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City Council to Consider Major Overhaul of Providence Tax Breaks

Friday, March 27, 2015

 

The Providence City Council is slated to address changes to tax stabilization agreements in the city, and debate is centered around how to scrutinize -- and expedite -- interested parties. 

"There's a discussion about changing and standardizing TSAs.  The Council is talking to the Administration, and we're working on what that will look like," said Providence City Council President Luis Aponte.  "We're talking to the advantages and disadvantages of policy changes.  Some argue a standardized process based on project size is preferable, some of us think it might make more sense as to what we want to incentivize. That's where we are right now. "

"So I think that there are two schools of thought here," continued Aponte.  "One is not every development is good development nor should we be incentivizing every development.  The other is we need to get things going and get cranes in the air and get moving." 

Last year, critics of the TSA process questioned the efficacy and oversight of the tax deals, following the report by City Auditor Matt Clarkin that at the end of 2012, the then-36 TSAs in Providence had a total assessed valuation of $429.4 million, and paid $5.2 million in taxes in 2013.

"TSAs are essential and important tools despite critics' opinions, and implemented widely in competing communities," said Zach Darrow, a leading TSA attorney in Providence. "There can always be improvements.  I don't think the current system is flawed, but there are situations that could be served better, or worse -- the debate whether they should be administrative, or on a case-by-case basis. I see merits to both sides."

TSAs in Spotlight

Last August, GoLocal's Stephen Beale reported that tax breaks for developers of some of the biggest projects in Providence totaled more than $15.1 million since 2013

 “The problem with the business model is when the TSA expires the project might be economically unsustainable,” local real estate investor and GoLocal Mindsetter Ric Santurri told Beale at the time, saying taxpayers cannot afford the tax agreements when roughly 40 percent of property in Providence is already exempted from taxes because it is owned by a hospital, university, or other tax-exempt organization or government entity.

"Some of the conversation has been around, do we treat projects the same -- a 500 unit building for student housing, where there are jobs in construction, but not ones later -- should that be treated the same way as a commercial project that comes up with 100 career track jobs?" asked Aponte.  "Should one be more generous than another -- do we want to incentive to developments that will leave permanent jobs?"

Providence Mayor Jorge Elorza is on the record with supporting a standardized approach for granting TSAs, rather than on a case-by-case basis.  

"Tax stabilization agreements are valuable tools for attracting and facilitating broad economic development in cities throughout the country. I want a standardized TSA because it will bring consistency and predictability to the process and benefit all who do business in the City of Providence," said Mayor Elorza.  "I look forward to continuing to work with the City Council to develop TSA policies that work for the City and those who seek to invest here."

Taxpayer, Policy Considerations

Some in the state argue that TSAs should not be used to incentivize projects.

"Governments should not be in the business of picking winners and losers, and they should not be in the business of making some taxpayers smooth out the investments of others," said Justin Katz with the Center for Freedom and Prosperity.  "Instead, Rhode Island and its cities and towns should concern themselves with being places in which people want to live and do business."

Taxpayer advocacy group RI Taxpayers called for a standardized process -- with demonstrated TSA project "justification."

"To a certain extent, the necessity of TSA's on some limited basis has become a reality as states compete to attract or retain businesses.   It is important, however, that our elected officials sharpen their pencil, do the numbers and show their work before committing to a TSA," said Monique Chartier with the group.  "They need to demonstrate that the revenue generated by THIS PARTICULAR company far exceeds the tax concessions proposed.  Sometimes the answer is obvious.  The revenue, direct and indirect, from a seasonal baseball stadium warrants little if any tax concession.  The revenue from a Google or Microsoft, conversely, would warrant a more aggressive TSA."

"Most of the time, however, the answer is not so obvious and the numbers have to be crunched," continued Chartier.  "Certainly, a standardized process needs to be implemented, one that involves officials publicly showing their work to justify, in dollars, the taxes they propose to concede so as to bring in specifically quantified revenue that the business would generate, directly and indirectly.  It is critical that officials demonstrate that they are not showing favoritism by offering a TSA but that it makes sense financially to the taxpayer."

Former Director of Administration and founding director of the Hassenfeld Institute for Public Leadership at Bryant University Gary Sasse offered his perspective -- and views as to what "best practices" are for TSAs.

