Opponents Blast Tax Breaks for 195 Dormitory Deal

Tuesday, November 25, 2014

 

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A week following 195 Commission's announcement of its first preliminary purchase and sales agreement, critics and opponents are questioning the need to consider tax breaks for the proposed developer -- and others -- on the former I-195 land.  

Following Providence City Councilman David Salvatore's proposal last Thursday that a uniform tax stabilization agreement (TSA) policy be applied uniformly to the 195 projects, critics questioned the use of tax breaks for a proposed 500 bed dormitory and retail space.

"I get it, you can say that they're looking to take politics out of it, but it makes zero sense to do this," said Keith Fernandes with the Providence Apartment Association.  "If you want to [use a TSA] to create jobs, but this is going to give us ten long term jobs, I believe.  The unions want to build it, of course, but what about the services needed to be provided by the city?"

"What they're doing is creating a separate rental market," continued Fernandes.  "They'll have reduced taxes, and so charge reduced rents, and still make a profit, and they're taking the market away from us.  We're against this standard, and the City Council should be able to vet it."

Gabe Francis, who owns rentprov.com and has been leasing properties in the city for ten years, spoke to the existing market dynamics -- and why he opposes any tax break for a dorm development.  

"Providence charges landlords 33.75 per thousand while they charge owner occupants 19.25 per thousand," said Francis.  "Why give a tax break to someone that is going to be running the same kind of business as the other landlords that are now going to have to compete with a brand new building?"

"There is no lack of housing in the Greater Providence Area.  If you go on any number of websites you can see that there are tons of vacant apartments all over the city," said Francis.  "We do leasing and what we need more of is good qualified tenants -- not more housing."

TSA Scrutiny Continues

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The announcement made last week by the 195 Commission that a purchase and sales agreement had been reached on the 1.25 acre lot is the first step in making the project move forward.  

"Next steps for PPC Land Ventures include securing the financing needed from both banks and investors, developing detailed architectural and engineering drawings and moving through the 195 Commission’s expedited permitting process.  Construction is expected to start in late summer 2015, and be ready for occupancy in September 2017. The project is expected to generate approximately 150 construction jobs and 10 permanent jobs." wrote the Commission in its release.  

Providence investor and real estate professional John Jacobson noted that in the realm of TSAs and the development of the 195 land, that he saw several developments occurring concurrently.  

"There's four things going on," said Jacobson.  "Enforcement of [current] TSA agreements;  what to do with the 2001 and 2002 TSAs and their possible extensions and eminent distress or collapse; 195 TSA policy; and a TSA policy that covers the whole city."

"As far as my opinion on 195 TSA policy, I have the humility to understand that I would need to consult professional policy people and economists to get the best policy. The Council hasn't done this and never has. I am curious what the rush is -- why not get everyone at the table and hammer out one amazing deal, " said Jacobson.  "If I was Council President or Mayor I would be asking the State to help offset the costs of TSAs as it is the State who benefits from the income taxes and sales tax. Providence has a history of giving away too much and getting too little."

Ric Santurri, a real estate investor and broker and GoLocalProv Mindsetter, put forth what he viewed as a potential "ideal" situation for the city and developer

"$150 a month property tax per bed per month,  $900K in yearly property tax which would be full commercial tax rate on half the cost of the building.  That's the deal I'd strike," said Santurri.  "Around 18% of rent to taxes is high but the deal is still doable, since they have no marketing costs and a ready made market every year."

"The wise thing would be to do a study of what competing landlords pay in property tax and structure the TSA based on that," continued Santurri.  "Although so far, it's been developers 80, city 1, when it comes to TSAs.  I just want a growing tax base."

Jacobson noted the timing as playing a factor as to whether to grant a TSA -- in the proposed dormitory project -- or for others

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"The City should have policy in place for [195] and it is a shame that they didn't do this before it went out to bid," said Jacobson.  "Salvatore and Solomon had 4 years to put this in place and the studies were done on past TSAs by April of this year. They waited until the TSAs passed in June and the Cornish extension was passed instead of putting policy in place. Now they are trying to pass two ordinances right at the end without giving [Mayor-elect Elorza} a chance to weigh in. Why ? What's the rush? These guys blew it. Time to step aside in my opinion and let the next administration deal with it. They are the ones who will have to live with it." 

Process Questioned

The process by which TSAs could be awarded -- and why they are being addressed just now for the 195 land development -- is also being questioned by some in the real estate industry. 

