City has power to hike senior exemptions, but will it?
It now has General Assembly approval, but will the city grant property owners over 65 years old an additional $2,000 exemption for a total of $12,000?
Mayor Scott Avedisian thinks that is exactly what will happen, meaning the city would need to make up $400,000 in lost revenues in next year’s budget.
At the heart of the issue is the council efforts to keep the value of senior citizen exemptions at pace with increased living costs and how, in effect, those benefits become the expense of non-senior taxpayers.
In the closing days of the General Assembly, legislators approved the increase in the property exemption that presently is at $10,000. Legislation was introduced after the council approved a resolution calling for the change. The resolution was signed by the mayor.
“It’s not a done deal,” maintains Ward 9 Councilman Steve Merolla, “it just gives us the authority to do it.”
Before passage of an ordinance, Merolla said the council “would need to take a look at the numbers.”
Avedisian has done that. He said Friday approval of the ordinance would have the city starting off the next budget “$400,000 in the hole.” The mayor doubts the number will dissuade the council because it passed the resolution.
Presently, senior citizens are entitled to a $10,000 value exemption on their real estate and $6,000 on a motor vehicle. They can’t take both exemptions; however, if married, the couple is eligible for a motor vehicle and property exemption. Seniors must apply for the exemptions and once they have it, they will continue to get it.
As proof of age, the city requires a license or other form of identification, such as a passport, or a birth certificate.
City tax collector and assessor Kenneth Mallette has called the city’s exemptions for seniors and disabled generous as compared to other municipalities. Mallette calculated exemptions granted by the citry as costing more than $3.3 million in tax revenues.
Elderly exemptions on real estate account for $2.2 million with another $445,000 in motor vehicle exemptions. The city circuit breaker, which is based on income, amounts to $428,000 and the tax freeze for heads of households with a disability is another $300,000.
Mallette has problems with the tax freeze, as it lacks guidelines and is not based on ability to pay. He said he would like to see legislators address those questions and iron out inequities.
By comparison, state legislation enables Cranston to exempt $9,000 in property valuation of taxpayers over the age of 65 without regard of ability to pay. East Greenwich has a tiered system based on age with a $26,000 exemption for taxpayers between the ages of 65 and 70. The exemption climbs to $58,000 for a taxpayer 85 years old or older.
With revaluations, Merolla contends the city needs to look at the effective value of exemptions to ensure they are truly providing the relief intended. With escalating property values, the proportional relief of a set exemption declines along with the tax rate. But in the last revaluation, residential and commercial values dropped, with the commercial values taking a bigger hit than homes. The effect was to drive up residential tax bills in proportion to commercial bills, although both increased.
Given state demands to fund pensions, which are projected to push up school department costs by $5.3 million next year for teacher pensions alone, Avedisian has already started work on the 2013 budget.
He said budget work “is never ending” and requires constant vigilance.
Although he signed the resolution to increase the senior citizen exemption from $10,000 to $12,000, Avedisian said additional consideration is needed.
“When you do that change, everyone pays more,” he said.
Asked about a proposal he advanced earlier this year for biennial municipal budgets, which he advocated as a means of stabilizing municipal spending, Avedisian said he still believes it is a good idea, although it is not practical with current turmoil over unfunded pension liabilities. He said it would be hard to set a two-year tax rate at this point. Nonetheless, a system of two-year budgets would go a long way to de-politicizing the process and creating predictability, he maintains.