It’s getting harder for our own kids and families to afford houses in this world we live in. A lot of people are growing up to find places outside of this town.”

David Gleason, Portsmouth Town Council

PORTSMOUTH — The town is considering shifting more of the property tax burden to commercial businesses in order to give some relief to residential homeowners.

During the third night reviewing Town Administrator Richard Rainer Jr.’s proposed spending plan for the 2024 fiscal year beginning July 1, the Town Council voted unanimously to approve a bottom line of $71,431,755, which represents a 1.92-percent increase over the current budget.

The spending plan entails a residential property tax rate of $12.865 per $1,000 in assessed valuation. That’s about $2.79 lower than the current rate of $15.65 (17.8 percent drop), but only because the recent revaluation has sharply increased most property values throughout town.

Larry Fitzmorris, president of the taxpayer group Portsmouth Concerned Citizens (PCC), said the tax rate will actually increase by an equivalent of 5.6 percent next year if the budget is passed as presented. 

A public hearing on the spending plan will be held Wednesday, June 14, and the council will formally adopt the budget on Monday, June 26, after which it will be sent to the state.

The total property levy on residential, commercial, and tangible property would increase by about 3.76 percent to $61,904,267, Rainer reported to the council. That falls below the 4-percent increase limit as mandated by the state, he pointed out.

On Monday, April 24, the council unanimously approved a motion by Keith Hamilton to lock the tangible tax rate at the current $15.65 for next fiscal year. He said the action could give tax relief to residential homeowners who saw their property values increase much higher than others under this year’s revaluation. 

(The town has the ability to impose three different property tax rates: a residential tax rate, a commercial tax rate, and a tangible tax rate. The latter is assessed by a city or town on all personal property owned and used in connection with a business. Eleven of the 39 municipalities in Rhode Island have different tax rates for residential, commercial, and tangible property.)

Commercial vs. residential

Two nights later, just before approving the provisional budget on April 26, it was council member David Gleason’s turn to suggest a change in the way the town sets its tax rates. 

Gleason proposed leaving the commercial tax rate at the current $15.651 (versus $12.865) for next year. That would take some burden off the residential taxpayers who saw their property values hiked an average of 29 percent, versus just a 7-percent increase for commercial properties, he said.

“It’s getting harder for our own kids and families to afford houses in this world we live in,” Gleason said. “A lot of people are growing up to find places outside of this town.”

His idea would bring in an additional $905,000 from the commercial sector which could be used to lower the burden on residential property owners, Gleason said.

He made a motion to direct Rainer and staff to analyze the implications — on both residential and commercial taxpayers — of leaving the commercial tax rate at $15.651 for next year, or setting it at $14.22 — the halfway point between the current rate and the $12.787 rate as set in the 2024 budget. 

Fair to businesses?

The motion passed 6-1, with council member Charles Levesque dissenting. He said it’s already difficult for larger businesses to set up shop in Portsmouth because the community as a whole isn’t “particularly welcome” since most residents favor a town that is “quasi-rural.” 

In addition, the town doesn’t have the infrastructure — such as sewers — to attract a lot of new business, he said. Setting a higher tax rate on commercial would simply “put further hurdles in front of them,” Levesque said.

Despite the vote to explore the issue, several other council members also expressed skepticism on whether Portsmouth was an appropriate community to tap into commercial property more in order to help residential homeowners. 

“Because (commercial property) is such a small percentage of our base, it’s not something that we’ve look to as a revenue source,” said Council Vice President Leonard Katzman. “I’m sure there are a handful of commercial entities doing very well in Portsmouth, but a lot of them are small businesses earning a living. I don’t know if I want to raise their taxes to offset residential taxes on the idea we want to lower residential taxes. I’m uncomfortable with the unknown of, who am I raising taxes on?”

Council member Daniela Abbott also said she wanted to see the numbers crunched more because she feared setting a higher tax rate for commercial properties could hurt small businesses. Businesses such as Raytheon, Hinckley Yachts, and Safe Harbor Marinas are “quite secure” with their finances, but many small business owners are just getting by and are taking “a pretty big hit financially” through the revaluation because many of them live here, she said.

Fitzmorris, of PCC, spoke in favor of Gleason’s idea. “We are in a real crisis right now, and the crisis is not the revaluation itself. It is the taxes that are driving people out of this town,” Fitzmorris said.

For people who have retired here and are trying to keep their homes, “these are real body blows to them when their taxes go up like this, and it’s been going up a lot in recent years. But this one is a whole lot. I don’t know what next year is going to look like, but if we get another (tax increase) like this year, you can count on a lot of people leaving the town,” he said.