July 22, 2024

Newport Could See Large Property Tax Increase

Residents and businesses in Newport could see the highest increase in property taxes allowed under state law when the city finalizes its fiscal year 2025 budget in June.

The reasoning? Upcoming and ongoing capital improvement projects with high price tags in the areas of education, infrastructure, stormwater mitigation, recreation and more.

At a recent City Council workshop, councilor Mark Aramli said he is a “pro-tourist person,” but the city needs to find sources of revenue, primarily from its roughly one million annual visitors, to cover the costs of future expenses.

“I think the city is broke,” he said. “I don’t see the revenues that are coming into the city aligning well with the very large expenses that we know we have coming. It’s clear to me that if we don’t find this revenue from our visitors, there’s a big tax increase coming for our residents, because we can’t afford to pay for the things we have coming.”

Under the city’s $110 million fiscal year 2024 operating budget, residents pay taxes of $9.92 per every $1,000 of a property’s assessed value annually. Non-residents, those determined by the city to not be occupying their property for a majority of the year, pay $10.93 per every $1,000 of assessed value.

The city made the distinction during the last budget cycle in an effort to provide relief for yearround residents and prevent largescale tax increases. The increased burden on non-owner-occupied properties is intended to offset the savings enjoyed by full-time residents and the mechanism acts as a protection.

Meanwhile, commercial properties pay $14.88 per every $1,000 of assessed value, the highest disparity between residential and commercial property tax rates (50 percent) allowed by state law.

State law also dictates that a municipality cannot increase its annual tax levy, the total dollar amount resulting from property taxes, by more than 4 percent year over year, though a municipality can petition the Rhode Island General Assembly for exemption from the law.

City spokesperson Tom Shevlin said it was too early to speculate about potential rate increases until the City Council hosts a meeting on the capital improvement plan (CIP) and the city completes its statistical property re-valuation cycle, which is currently ongoing. Due to the market, real estate values are expected to increase this year.

The meeting is scheduled for the end of January and will contain discussion about many of the anticipated projects and costs.

“What the city’s done in the past when property values have increased is we’ve actually lowered the tax rates so people don’t have to pay out of pocket and avoid that sticker shock,” Shevlin said. “I suspect that could happen again, but we can’t speculate about what the rates could be just yet.”

The council spent much of the nearly two-hour workshop brainstorming ways to increase revenue, ideas that will likely require state approval and include taxing shortterm rentals in mixed-use zones at a commercial rate, lobbying for increased state aid for public school infrastructure projects, supporting modifications to the state school funding formula, increasing the city’s per passenger docking and disembarking fees for cruise ships and establishing an “amusements and event tax” for annual events like the Newport Folk Festival and the International Boat Show.

Anticipated high-cost expenses that are already impacting or likely to impact the city in the next year or two include estimates such as $350 million for water system infrastructure improvements; $35 to $40 million for repairs to Bellevue Avenue; $40 million for the relocation of the city yard; $35 million for the overhaul of Easton’s Beach and its facilities for resiliency; between $6 and $30 million to close the deficit on the overbudget new Rogers High School project; $16 million for harbor improvement projects; and $10 million for “design build services to reconstruct or remove” the Van Zandt Bridge.

Meanwhile, a 20- to 25-foot portion of the Cliff Walk, the city’s largest tourist draw, remains closed to the public after collapsing in 2022. The yet-to-be-determined cost of repairs or remediation is large and will require federal and state support.

“There is a concept of the council trying to find ways to fund infrastructure that doesn’t put a direct burden on our residents,” said Mayor Xay Khamsyvoravong. “We’ve got to find the funding to do that. When you look at the scale of [repairs] and other challenges that we need to fund within the city, when you look at the reality that a lot of these large, tourist drawing properties, whether they’re owned by the state or nonprofits, are not paying property taxes, we have to find some way to pay for this. I think this concept merits a conversation about how we’re going to go about starting to cover some of those costs.”

Smaller-ticket items are projected as $3 million by fiscal year 2027 for water reservoir repairs; $1.5 million for drainage improvements in 2026; $2.5 million to address combined sewer outflows; $660,000 to replace a fire engine; $520,000 for the replacement of hoses and other equipment at the Fire Department; and $500,000 to replace 10 marked patrol vehicles at the Police Department.

Along with considering rate hikes and methods to increase revenue, the city is simultaneously seeking alternate means of funding the above work with strategies such as procuring state and federal funding, grants, loans from the Rhode Island Infrastructure Bank, bonds, changing policy at the state level, and even grassroots efforts like fundraising.

Some projects, such as the beach overhaul, relocation of the city yard and planned work to the Van Zandt Bridge, among others, may require bonding and approval from the voters.

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