February 4, 2009

1. Governor’sStrategic Tax Policy Workgroup February 4, 2009

2. Property Taxes – Overview of Sub-Group Consensus • Findings: • Property taxes in Rhode Island are high relative to the US as a whole, higher than Massachusetts and slightly lower than Connecticut. • Commercial and tangible rates are exceptionally high in Rhode Island in many urban municipalities. • Motor vehicle excise taxes are exceptionally high principally in urban municipalities. • Commercial rates are high in municipalities where commercial development is encouraged and low where such development is typically discouraged.

3. Property Taxes – Overview of Sub-Group Consensus • Findings (continued): • Personal exemption policy is inconsistent from one city or town to another and excessive exemptions undermine tax capacity. • Tax assessors need the authority to scrutinize the public purpose basis of statutory tax exemptions in order to maintain tax capacity. • The tax appeal process is cumbersome and lengthy.

4. Property Taxes – Overview of Sub-Group Consensus Rhode Island Net Assessed Value and Tax Levy

5. Property Taxes – Overview of Sub-Group Consensus Massachusetts and Connecticut Comparisons

6. Property Taxes – Overview of Sub-Group Consensus Key Components: • Reduce the overall property tax burden with the following priorities: • Modify excessive tax rates in some municipalities on commercial and tangible property. • Adjust high tax rates in some municipalities on motor vehicles. • Insure that property tax policy is consistent and supportive of long term land use goals of the state. • Improve the transparency of tax classification strategies. • Reduce reliance in some municipalities on tax stabilization agreements to attract development. • Modify the basis for granting personal exemptions.

7. Property Taxes – Overview of Sub-Group Consensus Key Components (continued): • Reduce the overall property tax burden with the following priorities: • Insure that tax exempt properties meet the public purpose test. • Insure state involvement in the assessment of public utility and affordable housing property. • Improve timeliness of the property tax appeal process. • Develop statutory incentives which prevent municipalities from enacting unique property tax policy which only applies to their city or town.

8. Property Taxes – Overview of Sub-Group Consensus • Property Tax Rates: • Move toward standardization of tangible property tax rates and maximum tangible tax rates in every municipality (Double the base rate). • Move toward standardization of commercial property tax rates and maximum commercial tax rates in every municipality (50% greater than the base rate). • Move toward standardization of motor vehicle excise tax rates between municipalities while maintaining or expanding the current state $6,000 vehicle exemption. ($25 per thousand motor vehicle tax rate simulated).

9. Property Taxes – Overview of Sub-Group Consensus • Property Tax Rates (continued): • Adjust the residential property tax burden taking into account tax burden adjustments resulting from proposed changes in other broad based state taxes. • Establish and enforce consistent tax classification standards in every municipality so that the tax rate determination (as well as valuation method) is transparent and consistent across the state. • Reduce or eliminate the reliance on future tax treaties or stabilization agreements as commercial rates are reduced and standardized.

10. Property Taxes – Overview of Sub-Group Consensus • Personal Exemptions: • Recommend that personal exemptions be limited to a fixed percentage of total municipal tax levy and that such exemptions be limited by a statewide personal income and residency qualifier.

11. Property Taxes – Overview of Sub-Group Consensus • Statutory Exemptions: • Recommend that the current statutory tax exempt standards be retained with the provision that tax assessors be given the authority to limit or eliminate the exemption based upon substantial and material unrelated business taxable income (as defined by the Internal Revenue Service code) associated with any particular parcel owned by a tax exempt organization.

12. Property Taxes – Overview of Sub-Group Consensus • Administration of the property tax: • Expedite the tax appeal dispute resolution process within municipalities before going to court. • Establish a state tax court or special calendar in Superior Court to hear real estate appeals which exceed a certain threshold. • Establish a uniform date deadline for filing all appeals with a response by the assessor required after the filing of all appeals. • Eliminate the annual requirement for “filing an account” for all real estate appeals that are continued from one year to the next.

13. Property Taxes – Overview of Sub-Group Consensus • Administration of the property tax (continued): • Allow for an automatic appeal for pending appeals in the following tax year for real estate appeals that were not resolved prior to the new tax year. • Require that all commercial property owners supply an income and expense statement prior to the establishment of original value by the assessor. • Provide technical assistance to all municipalities in implementing changes to the property tax enacted as a result of the tax policy group recommendations.

14. Property Taxes – Overview of Sub-Group Consensus Pricing * Potential revenue addition of $8,600,000.