City wants new tax on colleges, hospitals

STUDENTS DO HOMEWORK in the new Brown University bookstore last winter. City leaders want to charge private colleges and universities $150 per semester for every out-of-state student they have attending their school. /
STUDENTS DO HOMEWORK in the new Brown University bookstore last winter. City leaders want to charge private colleges and universities $150 per semester for every out-of-state student they have attending their school. /

Updated | 1:30 p.m.

PROVIDENCE — House Majority Leader Gordon Fox today plans to introduce a bill crafted by Mayor David N. Cicilline’s administration that would authorize new local taxes on private colleges, universities and hospitals.

Cicilline, Fox, D-Providence, and Sen. Maryellen Goodwin, D-Providence, announced the proposal at a press conference on Wednesday at Providence City Hall. They said the new assessments on Brown University, Rhode Island Hospital and other tax-exempt institutions are necessary to reduce the burden on residential taxpayers, and described them as a way to get the nonprofit institutions to pay their “fair share” for city services.

Providence is trying to close a $17 million deficit in the current fiscal year and a nearly $50 million hole in the budget for the 2010 fiscal year, which starts July 1.

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But the proposal unveiled Wednesday drew immediate opposition from Gov. Donald L. Carcieri, who said he “cannot support such an initiative,” as well as representatives of the targeted nonprofits. The Association of Independent Colleges and Universities of Rhode Island called it “a legislative attack on independent higher education, its nonprofit status, and its students.”

In 2003, the four private schools in Providence signed an agreement to make $48 million in voluntary payments to the city over the subsequent two decades. Adding the new fees “would be in direct conflict” with that deal, said the Rev. Brian J. Shanley, president of Providence College and incoming chairman of the universities association.

“While empathetic and understanding of the financial issues facing our host communities, colleges and universities, like everyone else today, are faced with tough decisions with regard to making ends meet especially for our students,” he said. “While the mayor views the $300 expense as minor to students, it is not for the many students who are struggling mightily to stay in school.”

Edward J. Quinlan, president of the Hospital Association of Rhode Island, said hospitals are feeling the impact of the economic crisis just as the city is. The state’s hospitals are expecting to lose $30 million in state government funding in the fiscal year that starts July 1, and have already suffered a combined operating loss of $17 million since the hospitals’ fiscal year began on Oct. 1, he said.

Quinlan also said the hospitals have provided more than $61 million in charity care in the first six months of this fiscal year alone. “Hospitals have a unique role, with no ability to increase prices or eliminate services; this would be yet another mandate that places the hospital mission in peril,” he said in a statement.

But Cicilline said the fiscal crisis faced by the city required the nonprofits to do more. Nonprofits own 40 percent of the total value of assessed property in Providence, but they contribute less than 1 percent of the city’s revenue, according to the mayor’s office.

“The playing field has become too tilted against local property taxpayers with Rhode Island’s overreliance on property tax to pay for schools, the loss of revenue sharing, and the recession,” the mayor said in a statement. “Every stakeholder must come forward to bring balance back to the equation, including the city’s unions and also the large not-for-profit institutions.”

The bill would introduce two new fees on nonprofit institutions. The first is a charge on private colleges and universities of $150 per semester for every out-of-state student who attends the school. It will be up to each school to decide whether to pass the cost onto students.

In a statement, Carcieri called the proposal “an ill-conceived move to try to fix the city’s budget shortfall by taxing college families.”

“The cost of higher education is already out of reach for many families, and assessing them a $300 yearly fee only exacerbates the burden,” he said.

A second new charge would be on nonprofits with more than $20 million in assessed property. They would have to pay a fee totaling as much as 25 percent of the amount of commercial property tax that they would owe if they were not exempt.

Cicilline estimates the two fees would raise roughly $16 million in additional revenue for the city, The Associated Press reported.

The bill would apply to institutions in all Rhode Island municipalities, not just those in Providence.

Cicilline’s consideration of a tax on college students has drawn national attention in recent weeks, because Providence would apparently be the first city in the nation to charge collegiates a fee to attend school there.

In an interview with Providence Business News earlier this month, Cicilline said he had not made up his mind about whether to pursue the idea. “This is really about everyone working together, doing more than they’ve done in the past to support the health and prosperity of the city,” he said.

The student fee proposal unveiled on Wednesday differs somewhat from initial descriptions of it, since it would now be a tax on the colleges and universities as institutions, rather than the students themselves. But the schools would be free to pass the cost on to students.

However, Carcieri argued it would be inappropriate for the Cicilline administration to promote a tax targeted at colleges.

“There are significant issues of fairness in singling out the private higher education institutions,” the governor said. “These institutions bring in thousands of out-of-state students to the capital city, and are a major economic generator. To effectively impose a city tax on them is bad policy.”

Shanley, PC’s president, said passage of the proposal would be “a radical departure” from traditional government policy, because the bill “in effect revokes our nonprofit, tax-exempt status.”

Daniel P. Egan, president of the higher education association, also noted that the city’s more than 10,000 college students volunteer in the community and boost the economy when they decide to stay here after graduating.

“To attempt and make such a dramatic leap in the waning weeks of a legislative session is problematic,” Egan said. “Nonprofits provide immeasurable indirect and direct benefits to their host communities and the state as a whole. To undermine those missions puts at jeopardy years of cooperation and community building.”

Quinlan, of the hospital association, added that his members “serve as an important community resource and vital role in our economy providing well-paying, stable employment, purchasing billions of dollars worth of goods and services and serving as the community’s health care safety net.”

This article has been updated with reaction from the Hospital Association of Rhode Island. It has also been revised to reflect a clarification by the association that the hospitals have suffered a combined operating loss of $17 million thus far in their current fiscal year, not a $17 million cut in state support.

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