Tuesday, May 5, 2009

Are They Limits or Targets?

The Rhode Island legislature has passed a law (S3050) requiring town tax levy increases to have annual limits gradually dropping to 4% by 2013.

This puts towns who have tried hard to limit costs in an awkward situation. If a town were able to hold the levy to a low or even zero percent increase for example, the following year's allowable increase will be based on that low levy. On the other hand, were the town to increase the levy the maximum, it would be entitled to the same percentage increase the next year but based on a higher amount.

A town which is conscientious in holding expenses can effectively be punished by that decision creating an incentive for the town to request more than it really needs, just in case. The limit becomes a target.

Wouldn't it better to amend the current law so that towns can "bank" the unused portion of any allowable increase? This amount of money could be made available to increase the limit in the event of a shortfall in a subsequent year, subject to certain restrictions and time limits upon application to the state. This could also reduce or eliminate litigation involved with a Caruolo action.

In this way a town could try its best to hold down taxes while not being punished in future years should real need arise.

But maybe it's just me.