Business divided on tax proposal

Providence business and nonprofit leaders are divided over a recent advisory-panel proposal to significantly lower the city’s commercial property tax rates while demanding bigger contributions from local colleges and hospitals.
Designed to solve what it describes as an “out of balance” tax system that hampers growth, the volunteer Commission on Revenue, Sustainability and Efficiency’s recommendations have been embraced by many companies and those involved in commercial real estate.
But in a sign of how complicated a job reforming the city tax code is, the Greater Providence Chamber of Commerce is split on the proposals.
The business group, of which city colleges and hospitals are members, supports the commercial property tax reforms, but opposes proposals to seek more revenue from the major nonprofits and a suggested hike in the local meals tax.
“On the tax-classification front, the commission did an excellent job stepping back and thinking about how the tax code might be structured to make Providence more competitive and business friendly,” said Chamber President Laurie White.
However, on seeking larger contributions from nonprofits, “we have been opposed to any move in that direction,” White said. “The colleges, universities and hospitals provide the foundation for the region’s economic recovery.”
She added that the local restaurant industry is concerned a proposed 1 to 2 percent increase in the local meals tax would make it less competitive.
Other business groups, including business-backed The Providence Foundation, are more enthusiastic about the commission report.
“They have documented well the need to have a more competitive tax structure,” said foundation Executive Director Daniel Baudouin.
In the 37-page report, the volunteer panel charged last spring with studying the city’s revenue structure recommended simplifying the tax code by scaling back the large 50 percent exemptions for owner-occupied residences while reducing rates across the board.
Ultimately, the panel recommends pegging the commercial rate at twice the residential rate and tangible rate, for business equipment, at three times the residential rate. The residential rate would drop to account for the Homestead-exemption reduction by the amount needed to hold homeowners harmless. Those changes would result in a 13.2 percent drop in the commercial rate and 14.2 percent drop in the tangible rate.
But acknowledging that such tax cuts might not be affordable now, resulting in an estimated loss of between $35 million to $40 million in city revenue, the panel recommended a first-step drop in the commercial rate to 2.075 times the residential rate and the tangible rate 3.3 times the residential rate.
Even those incremental steps would cost the city an additional $15 million to $18 million a year, the commission’s report estimates.
To offset those costs, in addition to seeking more money from nonprofits and a bump in the meals tax, the recommendations call for the state to accelerate its restoration of full school-aid funding to cities and towns.
The revenue commission, chaired by Nortek Inc. Senior Vice President and Treasurer Edward J. Cooney, was authorized by the city council last March after an audit of the city’s books revealed a $110 million structural budget deficit.
Mayor Angel Taveras has not said whether he will try to advance any of the changes during another year of expected budget cuts.
The one area where Taveras has made his position clear is in his desire to see more money from the city’s major tax-exempt hospitals and colleges put toward balancing Providence’s books.
For most of the past year, Taveras has been pushing for greater voluntary payments from the major nonprofits, including what have become contentious negotiations with the city’s largest tax-exempt landholder, Brown University.
“The revenue commission’s analysis makes very clear that one of our biggest barriers to creating a balanced, competitive revenue structure in Providence is the failure of Brown University and our city’s other tax-exempt institutions to contribute fairly for the city services they use,” Taveras said in a statement.
Under an agreement reached with then-Mayor David Cicilline in 2003, Brown, Johnson & Wales University, Providence College and the Rhode Island School of Design now pay the city less than $2 million annually, a total that increases 1.5 percent each year. Of that total, Brown pays $1.2 million. In December a tentative agreement that would have had Brown contribute an additional $4 million to the city each year fell apart when Brown President Ruth J. Simmons did not bring it to the Brown Corporation for approval, according to Taveras in a Jan. 4 letter to the school.
Brown instead returned with a counter offer of $2 million, all of which would be dedicated to the Providence public schools, which Taveras rejected.
The revenue commission calculated the city’s nine largest nonprofits’ share of the cost of municipal police, fire, planning and public works services at between $36 and $40 million.
The commission recommended the nonprofits’ annual payments increase to between $13.3 million and $18 million.
Responding to claims that the school does not pay enough, Brown Vice President of Public Affairs Marisa Quinn pointed to the fact that the school employs 1,400 city residents, pays Providence an additional $2.8 million in voluntary property taxes for new and noneducational buildings and that the state is reimbursing the city $23 million for its tax-exempt property.
For both Brown and Johnson & Wales, discussions with the city over increased payments in the past year have also included negotiations over purchasing pieces of the former Interstate-195 land.
Under state law, the nonprofits will need to work out a deal with the city before convincing the I-195 District Commission, which is responsible for developing the area, to sell to them.
Explaining his vote against the nonprofit recommendations in the report, commission member Mark Montella, senior vice president of external affairs for Lifespan, said he objected to the committee’s comparisons with voluntary payments made by institutions in Boston and New Haven, Conn.
“We felt that when you look at the development and delivery of health care [in Massachusetts and Connecticut], they really are vastly different from how the systems evolved in Rhode Island.” Montella said. &#8226

No posts to display