The purpose of this letter is to contrast fire districts and condominium associations when it comes to property tax assessment and collection within the Town of Westerly. Both types of organizations are non-profit, domestic corporations chartered by the State General Assembly. However, each organization is treated differently when it comes to property tax assessment and tax collection. In this letter, I am addressing only fire districts and condo associations located in Westerly.
PROBLEM Property owned by fire districts is not subject to property tax assessment or payment whether or not the property in question is related to fire prevention/protection. Property owned by condo associations is not exempt from town property assessment and payment.
FACTS There are eight (8) fire districts in Westerly. Three fire districts have no fire station, fire trucks or fire fighters. According to the Rhode Island Supreme Court (RI Supreme Court NO. 2003-17-Appeal, WC01-274, Shelter Harbor Fire Dist. v. Charles Vacca, Westerly Tax Assessor), all property, including non-fire prevention/protection related assets, that is owned by a fire district is non-taxable.
In the case of the three aforementioned fire districts they more resemble Home Owners Associations than fire districts. Five of the fire districts in Westerly own tax exempt property that includes land, buildings, roads, parking lots, beaches, tennis courts, docks & moorings, small boat racks and some provide rubbish collection, none of which has anything to do with fire prevention/protection.
Property owners within each of the five fire districts that own common property that is not directly involved with fire prevention/protection are assessed a district fire tax that includes a fee for both fire protection/prevention plus a fee for common property maintenance, upkeep, wages and salaries. Three of the five shoreline fire districts obtain fire protection/prevention services on a contractual basis due to the fact that these fire districts have no fire station, fire trucks or firefighters. At a meeting of the Dunn’s Corner Fire District Operating Committee held on March 10, 2014, the Moderator of the Shelter Harbor Fire District, Mr. Tom Llyod, disclosed to the Dunn’s Corner committee that the breakdown of the Shelter Harbor Fire District fire tax assessed is thus 25 to 27% of the fire tax collected goes for fire protection/prevention; the remaining amount of the fire tax collected goes to maintain the fire district infrastructure.
The total amount of the fire district’s so-called fire tax paid by the property owners within the shoreline fire districts is totally deductable from federal and state income tax.
Condominium Associations are, for the most part, state chartered, non-profit, domestic corporations. Condo unit owners are assessed both a town property tax, fire tax and a condo fee. The condo fee is assessed by the condo association to pay for the costs of expenses e.g. common utilities, insurance and infrastructure (roads, parking lots, exterior lighting etc.) along with building and grounds maintenance.
Condo fees are not tax deductable. Condo unit owners are assessed a fire tax based on the towns property assessment and is payable to the fire district that serves the condo association. The fire tax, like all fire tax, is deductible.
DISCUSSION Residents of shoreline fire districts enjoy a property and income tax advantage not available to residents of condominium complexes or anyone else in town for that matter. One example of a tax advantage is that residents in fire districts with valuable shoreline property have common access to restricted property that is not subject to a town mandated property assessment and tax.
In addition residents of the five shoreline fire districts not only have access to restricted property that is exempt from property taxes but they are allowed to deduct the entire amount of the so-called fire tax from their individual federal and state income tax. The value of common shoreline properties in the five fire districts is in the millions, none of which is on the town’s tax rolls.
In contrast residents of condominium complexes are subject to town property tax assessment and payment plus condo fees.
In addition state law requires that buildings and property not be assessed separately in condominium complexes. The town assesses condo units based on the unit’s last selling price irrespective of the condition of the common area and the location of the condo complex.
In cases where the condo association’s common areas are deteriorating or falling into disrepair condo unit owners are enjoined from challenging a unit’s property assessment based on the condition of the common area because the land on which the unit sits is not assessed separately. This results in condo units located in older complexes being over assessed since the unit’s property tax assessment is based solely on the unit’s last selling price.
Condo unit owners pay a disproportionate property tax because common property is not assessed and taxed separately as is the case within the remainder of the town.
Individual unit assessments within a condo complex can vary by thousands of dollars regardless of the fact that the units are all similar in size and layout. Thus, condo unit owners are not only subject to a disproportionate property tax they are not allowed to deduct condo fees from their income tax.
CONCLUSION: There is little or no empirical data on the subject of town property tax assessment and payment as it applies to fire districts and condo associations because there is no central data collection point.
Any evidence or testimony that is presented regarding condo property tax is considered anecdotal and biased. The RI General Assembly has created and authorized both fire districts and condo associations without any regulatory or enforcement oversight, responsibility or consideration for unintended consequences.
Incongruous property tax laws between the two taxing entities has created disparate treatment at both the state and local levels of government that results in a disproportionate higher property tax on condo unit owners. On the other hand property owners in shoreline fire districts benefit from a law that prohibits a property tax on common area property tax. In addition the fire tax in such communities is income tax deductible. Compounding the situation is the fact that there are two government entities involved with little or no consideration, cooperation, coordination or communication between the two.