How much of a tax break do nonprofits deserve?

SILENT PROTEST: This three-apartment unit on Valley Street in the Smith Hill neighborhood of Providence carries a large sign, directed at oncoming traffic, indicating that the property pays more in real estate tax than Brown University, one of the largest nonprofit entities in the city. According to a Zillow.com posting, the property pays about $3,000 in taxes annually. / PBN PHOTO/STEPHANIE EWENS
SILENT PROTEST: This three-apartment unit on Valley Street in the Smith Hill neighborhood of Providence carries a large sign, directed at oncoming traffic, indicating that the property pays more in real estate tax than Brown University, one of the largest nonprofit entities in the city. According to a Zillow.com posting, the property pays about $3,000 in taxes annually. / PBN PHOTO/STEPHANIE EWENS

What is the economic and cultural impact of the largest nonprofits based in Providence? By many measures, they help to define the capital city, which draws its identity in large part through the contributions of its universities and hospitals.

How much of a contribution to Providence in terms of cash? Not much.

The six largest nonprofits based in Providence, which are making cash payments to the city, called Payments in Lieu of Taxes, paid a total of $7.4 million to the city this fiscal year through March 31.

That represents a 6.8 percent share of the taxes that they would have paid, were they for-profit entities.

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Can Providence, which has had well-documented financial troubles over the past decade, demand more? For comparison’s sake, 49 of Boston’s largest nonprofit educational, medical and cultural institutions were asked to contribute payments or community benefits totaling nearly 20 percent of what they would have paid in taxes, if their properties were not exempt, according to city data. The combined cash payments made to the city in fiscal 2015 was $27.9 million, about one-third of what it had requested. That city re-examined its structure for voluntary contributions in 2012, according to The Boston Globe, setting a goal of a 25 percent contribution by the current fiscal year.

Approximately 40 percent of the properties in Providence are held by nonprofits, according to Mayor Jorge O. Elorza. Of the city’s commercial properties, the 21 most valuable are either subject to lucrative, long-term, tax-shielding agreements, called tax-stabilization agreements, or are owned by nonprofits and so do not pay property tax.

They include Providence Place mall, valued at $698.1 million, and Rhode Island Hospital, valued at $395.8 million. Brown University’s most expensive holding is Sidney Frank Hall, at 185 Meeting St., worth $189.8 million.

Providence officials, including several state and city leaders, say the nonprofits must do more for the host city. In the current fiscal year, the city expects to collect $9 million in these payments, most of it from four institutions.

Elorza spoke to the issue publicly in his fiscal 2017 budget address. He said the current status of the city, where nearly all of the expenses are paid by 60 percent of the taxable property, is unsustainable.

“The cost to maintain services and infrastructure has been largely placed on the homeowners and businesses that do indeed pay taxes,” he said.

He’s advocating for a more formal framework for all of the nonprofit anchors, the largest institutions that would offer more tax parity. The practice, up until now, has been individually negotiated deals.

Among the largest institutions, Brown University pays the greatest amount, and the greatest share of its assessed value. Lifespan, which operates Rhode Island Hospital and The Miriam Hospital, among other locations, has provided nothing this year, according to data collected by National Resource Network, the consultant hired by Providence to examine its long-term financial prospects. It is in the process of negotiating a new arrangement.

David Levesque, a spokesman for Lifespan, said the tax-exempt status of the hospital allows it to provide medical care to anyone who walks in the door, regardless of ability to pay for care.

“The Lifespan health system was the first hospital system to voluntarily agree to make payments to the city of Providence during the Angel Tavares administration. These payments have totaled nearly $2.8 million to date,” he said.

But he added Lifespan’s finances have worsened. As a result, “we are not currently in a position to make a payment to the city,” he said.

Nonprofit leaders argue the institutions have a mission that would be damaged if they were required to pay substantially more. The effort to increase PILOT payments, initiated under former Mayor Angel Tavares, resulted in a series of agreements with the largest nonprofits in the city.

Brown University, for example, in 2012 agreed to pay the city $31.5 million over the next 11 years.

But in 2016, for the second consecutive year, Elorza’s administration is seeking a change in state law that would allow it to collect taxes on properties owned by nonprofit entities that are used for commercial purposes, even if that revenue supports the bottom line.

– By Mary MacDonald

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