Chapter 253

2006 — S 3050 SUBSTITUTE A AS AMENDED

Enacted 07/03/06

A N A C T

RELATING TO TAXATION — PROPERTY TAXES

Introduced By: Senators Paiva-Weed, J Montalbano, Alves, Lenihan, and Felag

Date Introduced: April 27, 2006

It is enacted by the General Assembly as follows:

SECTION 1. Section 44-5-2 of the General Laws in Chapter 44-5 entitled “Levy and

Assessment of Local Taxes” is hereby amended to read as follows:

44-5-2. Maximum levy. — (a) A Through and including its fiscal year 2007, a city ~~and~~ or

town may levy a tax in an amount not more than five and one-half percent (5.5%) in excess of the

amount levied and certified by that city or town for the prior year. Through and including its

fiscal year 2007, but in no fiscal year thereafter, the ~~The~~ amount levied by a city or town is

deemed to be consistent with the five and one-half percent (5.5%) levy growth cap if the tax rate

is not more than one hundred and five and one-half percent (105.5%) of the prior year’s tax rate

and the budget resolution or ordinance, as applicable, specifies that the tax rate is not increasing

by more than five and one-half percent (5.5%) except as specified in subsection (c) of this

section. In all years when a revaluation or update is not being implemented, a tax rate is deemed

to be one hundred five and one-half percent (105.5%) or less of the prior year’s tax rate if the tax

on a parcel of real property, the value of which is unchanged for purpose of taxation, is no more

than one hundred five and one-half percent (105.5%) of the prior year’s tax on the same parcel of

real property. In any year through and including fiscal year 2007 when a revaluation or update is

being implemented, the tax rate is deemed to be one hundred five and one-half percent (105.5%)

of the prior year’s tax rate as certified by the division of local government assistance in the

department of administration.

(b) In its fiscal year 2008, a city or town may levy a tax in an amount not more than five

and one-quarter percent (5.25%) in excess of the total amount levied and certified by that city or

town for its fiscal year 2007. In its fiscal year 2009, a city or town may levy a tax in an amount

not more than five percent (5%) in excess of the total amount levied and certified by that city or

town for its fiscal year 2008. In its fiscal year 2010, a city or town may levy a tax in an amount

not more than four and three-quarters percent (4.75%) in excess of the total amount levied and

certified by that city or town in its fiscal year 2009. In its fiscal year 2011, a city or town may

levy a tax in an amount not more than four and one-half percent (4.5%) in excess of the total

amount levied and certified by that city or town in its fiscal year 2010. In its fiscal year 2012, a

city or town may levy a tax in an amount not more than four and one-quarter percent (4.25%) in

excess of the total amount levied and certified by that city or town in its fiscal year 2011. In its

fiscal year 2013 and in each fiscal year thereafter, a city or town may levy a tax in an amount not

more than four percent (4%) in excess of the total amount levied and certified by that city or town

for its previous fiscal year.

~~(b)~~(c) The office of municipal affairs in the department of administration shall monitor

city and town compliance with this levy cap, issue periodic reports to the general assembly on

compliance, and make recommendations on the continuation or modification of the levy cap on or

before December 31, 1987, December 31, 1990, and December 31, every third year thereafter.

The chief elected official in each city and town shall provide to the office of municipal affairs

within thirty (30) days of final action, in the form required, the adopted tax levy and rate and

other pertinent information.

~~(c)~~(d) The amount levied by a city or town may exceed the ~~five and one-half percent~~

~~(5.5%)~~ percentage increase as specified in subsection (a) or (b) of this section if the city or town

qualifies under one or more of the following provisions:

(1) The city or town forecasts or experiences a loss in total non-property tax revenues

and the loss is certified by the department of administration.

(2) The city or town experiences or anticipates an emergency situation, which causes or

will cause the levy to exceed ~~five and one-half percent (5.5%)~~ the percentage increase as

specified in subsection (a) or (b) of this section. In the event of an emergency or an anticipated

emergency, the city or town shall notify the auditor general who shall certify the existence or

anticipated existence of the emergency. Without limiting the generality of the foregoing, an

emergency shall be deemed to exist when the city or town experiences or anticipates health

insurance costs, retirement contributions or utility expenditures which exceed the prior fiscal

year’s health insurance costs, retirement contributions or utility expenditures by a percentage

greater than three (3) times the percentage increase as specified in subsection (a) or (b) of this

section.

(3) A city or town forecasts or experiences debt services expenditures which ~~are more~~

~~than one hundred five and one-half percent (105.5%) of~~ exceed the prior year’s debt service

expenditures by an amount greater than the percentage increase as specified in subsection (a) or

(b) of this section and which are the result of bonded debt issued in a manner consistent with

general law or a special act. In the event of the debt service increase, the city or town shall notify

the department of administration which shall certify the debt service increase above ~~one hundred~~

~~five and one-half percent (105.5%) of~~ the percentage increase as specified in subsection (a) or (b)

of this section the prior year’s debt service. No action approving or disapproving exceeding a levy

cap under the provisions of this section affects the requirement to pay obligations as described in

subsection (d) of this section.

