Proposed 25 Percent Tax on Nonprofits Would Bring $28 Million to Providence
Saturday, March 17, 2012
The capital city stands to bring in nearly $28 million annually from legislation that would force tax-exempt colleges and hospitals to pay 25 percent of the taxes they would have been charged had their property been fully taxable.
The bill, which is sponsored by powerful Senate Majority Leader Dominick Ruggerio and Senate Majority Whip Maryellen Goodwin, is viewed as a potential savior for Providence. The Taveras administration is hoping to receive $7.1 million from the hospitals and colleges, but only Johnson & Wales has agreed to increase its payments.
The city currently faces a $22.5 million deficit for the current fiscal year and Taveras has warned that bankruptcy or a supplemental tax hike may be on the horizon.
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“We all have a stake in the fiscal health of the Capital City,” said Ruggerio. “With Providence on the financial precipice, we remain hopeful that the tax exempt institutions will recognize not only the value of services they receive from the city, but the benefit we all receive from healthy, sustainable municipal government. This bill enables Providence, and all communities, to make decisions at the local level that impact their own well-being and derive some reimbursement for the services they provide colleges and hospitals.”
The 25 percent bill, which is part of a pack of legislative package requested by the administration, would enable any municipality to charge educational institutions and hospitals which are currently tax exempt an assessment of 25 percent of the taxes they would have been charged had their property been fully taxable. Further, the portion of property owned by colleges, universities and hospitals used for purposes to derive income other than by the provision of educational or healthcare services would no longer be exempt from taxation. (An example of this might be a sandwich shop on a university or hospital’s campus.)
The property value of large tax-exempt institutions in the city is approximately $3 billion, which would generate $105 million in revenue if fully taxed. Brown University and Lifespan, which oversees Rhode Hospital and the Miriam Hospital, combine to own over $1.8 billion in tax-exempt property.
The 25 percent formula proposed in the legislation is based on Boston’s model. A similar bill, sponsored by State Rep. John Carnevale, is making its way through the House.
“Johnson & Wales is an example of an institution that has stepped up to the plate to do its fair share in these difficult times, tripling their payments in lieu of taxes to the city," Goodwin said. "Rating agencies are nervous and have downgraded the city’s bond rating, and bankruptcy is a scary proposition. But the city is running out of options. This bill helps bring a fair and sustainable revenue stream to the city, while more evenly distributing the burden of paying for city services among those who use city services.”
Mayor Taveras said the legislation is part of package that will give the city the tools it needs to avoid bankruptcy. Taveras has also requested the General Assembly grant cities and towns the ability the freeze cost-of-living-adjustments (COLAs) for retirees.
“I appreciate and commend Majority Leader Ruggerio for his leadership and his ongoing support of Providence. Senator Ruggerio’s bill will provide Providence with additional tools to get Providence’s fiscal house in order,” Taveras said. “I believe that cities and towns must make tough structural changes to strengthen our entire state. I am committed to making those reforms in Providence. I will continue to work with all of our partners to ensure that everyone who depends on Providence’s success is a part of the necessary sacrifice to put our capital city on firm financial ground.”
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