WOONSOCKET – With elderly homeowners bracing for a big tax hit as the city addresses its long-term structural deficit, Council President John Ward is offering some legislative help to soften the blow.
Ward is proposing a measure that would simultaneously relax eligibility requirements for the senior citizens property tax exemption while making the benefit more generous.
In recent years, the senior exemption has grown so antiquated that a paltry 19 property owners are currently taking advantage of it, according to the tax assessor’s office.
“That’s because of our extremely generous homestead exemption,” says Ward. “As that’s being diminished and taken away it was appropriate to have the elderly tax exemption more consistent with what other towns are offering.”
Understanding why so few seniors take advantage of the elderly exemption isn’t rocket science when you consider the eligibility standards. Of course, beneficiaries must be 65 years old, but to qualify, their net household earnings may not exceed $14,000 a year, according to Tax Assessor Christopher Celeste.
Provided they meet the requirements, including a minimum of one-year occupancy in the home for which the exemption is sought, the city grants applicants a flat $158.76 break on their property tax bill.
If Ward’s proposal is approved, however, the City Council would relax the income ceiling to $30,000 a year and make the exemption a function of the tax rate, applied to the first $12,000 of the appraised value of the property up for the break. Using the tax rates currently applied to residential real estate, the equation boils down to a tax savings of about $387.
The age requirement stays the same, but only homes that are owner-occupied for a minimum of five years for seniors would qualify. Still, Ward says the changes, if approved, are likely to make significantly more property owners eligible for the senior citizens exemption.
“It’s long overdue,” says Celeste, who observes that – on paper, anyway – the exemption is even more stringent than it is in practice. All codified law indicates that the income limit isn’t $14,000 – the figure the city has been using for several years – but $8,000.
“Somebody, I don’t know when and why, decided that the figure should be $14,000, so that’s what we’ve been doing,” said Celeste.
Exactly how many newcomers would fit under the ballooned-up tent of the proposed exemption isn’t an easy figure to come by, but it’s readily apparent from census figures that a fair number of city residents over 65 own property. The latest figures released by the U.S. Bureau of Census, in 2011, say more than 13 percent of the city’s population, or about 5,436 people, are over 65 years old. The home ownership rate also stands at about 40 percent.
While the census doesn’t break down home ownership rates by age group, the figures suggest the number of elderly homeowners in the city is in the neighborhood of 2,000.
Many of those seniors have probably been taking advantage of the homestead exemption in recent years. Despite recent rollbacks in the exemption, single-family homes are still getting a whopping waiver of 39 percent off their appraised value.
Grappling with the fiscal chore of erasing a budget deficit on tract to reach nearly $15 million by the end of the fiscal year, the commission has already approved a phase-out of the homestead exemption at the rate of 3 percent a year. As the commission tweaks the details of a recently unveiled five-year plan designed to eliminate the deficit, it’s possible – likely, some say – that the panel will hasten the pace of the phase-out.
As Celeste puts it, “We’re on a five-year plan. Why’re we on a 14-year phase-out?”
Though a quicker phase-out hasn’t been addressed in much detail, Ward, who is also a member of the Budget Commission, says the five-year plan is flexible enough to adjust the homestead exemption as a strategy for generating new revenue. The key elements of the plan including raising about $2.5 million in supplemental taxes, restructuring the payoff schedule on the city’s unfunded pension liability, eliminating COLAs for members of the pension system, transferring all retirees over 65 year from private health care plans to Medicare and the realization of still-unspecified changes in union contracts.
The $15 million projected deficit that gets so much attention is just a snapshot of the city’s budget picture effective June 30. If one adds pension liabilities and health care benefits for retirees into the equation, the figure would reach nearly $96 million by mid-2017 if nothing is done to increase revenues or cut costs.
The City Council meets at 7 Monday night in Harris Hall, when it will take up Ward’s proposal for the first time. If approved, the measure could be passed along for the Budget Commission’s consideration before the end of next month.