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Non-Profit ProvPort Paid $11 Million in Management Fees to For-Profit Company UPDATED

Friday, June 17, 2016


ProvPort, the non-profit operator of the Port of Providence seeking a $20 million taxpayer bond, paid management fees to a sister for-profit company of more than $11 million over the three most recently reported years. The $11 million is approximately half on ProvPort's total revenue.

A last minute amendment to bolster the land holdings of ProvPort in Rhode Island's Fiscal Year 2017 budget was adopted into Article 5 of the budget 59-12 on Wednesday. The budget passed on Wednesday night by a vote of 59-13. 

According to IRS documents, ProvPort paid management fees of $3.731 million in 2012, $3.631 million in 2013, and $3.655 million in 2014 — totaling $11,017 million in total management fees to the for-profit company. These are the most recent tax documents available. The management fees are approximately fifty-percent of ProvPorts total revenue.

Payments to For-Profit Under Scrutiny

ProvPort spokesman Bill Fischer was unable to provide an explanation of who receives the management fees and schedule of the payments.

In addition, Fischer did confirm that the non-profit ProvPort only has one employee — Bill Brody, its legal counsel. According to IRS forms, Brody earned compensation of $225,000 as staff attorney.  

“ProvPort is the governance structure and has one employee who serves as a legal council,” wrote Fischer in an email to GoLocal.

"I would just say they dropped that $20 million behemoth out of left field. The question in my mind is what are they thinking putting it through the way they did. Nobody knew it was coming.  This is not how government is supposed to work. Members of finance had no clue. That's problem number one," said Ken Block, head of Watchdog RI and former candidate for Governor.

Is the Non-Profit a Shell for a For-Profit?

The relationship between the non-profit and for-profit raises concerns. The non-profit takes in the money, only has one employee, and transfers millions every year over to a for-profit company.  

"Our terminal operator, Waterson Terminal Services, covers all of ProvPort's expenses," said Fischer. "Utilities, insurances, employee payrolls, over 8 Million in capital improvements, security expenses, and maintenance."

RI Corporation documents show that Waterson Terminal is controlled by Bruce Waterson and Ray Meador. Waterson has been a long-time port operator and Meador is a California based businessman. Meador originally structured the deal to lease the port from the City of Providence under Vincent "Buddy" Cianci's administration in the early 1990's.

Representative Patricia Morgan raised additional concerns about the deal on Thursday. 

"Something is not right. Who's it going to benefit?  The landowners. Last night when they explained it in less than ten minutes, they didn't have the explanation done well. They haven't worked out the details, but they know that they want it. It should have have been properly vetted and it wasn't -- that's the problem," said Morgan. "It's always, we need money, let's go get the taxpayer."

According to the budget article, the proceeds of the bond, if approved by voters, will be used to buy certain properties along Allens Avenue.

"The biggest problem is why did they feel they had to sneak it through. Why not have a more robust debate?  I've got a number of questions about this.  What it looks like is just more corporate welfare. I saw DeSimone talk about jobs, but when we say our [zero] sales tax plan will create jobs, they believe what they want to believe," said Mike Stenhouse of the RI Center for Freedom and Prosperity.

"This is no way to run a government, a railroad, or a port. If the Speaker and Governor were involved for months, if this was done on purpose -- that's completely unacceptable. I would encourage every voter to vote it down right now -- just by the way it came about," said Block.

Presently, the $20 million funding scheme for land acquisiton is pending in the state budget awaiting Senate approval.

Questions are being raised about who are the land owners and who they are politically and financially connected to.

"It doesn't make any sense. The financing seems strange. So you're having taxpayers buy the land? It should come under intense scrutiny -- if this was a profitable venture, they wouldn't come to taxpayers. Whenever they can't get money anywhere else, they make the taxpayers the loaners of last resort," said Morgan.

Target properties provided by ProvPort



Related Slideshow: FY17 House Budget—Winners and Losers

The House Budget is passed and there were some last minute and controversial surprises.

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National Grid

When controversial Article 18 got pulled from the budget on Tuesday, critics had lauded the removal of the provision, which appeared to benefit a single wind farm - and the substantial political donor who owned it. But the real winner here is National Grid, the company owned by the British Energy Conglomerate, who would have had to force electric rate payers to pay millions more to connect renewable energy projects to the power grid and pay a greater share.

The battle is not over, however; Speaker Mattiello said that after having received feedback on Article18 and that he "reached the conclusion there are pieces of the article that do not need to be in the budget."  Given the level of scrutiny is it highly unlikely the measure will see light of day as a stand-alone measure before the session adjourns, but it can't be ruled out. 

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Statewide Tourism Campaign

There was no last minute relief for the Commerce Corp. The often controversial agency is taking a cut.

Following the ill-fated rollout of the statewide tourism campaign this year, House Finance opted to give money back to the regional tourism bureaus that had been slated to go to the centralized effort.

Mattiello said that the House finance budget is taking $1 to $2 million from the $5 million for next year from the statewide tourism office and giving it back to the regional tourism bureaus. “We had a snafu in the effort. We’ll rely on the locals for the year, and then it will transfer back to state initiative,” said Mattiello. 

