Following the city of Woonsocket’s lead, the Rhode Island League of Cities and Towns plans to file a lawsuit as early as late yesterday afternoon in order for the state’s municipalities to receive their third quarter municipal excise tax aid.

“The governor doesn’t have any authority, statutory or otherwise, to withhold those payments,” said Daniel Beardsley, executive director of the Rhode Island League of Cities and Towns. “In our opinion, the governor is in violation of the state law.” Republican Warwick Mayor Scott Avedisian said yesterday that the city has signed on with the League suit. The third quarter payment to Warwick would total about $3.5 million.

Governor Donald Carcieri, in attempting to solve a $219 million in-year budget deficit, proposed withholding the 3rd and 4th quarter payments to cities and towns. Elimination of the two quarterly payments would save the state about $66 million.

In a move to provide relief from what’s considered one of the most regressive taxes (without the exemption, everyone who owned a car paid the tax), the state began a plan to permanently phase out the motor vehicle excise tax about nine years ago. The state never fully implemented the phase-out and appears poised to reinstate the tax completely.

Currently, the state exempts the first $6,000 of a vehicle’s value, and pays communities a direct reimbursement for the lost revenue – as car taxes are paid to local cities and towns.

But given the depth and scope of the state’s budget deficit, Carcieri has proposed to eliminate the exemption completely next year. In Warwick, that means a person who owns a car worth $6,000 or more would be paying about $200 more per year in motor vehicle excise taxes.

“The governor himself has himself proposed elimination of the exemption,” Beardsley points out.

Amy Kempe, the governor’s spokeswoman, said that she couldn’t comment on the class action lawsuit to be filed by the League because it hadn’t been filed yet. With respect to the similar suit filed by Woonsocket, Kempe said she hoped the legislature would act on the supplemental budget proposal before the scheduled court date of Feb. 23.

“The governor made the decision not to release the third quarter excise tax reimbursements because it would put the state in an even worse position for the financial year 2010,” said Kempe.

Kempe said the governor hoped the state legislature would act one way or the other to balance the budget prior to the Feb. 23 Superior Court date with the city of Woonsocket. In that instance, the legislature would make the withholding of the reimbursement payment legal by balancing the budget some other way (raising taxes, cutting other spending) – which would make the lawsuit moot.

“We’ve reached out to the House and Senate and urged them to act on this one way or the other,” said Kempe. “We’re hopeful they will recognize the urgency of the situation and act on this.”

But according to Larry Berman, a spokesman for House Speaker William Murphy (D-West Warwick, Coventry, Warwick), the legislature will likely not act by the Feb. 23 court date. The House and Senate, he said, had completed their budget hearings, and had begun negotiations to craft their own budget.

In all likelihood, the legislature will not be able to act on the budget by the end of the week. Next week, the legislature will go on a one-week recess.

“I would say they’ll, at the earliest, get to it in the last week of February,” said Berman.

The House passed a non-binding resolution last week asking the governor to release the third quarter motor vehicle excise tax payments to cities and towns.

Even if the League is successful in gaining the third quarter payment amounting to $3.5 million, the mayor said he is proceeding with cuts in the current budget on the assumption the city won’t get the final payment. He said the administration is in talks with union representatives but there is no decision as of this point.

The mayor, City Council President Bruce Place (Ward-2) and Council Finance Committee Chairman Raymond Gallucci (Ward-8) jointly wrote the School Committee last month that they would expect the school department to proportionally share in whatever cut is made in state revenues to the city. If the League is successful in gaining the third quarterly payment, but the fourth is not made, schools would be called upon to make an additional $1.8 million cut in its budget this year.

In anticipation of cuts in its state funds in the current year, schools have already taken action to trim $1 million of its expenses. Further cuts would be difficult, if not impossible, Superintendent Peter Horoschak said last week.

Last year when the governor cut aid to the city mid-way through the fiscal year, municipal employees other than those employed by the school department, agreed to four-month pay cuts ranging from 3 to 5 percent for the last four months of the year to assist the city in bridging what would have otherwise been a budget shortfall. Similar reductions are apparently being talked about this year.

Last week School Committee Chairman Christopher Friel said if that is necessary, all municipal employees, including teachers, should share in pay cuts.

As for the next fiscal year starting July 1, Avedisian said the assumption is that the state will completely eliminate the reimbursement of the automobile tax. That would be a loss of $14 million in state revenue to the city.

With reports from John Howell