"THE PROPOSAL would create a sustainable and accountable way for cities and towns to invest in their Main Street districts, creating conditions that attract private investment, job creation and that return under-performing properties to tax rolls and strengthen municipal budgets," said Grow Smart Executive Director Scott Wolf.
Scott Wolf is executive director of Grow Smart Rhode Island, a nonprofit advocating for sustainable development in the state. This year, Grow Smart has introduced a proposal to spur growth and support infrastructure improvements in downtown areas by exempting new growth in those areas from the property tax cap. Wolf took a few minutes to explain and discuss the proposal with PBN.
PBN: As simply as you can, describe what the proposal, if passed by the General Assembly, would do in Rhode Island communities.
WOLF: The proposal would create a sustainable and accountable way for cities and towns to invest in their Main Street districts, creating conditions that attract private investment, job creation and that return under-performing properties to tax rolls and strengthen municipal budgets. It would amend the state-mandated property tax levy cap law by allowing municipalities to exempt from the levy cap a portion of tax revenue growth within targeted “Main Street districts” solely for the purpose of reinvesting in economic development, street-scape improvements and other public infrastructure repairs and upgrades within those districts. While not a panacea, we believe the proposal would provide a means for cities and towns to invest limited resources where they can provide the greatest return.
PBN: How have you revised the proposal from the version that reached the legislature last year?
WOLF: This year’s bill incorporates three revisions that grew out of testimony by [the Rhode Island Public Expenditures Council] last year when it was heard by the House Finance Committee. Specifically, clarifying a maximum cap on amounts that can be exempted from the levy cap law, inserting a requirement that a municipality must have a Capital Improvement Plan (CIP) guiding specifically how funds can be invested, and also adding a requirement that municipalities using this limited exemption establish tracking metrics for evaluation purposes.
PBN: Critics of the plan say it is simply an attempt to sidestep the state’s property tax cap. How do you respond to that charge?
WOLF: This proposal is for a very limited exemption to the tax levy cap and one reserved solely for investments in economic development – something that is sorely needed throughout Rhode Island. Funds derived from the exemption could not be used to offset a municipality’s operating budget deficit. Some seem concerned that use of the exemption would translate directly into a “tax rate” increase. This fails to acknowledge that levy growth can and should occur in response to economic development. The tax cap in Massachusetts (Proposition 2 ½), for example, does in fact exempt new growth, while Rhode Island’s cap does not.
PBN: How does this proposal compare to other economic development tools in Rhode Island and policies in neighboring states?
WOLF: We believe that the most effective economic development tool that Rhode Island has seen in decades is the now-halted State Historic Tax Credit, a tool we are working hard to see restored this year. That was a proven incentive that stimulated more than $1.2 billion of private investment in 22 of Rhode Island’s 39 cities and towns. Although the levy cap amendment is not likely to have as dramatic an impact as the State Historic Tax Credit, it would nonetheless be another effective tool for municipal leadership in revitalizing our Main Street districts. Massachusetts has a similar “Growth Districts Initiative” in which the Mass. Executive Office of Housing & Urban Development (EOHED) partners with municipalities to make public improvements in areas targeted for growth or revitalization. State funds are invested to help make these districts “development ready” with respect to infrastructure improvements, permitting, site preparation (including brownfields remediation) and marketing. Rhode Island currently lacks such an investment tool for our Main Streets.
PBN: The legislature turned down a similar version of this incentive proposal before. Why do you think this year might be different?
WOLF: First, because there is increased concern about the fiscal and economic health of our municipalities, and a growing recognition that these jurisdictions need more tools to strengthen their fiscal situation. Moreover, the proposal wasn’t very well-known last year and had only two co-sponsors. Since then, improvements were made to the proposal and a lot of time has been expended raising awareness among municipal officials and legislators about its likely benefits. This year there are nine co-sponsors and increased recognition that we need a proactive economic development strategy and set of tools to complement the austerity measures recently enacted. In fact, now more than ever our cities and towns need innovative tools to position themselves for economic resilience in a rapidly changing economy.