"We'd like to see this taken up in the next administration," said Fernandes. "I don't think they've got the votes [currently].  Solomon was behind the last extensions.  The next Mayor should be given the courtesy of having that choice."

Jacobson said he'd like to see a broader coalition determining policy for the 195 corridor -- and most importantly, to see that include Governor-elect Raimondo.  

"The 195 commission, Jones Lang LaSalle -- who the state had hired to market, [Raimondo's] team (possibly RIEDC), the Mayor and the Council should all put their big boy pants on, collaborate, have a few meetings, and pass the Ordinance, " said Jacobson.

Rentprov.com's Francis noted he wasn't against all TSAs - just that he saw the need downtown as greater for office space than rental units.  

"We don't need an economics professor to tell us that if we offer companies a major tax incentive that the state and city will benefit from the income taxes we get as well as getting more people that will spend money at local businesses,"said Francis.  "We already have the students and while I have no problem with the current students, I and many other local business owners that I speak with really would like to see office towers downtown.  If the city wants to offer a tax incentive to housing they should offer current landlords a rebate on monies that they spend on their properties."

 

Related Slideshow: Current Tax Stabilization Agreements in Providence

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130 Westminster St.

The Arcade - 103 Westminster St. Associates, LLC

Approval Date: 12/31/2012

Assessed Valuation: $1,826,200

Actual Tax Prior to TSA: $44,137

2013 True Tax: $67,113

2013 Stabilized Tax Payment: $16,742

Tax Status: Current

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122 Fountain St.

Sportsman Inn - HM Ventures, LLC

Approval Date: 4/20/2012

Assessed Valuation: $1,607,800

Actual Tax Prior to TSA: $77,010

2013 True Tax: $59,087

2013 Stabilized Tax Payment: $9,601

Tax Status: Past Due

End Date of Agreement: 12/31/2022

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244 Oak St. + 33 Magnolia St.

Roger Williams Brewery, LLC

Approval Date: 1/1/2012

Assessed Valuation: $496,800

Actual Tax Prior to TSA: N/A

2013 True Tax: $18,257

2013 Stabilized Tax Payment: $18,140

Tax Status: Past Due

End Date of Agreement: 12/31/2024

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1 AT&T Plaza

Hasbro - Empire LaSalle, LLC

Approval Date: 7/1/2012

Assessed Valuation: $25,092,400

Actual Tax Prior to TSA: $547,553

2013 True Tax: $922,146

2013 Stabilized Tax Payment: $47,568

Tax Status: Current

End Date of Agreement: 12/31/2024

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100 Weybosset St.

Providence G Building - Providence Capital, LLC

Approval Date: 3/20/2012

Assessed Valuation: $2,575,400

Actual Tax Prior to TSA: $129,610

2013 True Tax: $94,609

2013 Stabilized Tax Payment: $32,557

Tax Status: Current

End Date of Agreement: 7/1/2025

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11 Dorrance St.

The Biltmore

Approval Date: 3/15/2012

Assessed Valuation: $20,162,400

Actual Tax Prior to TSA: $694,575

2013 True Tax: $740,698

2013 Stabilized Tax Payment: $124,506

Tax Status: Past Due

End Date of Agreement: 12 Years from Commencement

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1 Park Row West

Johnston & Wales University Dorms - Capitol Cove, LLC

Approval Date: 3/11/2005

Amendment Date: 3/8/2010

Assessed Valuation: $2,252,500

Actual Tax Prior to TSA: $518,247

2013 True Tax: $82,779

2013 Stabilized Tax Payment: $968,606

Tax Status: Current

End Date of Agreement: 12/31/2023

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125 Washington St.

Mercantile Block Assoc., LLC

Approval Date: 11/16/2009

Assessed Valuation: $1,758,000

Actual Tax Prior to TSA: $59,851

2013 True Tax: $64,607

2013 Stabilized Tax Payment: $34,248

Tax Status: Current

End Date of Agreement: 12/31/2020

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1 Sims Ave.

Milhaus LLC - The Steel Yard

Approval Date: 1/8/2007

Assessed Valuation: $323,400

Actual Tax Prior to TSA: N/A

2013 True Tax: $11,885

2013 Stabilized Tax Payment: $19,641

Tax Status: Current

End Date of Agreement: 12/31/2016

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60 Valley St.

