PAWTUCKET — Noting the pressure the city is under for addressing not only this fiscal year's budget deficit but a $10 to $12 million projected shortfall for fiscal year 2012 as well, City Councilor Christopher O'Neill has suggested looking at lowering the car tax exemption while also cutting the city's motor vehicle tax rate.
At Wednesday's City Council meeting, O'Neill said that the city's car tax exemption rate that the Council approved last spring at $3,400, should be revisited since the city has still not found ways to make up for the loss of state aid. The state cut Pawtucket's $9 million share of its motor vehicle excise tax aid and offered cities and towns the ability to lower their exemptions to $500. After two previous motions for a lower exemption rate failed, including one for $1,500, the council set the exemption at $3,400. This rate generated about $5 million in revenue, leaving $4 million in lost state aid that has to be made up in some other way.
O'Neill said that city leaders should look into the financial aspects of further lowering the car tax exemption to $500 while at the same time cutting the city's motor vehicle tax rate by 10 percent. He said this would serve to “spread the burden over more residents” but added that this action would be made more palatable by lowering the dollar amount of the city's motor vehicle tax rate, which is one of the highest in the state.
O'Neill said that under the present motor vehicle tax rate of $53.30 per $1,000 of assessed valuation, the lowering of the exemption to $500 would generate an estimated $4.1 million in revenue. If the tax rate is reduced by 10 percent at the same $500 exemption, it would bring in an estimated $3.5 million in revenue. This would go far in addressing the $4 million shortfall that remains from the loss of state aid that still must be accounted for in the current year's budget, O'Neill pointed out.
O'Neill also noted that in a recent letter sent by state Department of Revenue Director Rosemary Booth Gallogly to Mayor Donald Grebien, she included a further lowering of the car tax exemption among the city's “principal available remedies” for lowering expenses (along with an increase in property taxes, using a deficit reduction bond or some combination thereof). He pointed out that Booth Gallogly also expressed the importance of all city and school officials working together to solve what she called a “daunting fiscal situation” and said that the sooner the deficit is addressed, “the less harsh the solutions will be in the current year.”
The rest of the Council gave its support for O'Neill's request to seek a financial analysis of what lowering the car tax exemption to $500 and cutting the car tax rate by 10 percent would mean for city residents. The discussion, however, led to a wider discussion among council members about the urgent need to come up with a significant amount of money to address the budget shortfall with just five months remaining of the current fiscal year. With cost-savings measures that have been implemented, the original $13 million budget is reportedly now down to about $9 million between both the city and the schools.
Councilor John Barry III, who had supported a $1,500 car tax exemption last spring, said there are only a few ways to address the city's deficit. He noted that the higher exemption amount had been approved with the idea that there would be significant concessions from the city's bargaining units, which haven't happened. “I don't like the car tax, but I'll be damned if we borrow our way out,” noted Barry.
Council President David Moran, who had also supported a lowered exemption amount last spring, stated that “nothing was done” by the prior administration to seek concessions from the unions. He, too, said the city's options to address the deficit are limited and stressed that “We do not want the state to take us over.”
Councilor Mark Wildenhain, who had also pushed for a lower original exemption, said he doesn't like the idea of now going back to taxpayers to ask for more. He said that lowering the exemption from the current $3,400 to $500 “would be a substantial increase on residents” and suggested that the city must look for other ways to boost revenue or cut expenses.
Wildenhain further pointed out that while the prior administration had once threatened some 330 municipal lay-offs, city officials have not heard of any concessions being gained from the unions since that time. “There were other things that were put on the table that weren't done,” he argued.
Councilor Thomas Hodge said that the car tax proposal is just “spreading the pain to taxpayers” and said the unions should be doing more in the way of concessions. “Lay the people off if they don't want to come to the table,” Hodge said.
Councilor Lorenzo Tetreault, who said he had also voted originally for the lowered car tax exemption, said he feels badly that “here we go again,” but also noted that the city's hands are pretty much tied in finding ways to deal with the deficit. “We've got bills to pay,” he said.
O'Neill pointed out that since the city is self-insured, lay-offs are not going to save much money. He said that measures must be taken that would bring in a significant amount of money, and suggested that the lowering of the car exemption down to $500 would help accomplish this, while the move to similarly cut the motor vehicle tax dollar amount “will show taxpayers we're trying to do the right thing to fix our problem.”
At the outset of Wednesday's meeting, O'Neill spoke about his earlier request to have a study done of the costs and issues involved with privatizing the city's rescue services. He said he had received a lot of phone calls and e-mails on the subject, but told the council that this concept “should not be taken off the table.”
O'Neill added, however, that he wanted to assure citizens that “I will not allow the city to compromise public safety for savings.” He further asked for people to be patient and to “let the process take its course. All questions will be answered.”
Moran said he agreed that the analysis of the privatization of the rescue services should go forward, but also said that it should be done with transparency. “I'm sure the fire department has questions as well,” he said.
Hodge, who had attempted to have the process tabled at the last Council meeting, told O'Neill that he had thought the administration was being “premature” in its drafting of a request for proposals for private rescue services. He said he did not object to a study of the issue, but cautioned that there is “always a savings in the first year of any privatization.” He noted that it is in years two and three that costs tend to escalate and services drop.