There has been a lot of confusing information about the City's finances and how that might affect homeowners and renters. Here is clear information about what's happening, where the city is in the budget process, and what I'm working on to protect middle & working-class families and move forward with creative and balanced solutions to Providence's financial issues.
Question & Answer: City Budget & Taxes
TL;DR Version:
1. Providence's fixed costs are increasing by more than the amount state law allows the City to raise the levy.
2. The total levy includes commercial, residential, and tangible tax and growth as new properties come online.
3. To meet rising costs, the City will cut the budget, raise new revenue, and ask the General Assembly to pass state legislation allowing Providence to increase the levy by up to 4% over the state-allowed cap if necessary. City Council passed a resolution asking the General Assembly to do that.
4. Passing the resolution asking the General Assembly to help the City didn’t raise taxes. The Council will set the tax rate when we pass the budget before July 1.
5. Increasing the total city levy by an additional 4% is not the same as raising individual residential taxes by that same 4%.
6. Just because your property assessment increased, it doesn't mean your taxes will increase by that same amount. Council has not set a tax rate yet.
7. Only the City Council can raise taxes as part of the budget process – and I have pledged that the burden of increased costs will be shared, not shouldered by working and middle-class homeowners and renters as I work with my colleagues to seek creative and balanced solutions that include raising other revenue, cutting the budget, and increasing the levy.
8. The Mayor will present the budget in mid-April, and then the Council Finance Committee will vet the budget, hosting two public hearings on the proposal before the full council passes the budget in June. The budget includes next year's tax rate.
9. You can make your voice heard. Join us on April 9 at 6 pm at Bell Street Chapel. Follow along online or in person as the Finance Committee vets the budget and attend the public hearings.
Question & Answer:
Why is the City having financial difficulties?
In November, the state education department, RIDE, and the City of Providence settled a lawsuit about school funding during the state takeover. The lawsuit was about different interpretations of the state law that governs state takeovers of municipal school districts. The settlement requires the City to pay more to the Providence Public School Department (PPSD), bringing this year's PPSD allocation to $146.5 million (M) and $147 M for the two years after. That breaks down to:
An additional $4M for 2024 and $11M for the 2025 budget, so 2025 Providence gave an additional $15M to PPSD.
An additional $11M in fiscal year (FY) 2026 and 2027 each.
What's the problem? Isn't education funding good?
Yes! That's why I advocated to pass a budget last year that included the largest single-year increase to education in any budget. We increased funding for education by $5.5M, for a total education allocation of $135.5M.
The City's budget doesn't have a lot of wiggle room – we are required by law to pass a balanced budget, and we do so for the fiscal health and well-being of all of us who live, work, and love our City. Education funding is a big part of that. Still, we don't have enough money to pay such a significant increase in one year and meet our other financial obligations while maintaining core city services.
So, what do we do?
This winter, Mayor Smiley proposed asking the General Assembly for enabling legislation that would allow Providence to increase the levy above the state cap for the next budget.
What is the levy? What cap?
The levy is all of the tax revenue the City collects each year – it includes taxes on commercial properties, residential properties, tangible tax, and new growth as new properties get developed and taxed. Tangible tax is the tax businesses pay on equipment and property that can be touched or moved. Each year, the City Council passes the levy alongside the city budget.
You can see the city budget Council passed last June here and the levy here.
Rhode Island State Law says that cities and towns cannot raise the total levy by more than 4% over last year's levy. That is the 4% cap.
4% of last year's levy is $15 M. The total amount the levy could legally be for the fiscal year that starts July 1, 2025, is $412,059487.
Why isn't $15M enough?
The City's fixed costs – nonnegotiable payments, like pension increases, education funding due to the settlement described above, and healthcare expenses – are going up. Considering the largest fixed costs only, the City is looking at increased costs over $21M. That doesn't include inflation, debt service, etc. And all that is before we consider core city services like trash collection, road maintenance, libraries, parks, and more.
What is City Council doing?
Providence City Council unanimously passed a resolution asking the General Assembly to allow us to increase the levy by up to an additional 4%, only if necessary, for up to $30M more than last year's levy. The resolution also asks the General Assembly to work with us to enable revenue from new sources, such as a sales tax on parking in a private parking lot. Finally, the resolution makes clear that this is not, in itself, a tax increase. The City Council sets the tax rate each year as we pass the budget.
The City Council is working with Providence state representatives and senators to identify new revenue sources requiring state-enabling legislation. Council is also working to raise non-tax revenue that is in our control – like bringing fines and fees up to levels comparable with neighboring cities and towns.
If the levy is part of the budget passed in June, why did City Council pass this resolution now?
Timing. Every winter, the Mayor and his administration prepare a city budget and present it to the City Council in April. The City Council finance committee vets every department budget from April to June in public committee meetings and two public hearings. It proposes a levy and budget back to the full Council for passage before July 1. The General Assembly only meets from January – to June. We can't wait to know exactly how much the City might need and responsibly vet the city budget. So, the City is asking permission from the state now.
Two important things:
Passing the resolution asking the General Assembly to help the City doesn't raise taxes, and it doesn't mean the City will necessarily raise taxes.
Increasing the total city levy by an additional 4% is not the same as raising individual residential taxes by that same 4%.
While we're talking about taxes... My property assessment went up a lot. Why did it go up so much? Are my taxes going up that much?
I don't have to tell you we are in a housing crisis - we are all experiencing it. Redfin named Providence the most expensive City for renters in the country. Not enough homes (houses, apartments, etc.) are being built fast enough to meet demand. That makes home sales prices really high, increasing rent, too. Property tax assessments are based on many factors, like improvements you made to your home, but they are also based on the property's potential worth if sold. Because of the housing crisis, sales prices are up, so your property's assessed worth is also up.
The City Council will set a new tax rate in budget deliberations. Your property assessment may have gone up a lot, but that doesn’t mean that your taxes will go up by that amount. City Council is working hard to increase revenue outside of property taxes.
I have pledged not to make the effects of the housing crisis worse in this year’s budget.
Here's what I said when we passed the resolution to the General Assembly:
"As city leaders, we have a responsibility to protect essential services, meet our school funding obligation, and make decisions that support working families. Providence urgently needs new, sustainable sources of revenue that do not overwhelmingly rely on regressive property taxes. That is why we are working closely with the administration and members of the General Assembly to identify alternative revenue streams – solutions that strengthen city finances and support residents. I'm confident that this partnership will lead to creative and balanced solutions that address these challenges."
What's Next?
The Mayor will present a budget in mid-April. The finance committee will vet the budget in public committee meetings and host two public hearings – one at the beginning of the process to hear resident feedback and one at the end when the Committee is ready to present its budget proposal. Then, the Council will pass the budget before the end of June.
We make better decisions when everyone makes their voices heard. Get involved! Join me on April 9 at 6:00 pm at Bell Street Chapel. Send me an email here. Give me a call or text at 401-338-0134. After the budget is introduced in the council, you'll be able to follow along at finance committee meetings and attend the public hearings.