(4) The city or town experiences substantial growth in its tax base as the result of major

new construction which necessitates either significant infrastructure or school housing

expenditures by the city or town or a significant increase in the need for essential municipal

services and such increase in expenditures or demand for services is certified by the department

of administration.

~~(4)~~ (e) Any levy pursuant to subsection ~~(c)~~ (d) of this section in excess of the ~~five and~~

~~one-half percent (5.5%)~~ percentage increase specified in subsection (a) of this section shall be

approved by ~~a majority vote~~ the affirmative vote of at least four-fifths (4/5) of the full

membership of the governing body of the city or town or in the case of a city or town having a

financial town meeting, the majority of the electors present and voting at the town financial

meeting shall also approve the excess levy.

~~(d)~~ (f) Nothing contained in this section constrains the payment of present or future

obligations as prescribed by section 45-12-1, and all taxable property in each city or town is

subject to taxation without limitation as to rate or amount to pay general obligation bonds or notes

of the city or town except as otherwise specifically provided by law or charter.

SECTION 2. Sections 44-35-3 and 44-35-6 of the General Laws in Chapter 44-35

entitled “Property Tax and Fiscal Disclosure – Municipal Budgets” are hereby amended to read as

follows:

44-35-3. Definitions. — (a) “Adjusted current property tax rate” means the estimated

property tax rate that would be necessary in the next fiscal year to raise ~~one hundred and five and~~

~~one-half percent (105.5%) of the property tax revenues in the next fiscal year that were levied in~~

~~the town’s or city’s current fiscal year.~~ the maximum levy authorized by section 44-5-2 of the

general laws.

(b) “Chief elected official” means the highest locally elected official in each town or city.

by a town or city to support its operating budget for the town’s or city’s next fiscal year.

44-35-6. Publication of property tax rates. — At least ten (10) calendar days prior to the

hearing for the purpose of adopting the town or city budget, the chief elected official in each town

or city shall cause to be published a notice indicating the town’s or city’s intent to consider

adopting a property tax levy. This notice shall be published in a newspaper of general circulation

in the town or city. However, this notice may not be placed in that portion of the newspaper

where legal notices and classified advertisements appear. This notice shall constitute notice of

public hearing which may coincide with the hearing on the proposed budget and shall be by and

in the following form:

(CITY, TOWN) of (NAME)

NOTICE OF PROPOSED PROPERTY TAX

RATE CHANGE

The (City, Town) proposes to increase (decrease) its property tax levy to ________ in

the ________ budget year; the property tax levy this year is __________, THIS IS A

PROPOSED INCREASE (DECREASE) OF ______%.

It has been estimated that the proposed increase (decrease) in property tax revenues will

result in a property tax rate of $________ (proposed property tax rate) per $1,000 assessed

valuation, as compared to the current property tax rate of $________ per $1,000 assessed

valuation.

A property tax rate of $________ (adjusted current property tax rate) would be needed in

the coming budget year to raise ~~five and one-half percent (5.5%) more, as an adjustment for~~

~~increased costs, than the property tax revenues being raised in the current budget year.~~ the

maximum levy authorized by section 44-5-2 of the general laws.

The (City, Town) budget __________ will be considered at (date, time, place).

The above property tax estimates have been computed in a manner approved by the

Rhode Island Department of Administration.

Chief Elected Official

SECTION 3. Section 44-45-2 of the General Laws in Chapter 44-45 entitled “Omnibus

Property Tax Relief and Replacement Act” is hereby amended to read as follows:

44-45-2. Legislative findings. — The general assembly finds and declares that the

following conditions confront Rhode Island at this time:

(1) In 1982, the governor’s advisory commission to study the financial operations of state

and local governments found that “when the state and local tax system is viewed in its totality, it

becomes clear that property tax relief and replacement is needed”.

(2) Rhode Island has a serious over reliance on the property tax, as evidenced by the

facts that:

(i) Rhode Islanders paid forty-nine dollars and ninety-two cents ($49.92) per capita in

property tax collections in fiscal year 1983, compared to a U.S. average of thirty-four dollars and

seventy-one cents ($34.71), ranking this state sixth highest in the nation;

(ii) Per one thousand dollars ($1,000) of personal income, property tax collections in

Rhode Island equaled five hundred and thirty-seven dollars ($537) that year, compared to a three

hundred and eighty-one dollar ($381) U.S. average, placing the state ninth highest nationally; and

(iii) Rhode Island’s cities and towns derived fifty-eight and nine-tenths percent (58.9%)

of their own-source local general revenue from the property tax in fiscal year 1983, compared to

an average of only twenty-eight and eight-tenths percent (28.8%) for all the states.