60 Valley St. LLC (c/o Armory Revival)

Approval Date: 9/26/2006

Assessed Valuation: $2,797,000

Actual Tax Prior to TSA: $14,333

2013 True Tax: $102,790

2013 Stabilized Tax Payment: $11,730

Tax Status: Current

End Date of Agreement: 12/31/2016

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160 Niantic Ave.

160 Niantic Ave. Morvco Realty LLC

Approval Date: 5/27/2004

Assessed Valuation: $1,305,300

Actual Tax Prior to TSA: $50,612

2013 True Tax: $47,970

2013 Stabilized Tax Payment: $38,550

Tax Status: Current

End Date of Agreement: 12/31/2015

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50 Holden St.

Promenade Building Assoc. - The Foundry

Approval Date: 5/17/2004

Assessed Valuation: $4,238,200

Actual Tax Prior to TSA: $42,802

2013 True Tax: $155,754

2013 Stabilized Tax Payment: $104,814

Tax Status: Current

End Date of Agreement: 12/31/2015

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21 Gordon Ave.

South Providence Development Corp. (Keith Fernandez)

Approval Date: 1/16/2004

Assessed Valuation: $1,042,600

Actual Tax Prior to TSA: $5,708

2013 True Tax: $38,316

2013 Stabilized Tax Payment: $10,984

Tax Status: Past Due

End Date of Agreement: 12/31/2016

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10 Memorial Blvd.

GTECH Corp. Headquarters

Approval Date: 7/15/2003

Assessed Valuation: $54,767,800

Actual Tax Prior to TSA: $236,619

2013 True Tax: $2,012,717

2013 Stabilized Tax Payment: $1,100,000

Tax Status: Current

End Date of Agreement: 12/31/2026

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65 Eddy St.

Peerless Lofts

Approval Date: 11/22/2002

Assessed Valuation: $12,843,700

Actual Tax Prior to TSA: $80,100

2013 True Tax: $472,006

2013 Stabilized Tax Payment: $33,407

Tax Status: Current

End Date of Agreement: 12/31/2016

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235 Promenade St.

Promenade Building Assoc. - The Foundry

Approval Date: 11/22/2002

Assessed Valuation: $15,810,300

Actual Tax Prior to TSA: $58,201

2013 True Tax: $581,029

2013 Stabilized Tax Payment: $30,345

Tax Status: Current

End Date of Agreement: 12/31/2015

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236 Westminster St.

Alice Building LLC c/o Cornish Associates

Approval Date: 12/28/2001

Assessed Valuation: $3,680,500

Actual Tax Prior to TSA: $25,531

2013 True Tax: $135,258

2013 Stabilized Tax Payment: $13,439

Tax Status: Current

End Date of Agreement: 12/31/2014

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100 Providence Place

The 903

Approval Date: 12/21/2001

Assessed Valuation: $68,573,700

Actual Tax Prior to TSA: $200,000

2013 True Tax: $2,520,083

2013 Stabilized Tax Payment: $620,474

Tax Status: Current

End Date of Agreement: 12/31/2015

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95 Chestnut St.

Hacht Development, LLC

Approval Date: 4/15/2012

Assessed Valuation: $3,091,300

Actual Tax Prior to TSA: $110,665

2013 True Tax: $113,605

2013 Stabilized Tax Payment: $20,453

Tax Status: Past Due

End Date of Agreement: 12/31/2022

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265 Oxford St.

Institute for Non-Violence

Approval Date: 1/1/2012

Assessed Valuation: $1,393,700

Actual Tax Prior to TSA: $32,928

2013 True Tax: $51,218

2013 Stabilized Tax Payment: $1,000

Tax Status: Current

End Date of Agreement: 12/31/2021

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145 Globe St.

Victory Square - JAG Investment Realty, LLC

Approval Date: 7/18/2011

Assessed Valuation: $7,234,800

Actual Tax Prior to TSA: $294,485

2013 True Tax: $265,879

2013 Stabilized Tax Payment: $252,750

Tax Status: Current

End Date of Agreement: 12/31/2013

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25 Eagle St.

Butcher Block Mill, LLC

Approval Date: 1/1/2011

Assessed Valuation: $590,500

Actual Tax Prior to TSA: $23,469

2013 True Tax: $21,701

2013 Stabilized Tax Payment: $11,431

Tax Status: Current

End Date of Agreement: 12/31/2023

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50 Agnes St.

50 Agnes, LLC

Approval Date: 1/1/2012

Assessed Valuation: $521,800

Actual Tax Prior to TSA: $21,422

2013 True Tax: $19,176

2013 Stabilized Tax Payment: $16,807

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103 Dike St.

