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Tuesday, April 16, 2013

The two Charlestowns

The OTHER Charlestown deserves a break
By Will Collette

Over the next several weeks, Charlestown will need to take action on a new budget for the new fiscal year that starts on July 1. 

Under the budget proposed by the town Budget Commission, property owners face a tax increase of 24 cents per thousand dollars in assessed property value, even though Charlestown currently has around $4 million in excess surplus funds.

The Budget Commission has decided to burn off the extra money the town has accumulated above and beyond the  amount of surplus funds recommended by the town's financial advisers by paying cash for two capital projects. 

It proposes spending $900,000 in cash to repave Klondike Road and another $2,807,728 to pay off what we still owe on the US Department of Agriculture loan that built the Police Station. There is some concern that USDA may ask the town to do that anyway, but probably not for another year, perhaps more.

If the town used bond funding instead of cash for the Klondike Road project, there would be no need for the 24-cent tax increase.

If the town also postponed paying off the USDA loan, it could give Charlestown residents a homestead tax rebate averaging around $1200 per household for the extra taxes they paid this year and it would STILL not have to raise next year’s taxes.

Alternatively, they could hold on to all or most of the excess surplus and use it to bargain with Larry LeBlanc for the purchase of LeBlanc’s 81 acres, currently slated for his unpopular industrial wind turbine project.

They could do that, but they won’t.

To the Budget Commission and Town Council padrones, it is more prudent to play our micro-version of deficit-busting austerity mania and trickle-down economics than give the vast majority of working-class Charlestown residents a break on their taxes. Or to hold on to the cash to use to relieve Charlestown of a major headache, namely the problems associated with the projects proposed for Larry LeBlanc’s 81 acres. 

The disconnect is, I think, a direct by-product of the Two Charlestown Effect.

If you only looked at Charlestown Town Government – at its Town Council, Budget Commission, Planning Commission and various other bodies – you would think that town residents are overwhelming elderly, retired and well-to-do.

If you were to only look at the actions of that Town Government, you would think that the only priorities in Charlestown are those that benefit those same people, plus our waterfront nonresident property owners. Witness Council Boss Tom Gentz’s reverse Robin Hood efforts to induce town residents to provide free labor for our nonresident waterfront property owners who have been slow to clean up storm damage on their properties.

If you looked at the campaign contributions of the town’s controlling political party, the Charlestown Citizens Alliance, you’d see it's those same non-residents and wealthy retirees who pay their bills.

But Census data and monthly data on such matters as home values and unemployment show that there is a much bigger Charlestown that is usually ignored and often disdained by its own town government.

There are two Charlestowns, divided roughly along geographic lines but more starkly along political lines. One consists largely of the privileged enclaves mostly South of One and especially along the water and those who carry water for them politically.

Then there are the working-class neighborhoods scattered all over town but concentrated North of One. Generally, the farther you get from water, the lower the income, the lower the property value and the higher the unemployment and poverty.

That other Charlestown vastly outnumbers the elite Charlestown that controls the town government. 

But money and privilege, plus the fact that civic engagement generally is much higher among older and wealthier people who have the leisure time to attend meetings, leaves Charlestown’s majority out in the cold politically and economically.

Census numbers show that the real Charlestown is not elderly, retired and well-to-do. Charlestown has more children than elderly people. 69% of Charlestown’s adult population works for a living or at least tries to. Our median income is in the lower half of Rhode Island’s cities and towns. We have a large number of residents whose incomes are low enough to qualify them for federal food assistance.
While Rhode Island’s unemployment rate has been falling lately, Charlestown’s unemployment rate is 11.5% compared to the statewide rate of 9.4%.

Home values in Rhode Island in general showed a one-year increase of 12% almost across the board. However, Charlestown saw its home values drop by 1.2% over the same period. After an encouraging few months of increases in home values toward the end of 2012, Charlestown home values plunged since the beginning of the year to below $300,000 again. puts the average Charlestown home value at $294,100, which is almost exactly what it was ten years ago.

Charlestown is generally in the middle of the pack statewide when it comes to home foreclosures. As most of Rhode Island has seen foreclosed and distressed properties get sold off (with the effect of generally lifting home values), Charlestown still has a number of distressed properties, many in pre-foreclosure, depressing home prices.

Zillow also estimates that 15% of Charlestown mortgage holders are “underwater” (because their home values have dropped, they now owe more on their homes than those homes are worth). That’s approximately 450 households. Zillow also estimates that 8% of them (around 240 households) are delinquent.

Zillow map showing Charlestown foreclosures, auctions
and pre-foreclosures
When the real estate market crashed, it took with it many older workers’ hopes for a comfortable retirement where they counted on rising home equity to be there as part of their savings. Many older workers find they simply can’t afford to retire when they planned to, but the job market for older workers is even more abysmal for them than it is for workers in general.

Try being a 55-year-old looking for a new job, or a person of any age who’s been out of work for a year or more. And if you’re a 55-year-old  who has been laid off, fahgedaboudit!

I can appreciate the Budget Commission’s efforts. They’ve managed the town’s money carefully with the result being one of Rhode Island’s lowest property tax rates – although offering almost no municipal services is the major cause for that.

I understand their arithmetic about the long-term savings accrued through lower interest costs. I also understand that the bond rating services might reward us for our lower debt with a higher bond rating. But I also wonder what value a lower bond rating has when we don’t borrow. It’s similar to the Catch-22 individuals face – you can get a great credit rating provided you don’t use your credit very much.

Their reasoning reflects that of the “deficit hawks” who insist that the government should be run like a household. However, they neglect to make the distinction between borrowing and paying interest on “durable goods” (e.g. a house or car) versus borrowing and paying interest on “consumables” (e.g. credit card debt).

Borrowing to acquire things of lasting value – land, buildings, a college education – is something responsible people do. Our Budget Commission, like their counterparts in the US House of Representatives, need to be more honest and acknowledge that not all spending or all borrowing is the same.

I look at the almost $4 million the Budget Commission wants to bleed off our excess surplus and see  $4 million in potential tax relief for Charlestown’s working families or major headache relief in the form of buying LarryLand for open space. 

With our high unemployment rate and depressed home values, Charlestown could use a tax rebate now and no tax increase in the upcoming year.

Alternatively, one less migraine headache cured by buying LarryLand would be worth the price.

On May 6, the town will hold a special Budget Hearing at Town Hall and then after whatever adjustments the Town Council makes after the May 6 hearing, the budget goes to the voters for their approval in June.

It’s up to town residents to speak up on May 6 and to let the members of the Town Council know how they feel, especially about the issue of spending the surplus to reduce future interest payments or use it to help Charlestown residents now.

Then it will be up to town residents to vote. There has already been a tax revolt over the Chariho budget when Hopkinton and Richmond residents voted down the budget for a lot less significant reason than Charlestown faces with its own budget.

I think the Town Council needs to re-think the Budget Commission’s proposal, the town’s priorities, the needs of the majority of the people and the merits of a tax increase in our fragile economy.