"Given Providence's uncompetitive property tax burdens TSA are a tool that should be in the City's economic development total kit," said Sasse. "However, their use should be based on the following best practices:

1) the city council should determine the parameters for TSAs, e.g. length of time, maximum tax relief schedule etc..
2) the city council should be required to approve all TSAs on an individual basis,
3) approval should be predicated on consistency with a city wide strategic economic development plan not the political connections of private developers,
4) all TSA agreement should have ironclad clawback provisions if the developer fails to meet economic development goals that should be incorporated into all TSAs.

 

Related Slideshow: Tax Breaks for Developers - See the Special Deals

Below is a breakdown of current tax stabilization agreements (TSA for short) in the city of Providence. In theory, tax stabilizations lower tax payments for developers as an incentive for development in the city. However, some deals have stretched over more than a decade. For each property, the amount the owner would normally be paying is displayed, along with the amount actually being paid under the TSA agreement. The difference is the amount of tax revenue the city is not receiving. Data is from the city Internal Auditor and is for fiscal year 2015. Note: several TSA properties are not listed because current data on assessments and estimated tax payments was not available in time for publication.

Prev Next

130 Westminster St.

The Arcade

Current Assessed Valuation: $1,826,200

2014 Tax without TSA: $67,113

Tax with the TSA: $16,742

Difference: $50,371

Agreement Date: 12/31/12

Expiration Date: 12/31/24

Prev Next

95 Chestnut St.

Hacht Development

Current Assessed Valuation: $3,091,300

2014 Tax without TSA: $113,605

Tax with the TSA: $23,867

Difference: $89,738

Agreement Date: 04/15/12

Expiration Date: 12/31/24

Prev Next

122 Fountain St.

Sportsman Inn

Current Assessed Valuation: $1,607,800

2014 Tax without TSA: $59,087

Tax with the TSA: $9,601

Difference: $49,486

Agreement Date: 04/20/12

Expiration Date: 12/31/24

Prev Next

265 Oxford St.

Institute for Non-Violence

Current Assessed Valuation: $1,393, 700

2014 Tax without TSA: $51,218

Tax with the TSA: $1,000

Difference: $50,218

Agreement Date: 01/01/12

Expiration Date: 1/0/00

Prev Next

100 Weybosset St.

Providence G Building

Current Assessed Valuation: $2,575, 400

2014 Tax without TSA: $94,646

Tax with the TSA: $32,557

Difference: $62,089

Agreement Date: 03/20/12

Expiration Date: 7/1/24

Prev Next

11 Dorrance St.

The Biltmore

Current Assessed Valuation: $20,162, 400

2014 Tax without TSA: $740,968

Tax with the TSA: $124,506

Difference: $616,462

Agreement Date: 03/15/12

Expiration Date: 3/15/24

Prev Next

103 Dike St.

Fete

Current Assessed Valuation: $589,700

2014 Tax without TSA: $21,671

Tax with the TSA: $6,152

Difference: $15,519

Agreement Date: 01/01/12

Expiration Date: 12/31/24

Prev Next

145 Globe St.

Victory Square

Current Assessed Valuation: $7,234,800

2014 Tax without TSA: $265,879

Tax with the TSA: $252,750

Difference: $13,129

Agreement Date: 07/18/11

Expiration Date: 12/31/23

Prev Next

1 AT&T Plaza

Hasbro

Current Assessed Valuation: $25,092,400

2014 Tax without TSA: $922,146

Tax with the TSA: $57,202

Difference: $864,944

Agreement Date: 12/01/11

Expiration Date: 12/31/23

Prev Next

25 Eagle St.

Butcher Block Mill

Current Assessed Valuation: $590,500

2014 Tax without TSA: $21,701

Tax with the TSA: $11,431

Difference: $10,270

Agreement Date: 01/01/11

Expiration Date: 12/31/23

Prev Next

41 Central St.

Art Recreation Center

Current Assessed Valuation: $287,100

2014 Tax without TSA: $10,551

Tax with the TSA: $5,862

Difference: $4,689

Agreement Date: 04/16/07

Expiration Date: 12/31/24

Prev Next

125 Washington St.

Mercantile Block Assoc.

