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INVESTIGATION: Brown Avoids $4M in Property Taxes

Monday, January 09, 2012

 

Brown University is not paying Providence more than $4 million in taxes on approximately $140 million worth of properties that are either not exclusively used for educational purposes or are too large to qualify for the tax exemption normally granted to schools under state law, a GoLocalProv investigation has found.

 

The GoLocalProv analysis includes houses rented to students and properties being used more like businesses than educational facilities. It also includes numerous properties that are being used for educational purposes, but sit on land that extends beyond one acre—the limit imposed on tax exemptions for schools under normal circumstances. (Read the state law.)

The data reinforces the prevailing sentiment at City Hall that Brown does not contribute enough to city revenues.

“Mayor Taveras has been calling on Brown University and the city’s other tax exempt institutions to share in the sacrifices needed to put Providence on a sustainable path,” said spokesman David Ortiz. “The taxpayers have sacrificed. The city labor unions have sacrificed—and we’re disappointed that Brown University and the other tax exempts have not shown the same sense of urgency.”

 

Councilman Sam Zurier, who is chairing a subcommittee on tax-exempt nonprofits, said the council believes Brown should be paying more. “It’s not paying what we would like them to pay, given the city’s current financial difficulties,” said Zurier, whose ward includes most Brown’s campus.

City councilman John Igliozzi, who chairs the Finance Committee, suggested that Brown is taking advantage of its property tax exemption.

“The ones that are truly [for] educational purposes, I understand the argument for exemption, but Brown uses that and masks all their non-educational properties saying it’s in some way connected to educational services,” Igliozzi said. “They shouldn’t be receiving that exemption.”

Councilman: Brown ‘should not be receiving exemption’

In the past, the debate has focused on how the city can obtain some revenue from academic buildings. City officials have floated various trial balloons for ways the city can bypass the exemption—a student head tax, a dorm tax, and a fee for fire and police services. None have become a reality. But city officials have not discussed, at least publicly, the issue of whether they should try to tax non-educational buildings and properties.

Former Mayor Buddy Cianci thinks they should. “I think if it’s being used commercially and [it’s] non-educational, they should pay full freight,” Cianci told GoLocalProv.

 

Of course, in accordance with a 2003 agreement with the city, Brown has been making annual payments in lieu of taxes (PILOT) to Providence. But those payments are voluntary and, at the current annual amount of $2.4 million, come to only about half of what Brown would be paying if the city sent it a tax bill for its properties that are not used for educational purposes or exceed one acre.

Brown-owned commercial properties—defined here as those that operate more like a business and are only indirectly, at best, connected with the educational mission of the university—include the following:

■ The Faculty Social Club on Magee Street, a private club that advertises itself as a venue for private parties, wedding receptions, banquets, and departmental faculty meetings. Membership is restricted to professors and staff, parents, and alumni at a discounted rate. “Special friends” of Brown can become members for $315 a year. In February 2009, the club reported gross profits of just over $746,000, according to 990 forms filed with the IRS. The club has an assessed value at $680,300, which means that, at the current commercial rate, its taxes would be $25,001.

■ A former Ethan Allen department store: The vacant building at 1120 North Main Street may look like your typical department store, but its owner is Brown University. With a current assessed value of $1.1 million it would yield just over $43,000 in taxes if Brown (or another nonprofit) had not purchased it. A university spokeswoman said that Brown has no plans to actually use the building. Instead, the building is currently on sale, she said.

■ Power Street parking garage: The two-floor, one-acre garage at 101 Power Street has an assessed value of $6.6 million, with a potential tax of $243,942.

Daycare centers: Brown also owns the lot at 148 Hope Street, the location of the Fox Point Public Day Care Center (also known as the Brown/Fox Point Early Childhood Education Center) . The property has an assessed value of just over $1 million that would yield about $37,000 in taxes, at the current commercial rate of $36.75 for every $1,000 in value. (The university also is listed as owning a lot on Taft Avenue where a second daycare center is located.)

In addition, Brown is not paying taxes on about 50 other properties that are not used as dorms, classrooms, dining halls, or administrative offices, according to a GoLocalProv analysis of city assessment records and Brown University documents:

 

■ 28 Rental Properties have a total assessed value of $28 million and a potential tax of $906,227 if Brown had to pay taxes on them.

