RIPEC report offers a sober warning for municipalities
A new Rhode Island Public Expenditure Council report confirms some widely held views about the plight of the state’s distressed cities and towns.
In particular, it finds that property taxes have increased across the state by just under 34 percent, or $560 million, since fiscal 2006. RIPEC basically attributes that hike to how 1) state aid to cities and towns has been cut; and 2) municipalities haven’t received flexibility to reduce their costs.
Central Falls receiver Robert Flanders has said he expects municipal bankruptcies to become more common.
Yet RIPEC warns municipalities to view chapter 9 bankruptcy as a last resort, in part since it doesn’t address such underlying factors as a community’s tax base or the practices that led to fiscal trouble in the first place.
Furthermore, the community may become less attractive to current and potential businesses and residents who, as a result, may choose not to locate in the municipality, further straining the community’s fiscal capacity.
The release of RIPEC’s report is timely for Governor Lincoln Chafee, who’s holding another strategy session with mayors this afternoon before speaking with reporters.
Other highlights from the study:
— As of the most recent information in 2009, Rhode Island property tax burden as a share of personal income was the fourth-highest in the country, and 141 percent of the national average.
— Single-family home prices in the state fell 27 percent between the market peak in 2006 and the last quarter of 2011. RIPEC predicts, “Housing prices are likely to continue to decline in Rhode Island.”
The conclusion of the RIPEC report warns, “Without substantive restructuring, loal governments will not be able to support current service levels in the coming years.
The parties subject to the restructuring effort — employees, retirees, vendors and debtors — may be served by local officials empowered to make modifications to these agreements, ideally through a collaborative process, rather than through bankruptcy, in which the primary goal is to make the community solvent.