Current Assessed Valuation: $1,758,000

2014 Tax without TSA: $64,607

Tax with the TSA: $34,248

Difference: $30,359

Agreement Date: 11/16/09

Expiration Date: 12/31/20

Prev Next

200 Allens Ave.

Capstone Properties

Current Assessed Valuation: $1,753,500

2014 Tax without TSA: $64,441

Tax with the TSA: $25,110

Difference: $39,331

Agreement Date: 01/08/07

Expiration Date: 12/31/16

Prev Next

35 Hylestead St.

65 Pavillion LLC

Current Assessed Valuation: $675,500

2014 Tax without TSA: $24,825

Tax with the TSA: $9,752

Difference: $15,073

Agreement Date: 08/01/05

Expiration Date: 12/31/16

Prev Next

60 Valley St.

Armory Revival

Current Assessed Valuation: $2,797,000

2014 Tax without TSA: $102,970

Tax with the TSA: $11,730

Difference: $91,240

Agreement Date: 09/26/06

Expiration Date: 12/31/16

Prev Next

160 Niantic Ave.

Morvco Realty

Current Assessed Valuation: $1,305,300

2014 Tax without TSA: $47,970

Tax with the TSA: $38,550

Difference: $9,420

Agreement Date: 05/27/04

Expiration Date: 12/31/15

Prev Next

166 Valley St.

Rising Mills Project

Current Assessed Valuation: $16,749,900

2014 Tax without TSA: $615,559

Tax with the TSA: $80,535

Difference: $535,024

Agreement Date: 12/01/03

Expiration Date: 12/31/16

Prev Next

21 Gordon Ave.

South Providence Development Corp.

Current Assessed Valuation: $1,042,600

2014 Tax without TSA: $38,316

Tax with the TSA: $10,984

Difference: $27,332

Agreement Date: 01/16/04

Expiration Date: 12/31/16

Prev Next

5 Avenue of the Arts

Masonic Temple

Current Assessed Valuation: $45,974,100

2014 Tax without TSA: $1,689,548

Tax with the TSA: $284,219

Difference: $1,405,329

Agreement Date: 07/15/03

Expiration Date: 12/31/25

Prev Next

10 Memorial Blvd.

GTECH Corp. Headquarters

Current Assessed Valuation: $54,767,800

2014 Tax without TSA: $2,012,717

Tax with the TSA: $1,100,000

Difference: $912,717

Agreement Date: 07/15/03

Expiration Date: 12/31/26

Prev Next

65 Eddy St.

Peerless Lofts

Current Assessed Valuation: $12,843,700

2014 Tax without TSA: $472,006

Tax with the TSA: $33,407

Difference: $438,599

Agreement Date: 11/22/02

Expiration Date: 12/31/15

Prev Next

210 Westminster St.

Wilkinson Building

Current Assessed Valuation: $1,188,300

2014 Tax without TSA: $43,670

Tax with the TSA: $6,349

Difference: $37,321

Agreement Date: 11/08/02

Expiration Date: 12/31/15

Prev Next

255 Promenade St.

The Foundry

Current Assessed Valuation: $15,810,300

2014 Tax without TSA: $581,029

Tax with the TSA: $30,345

Difference: $550,684

Agreement Date: 11/22/02

Expiration Date: 12/31/15

Prev Next

220 Westminster St.

Harrisburg Associates

Current Assessed Valuation: $2,004,800

2014 Tax without TSA: $73,676

Tax with the TSA: $10,302

Difference: $63,374

Agreement Date: 11/08/02

Expiration Date: 12/31/15

Prev Next

236 Westminster St.

Cornish Associates

Current Assessed Valuation: $3,680,500

2014 Tax without TSA: $135,258

Tax with the TSA: $13,439

Difference: $121,819

Agreement Date: 12/28/01

Expiration Date: 12/31/14

Prev Next

77 Reservoir Ave.

Mashpaug Associates

Current Assessed Valuation: $6,953,300

2014 Tax without TSA: $255,534

Tax with the TSA: $108,829

Difference: $146,705

Agreement Date: 11/09/01

Expiration Date: 12/31/15

Prev Next

825 Chalkstone Avenue

CharterCARE(Roger Williams Hospital)

Current Assessed Valuation: $72,249,200

2014 Tax without TSA: $2,655,158

Tax with the TSA: $2,500,000

Difference: $155,158

Agreement Date: 07/02/14

Expiration Date: 12/31/24

 
 

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