Providence Place tax exclusion costly but worth the investment

BIG VALUE, FEW TAXES: Thanks to a 30-year tax treaty signed to encourage its development, Providence Place mall, the city's most valuable commercial property, pays roughly 2 percent of what it would be expected to pay without such an agreement. / PBN PHOTO/ MICHAEL SALERNO
BIG VALUE, FEW TAXES: Thanks to a 30-year tax treaty signed to encourage its development, Providence Place mall, the city's most valuable commercial property, pays roughly 2 percent of what it would be expected to pay without such an agreement. / PBN PHOTO/ MICHAEL SALERNO

Providence’s behavior suggests that city government sees commercial property taxes as a key to patching its fiscal problems. How else to explain that the city has the third-highest commercial property tax rate in the nation, according to a recent study?

This year’s revaluation of commercial property in Providence only focused officials more intently on this issue, as it found that of the 40 most valuable commercial properties in the city, only four are subject to full taxation.

Which leads us to Providence Place mall. At $698.1 million, the mall is the city’s most valuable commercial property and would generate roughly $25 million per year in property tax if it were not the recipient of a tax treaty. Instead, in lieu of property and personal property taxes, which were waived for 30 years when it was developed, the mall owners are paying $500,000 this year into city coffers.

Mayor Jorge O. Elorza’s administration does not feel the deal that was made in the mid-1990s was a good one.

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But based on what key people involved in the development of the mall say, it was instrumental in the city’s renaissance. Prior to its construction, the area was barren. Today it is a well-used asset for the city, by both residents and visitors.

Certainly there is much to be learned from the Providence Place tax agreement, including how to structure similar deals going forward. But there can be no question that on balance, it was a necessary project, deserving of public support. •

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