(3) In 1983-84, Rhode Island ranked only forty-third nationally in terms of state support

for public elementary and secondary school, providing only thirty-six percent (36%) of these

revenues.

(4) The state educational operations aid formula should be gradually increased until the

state and municipalities equally share the cost of providing local education. The general assembly

remains committed to that objective and intends to pursue that objective aggressively upon

receipt and consideration of the final report of the joint legislative committee to establish a

permanent education foundation aid formula in accordance with section 16-7.2-2 of the general

laws.

(5) The state should also share a greater portion of its economically sensitive growth

taxes with its cities and towns in order to further shift the burden of funding essential municipal

services from the property tax.

(6) The growth in property tax levies should be capped in accordance with section 44-5-

2 of the general laws ~~to five and one-half percent (5.5%) annual growth~~ as a quid pro quo for

receiving increased state aid to reduce reliance on the property tax.

(7) Cities and towns should be assisted in their efforts to control school and municipal

expenditures by appropriately amending state arbitration and school budgeting laws.

SECTION 4. Chapter 45-2 of the General Laws entitled “General Powers” is hereby

amended by adding thereto the following section:

45-2-3.2. Availability of funds upon failure of city or town to approve annual

appropriation. – Unless otherwise provided by a city or town charter, in an emergency caused

by a failure of a city or town to approve an annual appropriation measure, the same amounts

appropriated in the previous fiscal year shall be available for each department and division

thereof, subject to monthly or quarterly allotments, in accordance with seasonal requirements, as

determined by the city or town’s chief financial officer: provided, that expenditures for payment

of bonded indebtedness of the city or town and interest thereon shall be in such amounts as may

be required, regardless of whether or not an annual appropriation ordinance is enacted by the city

or town council.

SECTION 5. Section 16-2-21 of the General Laws in Chapter 16-2 entitled “School

Committees and Superintendents” is hereby amended to read as follows:

16-2-21. Pre-budget consultation — Annual reports — Appropriation requests —

Budgets. — (a) At least sixty (60) days but not more than ninety (90) days prior to the formal

submission of the school budget to the appropriate city or town officials by the school committee,

there shall be a joint pre-budget meeting between the school committee and the city or town

council(s). At or before this meeting:

(1) The highest elected official of the city or town shall submit to the school committee

an estimate, prepared in a manner approved by the department of administration, of projected

revenues for the next fiscal year. In the case of the property tax, the projections shall include only

changes in the property tax base, not property tax rates;

(2) The school committee shall submit to the city or town council a statement for the

next ensuing fiscal year of anticipated total expenditures, projected enrollments with resultant

staff and facility requirements, and any necessary or mandated changes in school programs or

operations; and

(3) The school committee shall prepare and submit, annually, to the department of

elementary and secondary education, on or before the first day of August, a report in the manner

and form prescribed by the state board of regents for elementary and secondary education; the

committee shall also prepare not less than thirty (30) days before the date of the annual financial

town meeting, or the date of the meeting of the city council at which annual appropriations are

made, on forms prescribed and furnished by the department of elementary and secondary

education, the estimates and recommendations of the amounts necessary to be appropriated for

the support of public schools for the fiscal year ensuing; provided, that a copy of these estimates

and recommendations shall be sent to the department of elementary and secondary education, and

until the report is made, and if the estimates and recommendations are not presented to the

department, it may refuse to draw its orders for the money in the state treasury apportioned to the

city or town; provided, that the necessary blank for the report has been furnished by the

department on or before the first day of June, next preceding, and the necessary forms for the

estimates and recommendations shall have been furnished by the department not less than sixty

(60) days before the date of the annual appropriations meeting of the city council; the committee

shall also prepare and submit annually to the department of elementary and secondary education

and at the annual financial town meeting a report to the city or town, setting forth its doings, the

state and condition of the schools, and plans for their improvement, which report, unless printed,

shall be read in open meeting; and if printed, at least three (3) copies shall be transmitted to the

department on or before the day of the annual financial town meeting in each year.

(b) If the amount appropriated by the town meeting, the city or town council, or budget

referendum is either more or less than the amount recommended and requested by the school

committee, the school committee shall, within thirty (30) days after the appropriation is made,

amend its estimates and recommendations so that expenses are no greater than the total of all

revenue appropriated by the state or town or provided for public schools under the care, control,

and management of the school committee.

and revenues shall be considered an adopted school budget.

(d) Notwithstanding any provision of the general or public laws to the contrary:

(i) the budget adopted and presented by any school committee for the fiscal year 2008