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Providence property taxes expected to rise as home valuations soar

Aides to Mayor Jorge Elorza say the new assessments will result in a tax hike for most property owners, but a state law that caps the amount that the city can raise in new revenue each year will complicate how new bills will be calculated.Stew Milne/Associated Press/File 2014/FR56276 AP via AP

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PROVIDENCE — The majority of Providence’s 28,000 homeowners can expect to see larger tax bills this year after their property values soared by up to 50 percent in some neighborhoods, according to Mayor Jorge Elorza’s administration.

Results of a state-mandated property valuation show single-family homes throughout the city grew by 25 percent on average over the last year, while two-family properties and triple deckers saw even larger increases.

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Aides to Mayor Jorge Elorza say the new assessments will result in a tax hike for most property owners, but a state law that caps the amount that the city can raise in new revenue each year at 4 percent — no matter how much values increase — will complicate how new bills will be calculated.

In the end, in fact, the overall tax rate will probably decline but will still lead to higher tax bills because of the increased valuations.

“While we are still formulating the budget and necessary revenues, we are still working with possible tax rate scenarios that will reflect a lowering of the rates against valuations,” said Victor Morente, a spokesman for the mayor.

“But more than likely, even under that process, there could be an increase in the majority of properties.”

The city needs the extra tax revenue to pay for already-guaranteed raises for most city employees and to close a projected $12 million deficit in the school department’s budget for the fiscal year that begins July 1.

Notices will be mailed to homeowners by next week, and the city will hold public hearings on the revaluation through May 17.

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The values will be finalized by June 3.

The explosive growth in property values may come as welcome news to homeowners who are just now seeing their assessments surpass pre-recession levels.

But because the state allows municipalities to raise their overall tax levies only by 4 percent each year, city leaders say the adjustment in rates could actually lower taxes on more expensive homes that didn’t see values grow as much as properties worth less than $200,000.

For example, a single-family home worth $400,000 that is currently taxed at $18.80 per $1,000 of assessed value generates $7,520 in taxes each year. If the new value of that property is $480,000 and the tax is lowered, for example, to $15 per $1,000, the home would generate $7,200 in taxes, or $320 less.

Meanwhile, a $200,000 home whose value increased to $260,000 would see taxes grow by $140, from $3,760 (at $18.80 per $1,000) to $3,900 (at $15 per $1,000).

Every neighborhood is expected to see double-digit increases in property values, but the growth hasn’t been even across the board. Homes that sold for less than $215,000 in 2018 have seen values increase by 34 percent. For homes worth more than $215,000, values grew by just 20 percent.

City Councilman John Igliozzi, who chairs the Council Finance Committee, said he expects Elorza’s budget will lead to higher taxes in less affluent neighborhoods like Silver Lake, the community he represents.

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In his ward, single-family values are up 32 percent and triple-deckers are up 49 percent.

“The good news is people’s property values went up,” Igliozzi said. “The not-so-good news is that the percentages were highest in the most economically challenged neighborhoods.”

Because multifamily properties have seen larger increases in value, Igliozzi said he fears the landlords may transfer additional costs to tenants by raising rents. The non-owner-occupied rate — known as the landlord tax — is $31.91 per $1,000.

Keith Fernandes, who owns multiple rental properties in the city and advocates on behalf of landlords, said the increase in multifamily property values will almost certainly result in an increase in rents.

He said city leaders should seek to close the gap between the owner-occupied tax rate and the non-owner-occupied rate, a measure that was approved in 2014 but never implemented.

“Otherwise landlords will have no option but to pass on those tax increases to renters via higher rents again, which is patently unfair to people who choose to rent,” Fernandes said. “Everything else is just window dressing.”


Dan McGowan can be reached at dan.mcgowan@globe.com. Follow him on Twitter at @danmcgowan.