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Medical Marijuana Growers, Patients

One of the biggest battles of the 2016 General Assembly session started when Governor Raimondo proposed a tagging fee on medical marijuana plants -- to major pushback. 

The tax as proposed in the Governor's 2017 budget would have imposed a $150 per plant charge on patients lawfully growing marijuana for medical purposes, and a $350 per plant charge for caregivers, for a projected total of $8.5 million in new revenue. 

House finance scaled back the fee-per-plant to $25, to cover the costs of regulating the marketplace. 

“Advocacy works. We listened to folks, no one really liked the proposal we received,” said Mattiello. “[As far as] the need of regulations, we’re probably on the low end of that. But we didn’t want to enhance revenues on prescription medications.”

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A surprise amendment that resussciated a dead proposal.

A late session effort by the City of Providence to get a $20 million bond question on the ballot for ProvPort in November initiatially hadfallen flat as a line item in the budget. 

Legislation introduced by Senate Majority Leader Dominick Ruggerio in late May and now a budget article add-on for a bond referendum of $20,000,000 to fund the acquisition, expansion and infrastructure improvement of up to approximately 25 acres of land and facilities located between Allens Avenue in Providence and the Providence River by ProvPort, Inc. 

While it appears to be a House Finance budget “loser” the battle is not over yet for the year, as Mattiello said there is still ongoing discussions. 

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Business Owners

Mattiello touted in his “pro-business, pro-economy” budget lowering the minimum corporate tax from $450 to $400. This comes a year after the General Assembly lowered it from $500 to $450 last year, taking away at that time the dubious distinction for Rhode Island being the state with the highest corporate minimum tax.  

“There are no new taxes or fees,” said Mattiello of the House Finance FY17 budget (apart from the $25 medical marijuana tax).

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School Infrastructure

Raimondo had called for a $40 million school construction and renovation bond to be put on the November ballot, but Mattiello said during a media briefing that the state should wait for the completion of a study expected to show what exactly the construction needs are for the state’s schools.

Mattiello said that there is still funding in the budget for school construction needs, as Raimondo had also proposed an $80 million appropriation for construction and renovation, including of $9.1 million for the school building authority -- but the dedicated bond question that would have increased resources by 50% -- was off the table in the House Finance budget. 

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Smokers and Mini-Marts

After years of steady increases in the state’s cigarette tax, smokers got a reprieve in House Budget when the committee rejected Raimondo’s proposal to raise the cigarette tax twenty-five cents from $3.75 to $4 a pack.

Make no mistake about it, this is just as much about the convenience stores not wanting the additional tax on their golden goose -  and New England Convenience Store Association lobbyist Brian Goldman just got vetted by Senate Judiciary for his nomination from Raimondo to replace Associate Judge Frank Cenerini, who retired in October 2014.

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Raimondo’s Minimum Wage Hike

Governor Raimondo once again pushed for an increase in the state’s minimum wage, and it appears she will be once again denied by the legislature.

Speaker Mattiello said that Raimondo’s effort to boost the minimum wage from $9.60 to $10.10 an hour would be a no-go. So while it falls in the loss category for those who were pushing for it, it could have been labeled as a win for business owners who have said they couldn’t incur such a mandatory increase. 

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Retirees (Pensioners)

“We are giving pension relief to everyone who receives some type of pension income, whether it’s public employees, private, or veterans,” said Mattiello.

Mattiello noted that the tax deduction “will be income tested, [and] you have to be Social Security age to qualify.” The tax exemption is slated to apply to the first $15,000 in retirement income, for those qualifying individuals with incomes of $80,000 or less, and couples up to $100,000.

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Solar and Wind

While the removal of Article 18 was championed as a win against crony capitalism, there was more at stake than just one developer with strong political ties.  While the article appeared as of Tuesday looked to be gone from the budget, that did not mean the legislative proposal could not stand alone. EcoRI was quick to point out however all that the article did for provide for a number alternative energy incentives including: 
Article 18...would allow loans for projects using net metering and virtual net metering, as well as those priced through the Renewable Energy Growth Program.

Article 18 also includes a five-year extension of the state Renewable Energy Fund, which provides grants for small- and medium-sized solar projects. The funds are collected through a monthly surcharge on electric bills and the pool of funds, currently about $6 million, is distributed to solar developers and installers through the Rhode Island Commerce Corporation.

Article 18 also exempts residential and commercial manufacturers from paying local property taxes. It also establishes a statewide property tax rate for commercial renewable-energy systems. The new tax rate will be determined by the Office of Energy Resources.

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Beach Visitors

Beachgoers get a win.

Everyone who loves the beach gets a win with the the House budget. Speaker Mattiello touting that “beach fees are reduced to the 2011 level” for the coming year.

A season pass for residents would be slashed from $60 to $30, non-residents from $120 to $60, and Rhode Island senior citizens from $30 to $15. Plus,  one-time entrance fees would be lowered for residents from $10 to $6 (and senior citizens, down to $3).


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