■ 21 Properties Exceed One acre: The state law on tax exemption normally permits colleges and universities to claim the exemption on education buildings as well as the surrounding land—but only up to one acre. (Click here to read the law.) There are 21 properties that have land well in excess of one acre. Once the buildings and surrounding one acre are excluded, that leaves $105 million in property that, under normal circumstances, would be taxed, yielding $3.3 million in revenue for the city.

In all, the commercial, rental, over-sized properties add up to 54 parcels worth $143,805,754. The total amount of taxes that could be generated from these properties tops $4.6 million.

In an e-mail, a university official maintained that the properties listed above still merit the exemption. “Any properties that support the University’s educational enterprise are exempt from taxes,” said Marisa Quinn, the vice president of public affairs and university relations.

As for the school’s rental properties in particular, Quinn said those rented to students or part of the Brown to Brown residential program, which she said sells Brown-properties to members to professors and other employees.

Critics: Brown prospers while other taxpayers struggle

Brown Faculty Club

Brown’s blanket exemption on all its properties has raised the ire of several prominent local taxpayers.

 

Mike Patch, president of the Providence Apartment Association, disagreed that Brown should not have to pay taxes on rental houses. He said Brown’s tax exemption on off-campus houses gives it an unfair advantage over other landlords who compete for tenants. “I think a lot of people in Providence feel like that there has to be more of a contribution from nonprofits,” Patch said. “Specifically, when it relates to properties that are income-producing.”

“The real shame is not that Brown has failed to pay—it is that we failed to mail them the bill,” said Angus Davis, a local entrepreneur who founded Tellme and now is CEO of Swipely, a marketing startup in Providence. “While countless Providence taxpayers struggle to pay exorbitant property tax increases, Brown University gets no bill for the property taxes it is obligated to pay under the law.”

All that being said, Cianci said the city needs to remember just how much it benefits from having Brown in its midst. “I can’t imagine the City of Providence without Brown University,” Cianci said. “It’s not only an educational opportunity, it’s an economic advantage that a lot of other cities our size don’t have.”

By the same token, he said Brown needs to realize that it needs Providence too. “Brown and the City of Providence—they’re in a symbiotic relationship,” Cianci said. “If the city falters. … Brown can’t pick up its buildings and move.”

Igliozzi agreed, saying the city had to forge a new partnership with its nonprofit hospitals and universities, saying the current formula for how city finances operate—with nearly 40 percent of all properties tax exempt—is simply no longer practical. “Right now, the present formula, two are prospering,” Igliozzi said. “And the two are the hospitals and the universities. And, if we continue with the formula, the third partner will collapse.”

No agreement with the city

Former Ethan Allen department store

Soon after declaring that the City of Providence was facing a financial emergency, Mayor Angel Taveras last year called upon all nonprofit hospitals and universities in the city to collectively come up with an additional $7 million in voluntary tax payments to help the city steer its way out of the fiscal storm. Taveras said he was counting on the money to close a $110 million deficit.

 

By last summer, Taveras had reach most of his goals and whittled that deficit to a far smaller number. But now, halfway into the fiscal year, no agreement on increased PILOT payments has been reached.

Brown cherry picking its taxes?

In response to GoLocalProv queries, Brown provided a list of properties that it voluntarily pays taxes on, in addition to its annual PILOT payments. The list, which city officials confirmed is accurate, shows that the university is paying nearly $1.6 million in taxes on approximately 34 properties.

But the document raises more questions than answers. For example, Brown is paying $66,000 in taxes for the provost’s home, at 37 Cooke Street, but it does not pay any taxes on the president’s 55 Power Street house, not to mention at least 21 income-producing rental properties. Likewise, Brown is paying taxes on nine separate parking lots, but not the most valuable one it owns: the 55 Power Street garage, which would generate four times as much in taxes as all other nine parking lots combined.

Yet another discrepancy: the university pays taxes on a building it is leasing to a Chinese restaurant on Benevolent Street, but not on the Grad Center Bar about one block away, which is open to the public for a small annual fee.

When asked to explain such inconsistencies, Quinn said: “We have generally made payments on properties that are not used in support of our educational mission.”

COMING TOMORROW—PART II: The GoLocalProv investigation continues into why Brown is receiving a special tax exemption broader than what the state law normally allows and why city officials have yet to challenge this exemption.

Editor's note: All addresses used here reflect the addresses as listed in the city tax assessment database, which may not be the same as the mailing address for a particular property.

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