YES, VIRGINIA, THERE IS A TAX CAP IN TIVERTON

Is there a tax cap in Tiverton?

Yes, Virginia, there is a tax cap in Tiverton as there is in every city and town in the state. At the beginning of each year, the Division of Municipal Finance sends out a letter advising each city and town of its tax cap. Tiverton is no exception. The authority to administer the tax cap is granted to the Division of Municipal Finance located in the Department of Revenue.

Just a little history.

In July, 2006, the General Assembly passed a bill (known sometimes as 30-50 or Paiva Weed) but always known as the “tax cap”. What it did was change the cap from a cap on the tax rate to a cap on the levy. After 2006, the cap was based on a percentage of the prior year’s levy and for the next year (2012-2013) that levy can not exceed four percent (4%) of the levy for the prior year. The law also provides communities with the right to exceed the tax cap if the community can show, among other things, a loss of revenue or the increase of emergency expense, all of which have to be certified by either the State Auditor General or the Department of Administration. The burden is on the community to show it comes within such an exception.

What does the law provide?

The law itself as passed by the General Assembly is confusing if the Town has a Financial Town Meeting the way Tiverton does. The law is very clear that if in a community where the respective city or town council approves the budget and sets the levy that any increase over the cap must be approved by a four-fifths (4/5) vote of its full membership; or, stated another way; two (2) members of the council can block any increase. For Tiverton, where the Town appropriation body is NOT the Town Council but the Financial Town Meeting, the law was less clear. However, when the Division of Municipal Finance issued its regulations specifically laying out how communities were to comply with the law, any confusion was clarified. You be the judge of this language.

(Be mindful of this fact – when regulations are issued, they must be advertised and be subject to a public hearing. Then and only then when so adopted, they have the force of law. No different than IRS regulations, wetland and septic system regulations issued by a government agency.)

Section 3.07 of the regulations states:
“3.07 Once a city/town is notified that it may exceed the levy cap applicable to that year, the approval by at least a four fifths vote of the members of the governing body of the city/town, or a majority vote of electors in the case of financial town meeting community, must be certified in order to levy a tax in excess of the cap.”

So, what is the dispute?

Simply put, the question is which body in Town should have the authority to exceed the tax cap. The prior Town Council took the position that the Financial Town Meeting was the appropriate body to decide if the tax cap was to be exceeded. Both under our charter and in the Town’s history, it was the body that voted appropriations and levied the tax to carry out the appropriations. In effect, the voters decide whether to tax themselves. No one else does it - not the Budget Committee, the School Committee nor the Town Council. To decide otherwise would have allowed two (2) members of the Town Council to veto any proposed levy or any levy passed by the Financial Town Meeting no matter what the needs of our community were.

It would have given the Town Council a power which it never had historically or had under our charter. And, from a policy standpoint, should two (2) members of the Town Council have that power?

Does that mean then, that the Financial Town Meeting has unlimited
power to exceed the cap?

No, it doesn’t. Let’s take the 2010 Financial Town Meeting as an example. Remember that the Budget Committee, under Chairperson Jeff Caron, cut the school budget by $1,000,000 and recommended major cuts in the municipal budget. Unless you were Rip Van Winkle, any reader knew that the School Committee and the Council would seek to restore some cuts to maintain services in the Town even if the tax cap was to be exceeded. At the Financial Town Meeting, those recommendations were made and the tax cap was indeed exceeded and the voters passed a resolution so stating.

Following that meeting, the Town Council had the burden of proving to the Division of Municipal Finance that the exceedance was permitted under the law. The Town’s request showed that it had loss of non property tax revenue (primarily from state cuts) of $1,054,900. After reviewing the Town Council request, the Division of Municipal Finance certified a loss of $1,107,082 and approved the amount requested by the Town.

On June 15, 2010, the Division of Municipal Finance in its letter of approval stated in part …… “The Town is certified to exceed the property tax levy by no more than $1,054,900 for the Fiscal Year 2011. “By no more than,” not an unlimited amount. The Division of Municipal Finance in approving the Town’s request also DID NOT require the Town Council to approve the excess by a four-fifths (4/5) vote.

In summary, although Tiverton has a Financial Town Meeting, it is subject to the tax cap despite allegations to the contrary. And those that assert those allegations should check the facts. If the charter does get changed in favor of a Referendum, which would give the Town Council a power which it never had historically and the voters of the Town give the Town Council that power – so be it. But, it would give a minority of two (2) the veto power over the majority.

Louise Durfee
Tiverton, RI