Music House, LLC - Fete

Approval Date: 1/1/2012

Assessed Valuation: $589,700

Actual Tax Prior to TSA: $17,555

2013 True Tax: $21,671

2013 Stabilized Tax Payment: $5,417

Tax Status: Current

End Date of Agreement: 12/31/2024

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41 Central St.

Yet Another LLC - Art Recreation Center

Approval Date: 4/16/2007

Assessed Valuation: $287,100

Actual Tax Prior to TSA: $12,879

2013 True Tax: $10,551

2013 Stabilized Tax Payment: $5,862

Tax Status: Past Due

End Date of Agreement: 12/31/2024

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200 Allens Ave.

200 Allens Ave. LLC (Capstone Properties)

Approval Date: 1/8/2007

Assessed Valuation: $1,834,300

Actual Tax Prior to TSA: $74,754

2013 True Tax: $67,411

2013 Stabilized Tax Payment: $23,537

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End Date of Agreement: 12/31/2016

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35 Hylestead St.

65 Pavillion LLC

Approval Date: 8/1/2005

Assessed Valuation: $675,500

Actual Tax Prior to TSA: $13,345

2013 True Tax: $24,825

2013 Stabilized Tax Payment: $9,752

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203 Weybosset St.

Zampalis Realty (Zampalis Realty LLC)

Approval Date: 8/1/2005

Assessed Valuation: $547,900

Actual Tax Prior to TSA: $12,565

2013 True Tax: $20,135

2013 Stabilized Tax Payment: $31,300

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166 Valley St.

Rising Mills Project (166 Valley St. LLC, Struever Bros)

Approval Date: 12/1/2003

Assessed Valuation: $16,749,900

Actual Tax Prior to TSA: $91,763

2013 True Tax: $615,559

2013 Stabilized Tax Payment: $80,535

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End Date of Agreement: 12/31/2011

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100 Exchange St.

Intercontinental Fund IV F/K/A Cap Hill Prop

Approval Date: 1/16/2004

Assessed Valuation: $107,237,400

Actual Tax Prior to TSA: $1,888,763

2013 True Tax: $2,910,464

2013 Stabilized Tax Payment: $1,086,829

Tax Status: Current

End Date of Agreement: 12/31/2023

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5 Avenue of the Arts

Masonic Temple - RP Providence Owner LLC

Approval Date: 7/15/2003

Assessed Valuation: $45,974,100

Actual Tax Prior to TSA: $79,072

2013 True Tax: $1,689,548

2013 Stabilized Tax Payment: $215,843

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End Date of Agreement: 12/31/2025

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532 Kinsley Ave.

Monahasset Mills LLC

Approval Date: 11/22/2002

Assessed Valuation: $10,857,600

Actual Tax Prior to TSA: N/A

2013 True Tax: N/A

2013 Stabilized Tax Payment: $12,836

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End Date of Agreement: 12/31/2017

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210 Westminster St.

Harrisburg Assoc. LLC and Lerner Assoc. LLC

Approval Date: 11/8/2002

Assessed Valuation: $1,188,300

Actual Tax Prior to TSA: $19,404

2013 True Tax: $43,670

2013 Stabilized Tax Payment: $6,349

Tax Status: Current

End Date of Agreement: 12/31/2016

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220 Westminster St.

Harrisburg Assoc. LLC and Lerner Assoc. LLC

Approval Date: 11/8/2002

Assessed Valuation: $2,004,800

Actual Tax Prior to TSA: $10,302

2013 True Tax: $73,676

2013 Stabilized Tax Payment: $10,302

Tax Status: Current

End Date of Agreement: 12/31/2016

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100 Fountain St.

Steelwood (Palmer Building) (LAF Realty LLC Inc.)

Approval Date: 4/25/2002

Assessed Valuation: $503,300

Actual Tax Prior to TSA: $48,935

2013 True Tax: $18,496

2013 Stabilized Tax Payment: $22,970

Tax Status: Past Due

End Date of Agreement: 12/31/2016

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77 Reservoir Ave.

Mashpaug Associates LLC

Approval Date: 11/9/2001

Assessed Valuation: $6,953,300

Actual Tax Prior to TSA: $113,538

2013 True Tax: $255,534

2013 Stabilized Tax Payment: $108,829

Tax Status: Current

End Date of Agreement: 12/31/2015

 
 

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