Special districts in Rhode island.

It is not within the scope of this report to elaborate in any great detail upon special districts in Rhode Island.
However, a word should be mentioned in regard to them as independent units of government.

There are forty-seven special district governments in Rhode Island (excluding two regional school districts, four housing authorities, and the Kent County Water Authority).
These forty-seven special purpose governments have the authority to levy taxes, to borrow money, own property, sue and be sued, and in general to exercise normal corporate powers.
Unlike cities and towns, however, they do not have to submit any financial statements to the state Bureau of Audits.
It is not an exaggeration to say that the state government has little or no fiscal control over these units of government.
In addition to the collection of service charges, the special districts levy annual property taxes of approximately $450,000.

Fiscal years in other states

comparative data.

A review of practices in other states regarding fiscal uniformity is pertinent to this report.
Included in the findings are: 1.

Forty-six states, including Rhode Island, end their fiscal year on June 30.
The other four states end on varying dates: Alabama (Sept. 30), New York (March 31), Pennsylvania (May 31), and Texas (August 31).
2.

In sixteen states, the fiscal year ending of the cities (June 30) is the same as that of the state: Alaska, Arizona, California, Delaware, Massachusetts, Montana, Nevada, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, Vermont, West Virginia, Wyoming, and Hawaii).
3.

In eleven states, the fiscal year of the cities ends on December 31, while the state fiscal year ends on June 30 (Arkansas, Colorado, Indiana, Kansas, New Hampshire, New Jersey, Ohio, South Dakota, Utah, Washington, and Wisconsin).
4.

In eight states whose fiscal years close on June 30, a majority of their cities close their fiscal year on December 31::
(Georgia, Iowa, Kentucky, Maine, Maryland, Minnesota, Virginia, and South Carolina).
5.

One state, Alabama, closes its fiscal year on September 30, and all cities in the state, with one exception, also close fiscal years on September 30.
6.

Mississippi closes its fiscal year on June 30, while all of its cities close their fiscal years on September 30.
7.

Pennsylvania closes its fiscal year on May 31.
All of its cities close their fiscal years on December 31.

The remaining twelve states have varying fiscal years for the state, city and local governments.
However, only Illinois, Oregon, Louisiana and Rhode Island have a situation in which the sundry units of government vary widely in relation to fiscal uniformity.

Fiscal uniformity: advantages and disadvantages

advantages.

An excellent summary of advantages concerning the uniform fiscal year and coordinated fiscal calendars was contained in a paper presented by a public finance authority recently.
He listed among the values of fiscal uniformity: 1.

The uniform fiscal year requires compliance with common sense administration of local finances: adoption of the budget, or financial plan, in advance of spending.
2.

The uniform fiscal year ensures conformance with another common sense rule, that of having cash in the bank before checks are drawn.
It enables towns to make more economical purchases and to take advantage of cash discounts.
3.

The uniform fiscal year promotes more careful budgeting and strengthens control over expenditures.
By fixing the tax rate in advance of spending, upper limits are set on expenditures.
4.

The uniform fiscal year brings the town's fiscal year into line with that of the schools, which expend the largest share of local disbursements.
This greatly simplifies the town's bookkeeping and financial reporting.
5.

The uniform fiscal year eliminates interest charges on money borrowed in the form of tax anticipation notes.
Furthermore, tax collections not immediately needed for current expenditures may be invested in short-term treasury notes, augmenting the town's miscellaneous revenues and reducing the tax levy.
6.

The uniform fiscal year facilitates inter-town comparison of revenues and expenditures.
When towns have the same fiscal year it is relatively easy to make meaningful comparisons;
and as the cost of local government increases, the demand for such comparison also increases.
Towns having different fiscal years are difficult to compare.

Of all advantages, probably none is more important than the elimination of tax anticipation notes.
Borrowing in anticipation of current taxes and other revenues is a routine procedure of the majority of municipalities at all times.
It may be by bank loans, sale of notes or warrants, or by the somewhat casual method of issuance and registration of warrants.
In any event it is a form of borrowing which could be and should be rendered unnecessary.
Its elimination would result in the saving of interest costs, heavy when short-term money rates are high, and in freedom from dependence on credit which is not always available when needed most.
This type of borrowing can be reduced to a minimum if quarterly installment payment of taxes is instituted and the first payment placed near the opening of the fiscal year.
Any approach toward such a system looks toward saving and security.

It should be noted that there are other and equally important reasons for establishing meaningful intergovernmental reporting bases on a uniform fiscal year.
Both the federal and state governments commence their fiscal years on July 1.
Both units of government contribute increasingly large sums of money to the several local governments in this state as indicated below:

It has been said that when local government revenues were mostly produced locally from the property tax, the lack of a uniform fiscal year was no great handicap;
but with the growth of state and federal fiscal aid, the emphasis on equalization, and the state-local sharing of responsibility for certain important functions, this is no longer true.
The haphazard fiscal year calendar is an obstacle to the planning of clear and efficient state-local revenue and expenditure relationships.
Disadvantages.

Although there are many sound reasons for adopting uniform and coordinated fiscal years in Rhode Island, there are also certain difficulties encountered.
These involve more the mechanics employed in adjusting to fiscal uniformity than they do actual disadvantages to the principle.
One problem is a matter of shifting dates;
the other, is how to finance the transition.

