taxation, May 2011, accessed Feb. 8, 2012
TaxFoundation.org, "Rhode Island’s State and Local Tax Burden," Feb. 23, 2011, accessed Feb. 8, 2012
TaxFoundation.org, "2012 State Business Tax Climate Index," Jan. 25, 2012, accessed Feb. 8, 2012
LincolnInst.edu, "Local Property Tax Revenue By State 2008," Lincoln Institute of Land Policy, accessed Feb. 8, 2012
LincolnInst.edu, "Percentage Distribution of Local General Revenues by Source, by State 2008," Lincoln Institute of Land Policy, accessed Feb. 8, 2012
Rhode Island League of Cities and Towns, "Property Tax Policy -- Providence," Peder Schaefer, associate director, Aug. 4, 2011, accessed Feb. 7, 2011
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