Narragansett Well Positioned to Lower Commercial Taxes


According to its filed agenda, the town council of Narragansett will consider and vote on a proposed change in tax rates on Monday night.  As described in Matthew Enright’s reporting for The Independent, commercial property owners in town pay 150% the rate charged to residential property owners.

The state Division of Municipal Finance puts the current rates at $9.94 for residential and $14.91 for commercial.  The proposed ordinance would eliminate the different rates, lowering the commercial and raising the residential.

Obviously, such changes to the status quo create winners and losers, and opponents of the plan are saying, as does Town Council candidate and Democratic Town Committee Chairman Will Hames, that they “don’t think we should be paying Stop & Shop’s taxes.”  The data available from Municipal Finance suggests:

  • that it would be more accurate to say that business owners in the town are currently paying disproportionately for residents’ services,
  • that this is hurting Narragansett’s commercial tax base,
  • and that the town should lower its commercial rate without raising the residential rate, adjusting its budget accordingly.

By the numbers, Narragansett’s residential tax rate is the 4th lowest in the state, while its commercial rate is the 6th lowest.  These low rates, however, are mainly a reflection of the town’s high property values.  Despite having around half the population of its neighbors, North and South Kingstown, Narragansett’s total residential property value is significantly higher than those of both towns — 47% and 16%, respectively.  As the following chart shows, these differences result in Narragansett’s having a higher tax levy (i.e., total taxes collected) than either of its neighbors.


The chart also shows that, despite having relatively valuable property, Narragansett’s commercial property tax collections are much lower than those of its neighboring towns.  This suggests that its actual commercial activity is also much lower.

In summary, Narragansett is raising a large amount of taxes per capita — 6th highest in the state — in part by soaking a small number of businesses with an inflated tax rate.  Although some residents may like this state of affairs, one could suggest that, as a matter of principle, government shouldn’t be so heavy handed in preferring one use of property over another.  Taking the town’s thumb off the scale would almost certainly encourage more business in town, reducing the hit to tax collections in the long term.

Given its high tax burden, Narragansett clearly has room to adjust its spending to compensate for lower commercial collections.  But if residents would prefer to keep the high taxes and whatever services they purchase with them, they shouldn’t object to applying the tax burden more fairly.

  • jimri

    (1) There has been an explosion in residential property values in Narragansett in the last 30 years, which has driven down the proportion of tax revenue that’s generated from business and driven up the residential portion. There has been no exodus of business from the town.
    (2) We have among the lowest business tax rates in the area, and significantly lower than all towns in the north of the state. Removal of the 1.50 surcharge, and increasing the base tax rate to offset the loss of that revenue, would result in our having the lowest business tax rate in the state except for Block Island, Jamestown or Little Compton. We compete with none of them for business.
    (3) Eliminating the business tax differential and reducing spending overall to pay for it is a laugh. The town has unfounded pension and other post employment benefits liabilities of over $100,000,000 now, and is drunk on bonding debt, having just completed an athletic complex and about to approve a new library.
    (4) There is little room for business growth in the town, and no one seriously believes this business tax reduction will cause any. This is an effort to reward well-connected business insiders in town (sound familiar, RI?). The plan is to fund this tax giveaway to business without making voters (year-round residents) foot the bill, by enacting a split residential tax rate that would be higher for non-resident homeowners (who can’t vote) than those of us who live here all year.
    (5) “Outsiders” – homeowners who don’t live here all year and the renters that they bring (tourists in the summer, students in the winter) – are the folks it is fashionable to disdain currently in Narragansett. Most of the local political issues display this in one way or another. The changes in tax rates being proposed are targeted to reward insiders at the expense of outsiders. It may look different to you over and n Tiverton, but that’s the view from this side of the bay.

  • GaryM

    Things are a little more complicated than your article suggests. To begin, the claim that commercial property is not residential property is wrong. Commercial rental projects over 5 units owned by investment companies are in fact “residential” in that they put kids into the schools. At the same time, single family homes that are used solely for rental purposes in Narragansett are not “residential” in the classic sense that they bring kids into the school system. They are indeed operating more like a small business entity for the many investors who own residential property in Narragansett close to the water. This is what helps keep property taxes low.

    If the commercial rate is lowered, is that kick-starting more high density apartment development in town taking advantage of Narragansett’s ultra low residential tax rate as compared to most other communities?

    Investors will love the new math, but what are the unintended consequences? Will Narragansett become more like Wildwood, NJ?

    • Justin Katz

      1. Your tax rate is low, but your taxes collected are high because the values are so high. Having a single rate won’t change that.
      2. Inasmuch as Wildwood was one of my favorite places to be a disruptive teenager in my youth, I can testify that Narragansett is a long, long way from becoming such a place.
      3. If controlling development is the goal, there are much more direct and fair ways of doing so than giving single-family-home owners preferential tax treatment.

  • Justin Katz

    You’re stretching things quite a bit with that “most comparable towns.” Barrington is one of the few RI towns that has a higher per capita tax levy than Narragansett, and its commercial tax revenue is much lower. As I said in the original essay, if the people of Narragansett want the high taxes, they should at least be fair to commercial property owners.
    Barrington, for instance, has a single tax rate for property.