Little can be done about the changing of dates.
This is an inherent part of adjusting fiscal calendars.
It usually means a confused and disgruntled tax-paying public for a period of time.
But cooperation and understanding between local officials and the citizenry help lessen this problem.

The other problem is the matter of financing the transition period in the several cities and towns.
This will be covered more fully later.
It should be kept in mind that the ease or difficulty with which a town or city can convert to the proposed plan is directly dependent upon the financial condition of that town or city.
Fortunately, there are no cities or towns in the state, with one or two possible exceptions that are in too difficult a position to finance the proposed change.
Sacrifice will have to be made in some cases, but it is to the municipality's advantage to finance the change-over for a short period of time rather than pay interest on tax anticipation notes indefinitely.

Adjusting the fiscal calendars

The advantages of a uniform fiscal year and well synchronized fiscal and tax collection calendars are sufficiently great for Rhode Island municipalities to exert effort to secure them.
The type of program desired can be determined by the nature and extent of the adjustments needed.
Two features are immediately evident.
First, the present situation is too varied to be systematized by any single formula.
Second, the shift to a uniform July 1 to June 30 fiscal year will, of itself, improve the tax collection calendars of the great majority of cities and towns.
There are at least two problems to consider: one is a matter of adjusting the fiscal calendar;
the other is how to finance the adjustments when necessary.
The latter matter is considered in detail in a later section.

Twelve cities and towns in Rhode Island presently indicate some plans to establish a uniform and/or coordinated fiscal tax year calendar.
Plans vary from the "talking stage" to establishing special committees to accomplish this end.
What is important here is that many of the cities and towns recognize the need for improved fiscal practices and are taking the initiative to obtain them.

An analysis of the fiscal tax collection year calendars throughout the state indicates that transition may not be as painful as is commonly thought.
However, it must be stressed that much depends upon the financial condition of the individual cities and towns involved.

The adjustments needed to establish a uniform and coordinated fiscal tax collection year calendar throughout Rhode Island, based on a July 1 to June 30 year, are shown below.
No adjustment needed.

Six cities and towns are presently on a July 1 to June 30 fiscal year and have coordinated their tax collection year with it.
No change is required for these towns.
These municipalities include: Barrington, Lincoln, Middletown, Newport, North Kingstown, and South Kingstown.
Adjustment of fiscal year.

One town and one city, Coventry and East Providence, require an adjustment of their fiscal year only.
This change will automatically adjust their tax collection year calendar so as to make all tax installments due and payable in the fiscal year collectible within that year.
Adjustment of tax collection year.

Six cities and towns are now on a July 1 to June 30 fiscal year and will need only to adjust their tax collection year calendar to establish uniformity.
These cities and towns include Bristol, Glocester, Pawtucket, Cumberland, Central Falls, and Woonsocket.
Simultaneous adjustments.

Two cities to be considered, Providence and Cranston, are an enigma.
Both have excellent integration of their fiscal tax collection year calendars.
However, neither of these two cities is on the desired July 1 to June 30 fiscal year.

The adjustment to a uniform and coordinated fiscal period could be accomplished relatively easily for them.
In that both cities end their fiscal years on September 30, they could levy taxes for an interim period of nine months, commencing with September 30 and ending with June 30.
These three installment dates would be: October 26, January 26, and April 25 (Providence) and November 15, February 16 and May 15 (Cranston).
Both would start their new fiscal year on July 1.
Their tax collection calendar could then be: July 25, October 26, January 26, and April 25, (Providence);
and August 15, November 15, February 17, and May 15, (Cranston).
Under this plan both Cranston and Providence would be on the uniform fiscal year but would still be using the same installment periods.
Varying adjustments.

The remaining twenty-three towns have fiscal years which end prior to June 30.
All of these towns will require adjustments of both their fiscal and tax collection years.
Assuming an adjustment to the July 1 to June 30 fiscal year, the required adjustment of the tax collection years and the towns involved are shown in Table 3.

Methods of financing adjustments

Aside from the matter of adjusting the fiscal and tax calendars, there is the problem of financing the adjustment when this is necessary.
It should be emphasized strongly that adjustments in fiscal dates or adoption of interim budgets do not necessarily mean financing over and above normal governmental requirements.
In many communities there is simply no financial problem;
it is only a matter of adjusting accounting methods, careful fiscal planning and management, or some like combination of techniques.
In other municipalities the difficulties in overcoming the financial burden have been sufficiently great to dishearten proponents of fiscal year changes.
Fortunately, such cases in Rhode Island are more the exception than the rule.

As shown earlier in Table 1, the several cities and towns use widely varied fiscal and tax collection calendars.
In addition, no two Rhode Island communities are identical in relation to their over-all financial condition.
These factors practically insure that no single financing formula is feasible;
each situation must be studied and a plan developed that takes into consideration such factors as the effect of the existing and prospective tax calendars, the financial condition of the treasuries, and the length of the transition interval.
Suitable plans range from those that are very easy to develop to those that are difficult to formulate and require borrowing ranging from short-term serial notes to long-term bonds.

The financial problem, where it exists, usually stems from the adoption of a budget for the transitional or adjustment period.
For those communities which have financial difficulties in effecting adjustments, there are a number of alternatives any one of which alone, or in combination with others, would minimize if not even eliminate the problem.