Prov Fiscal Crisis: Should the Private Universities Pony Up?
Monday, April 11, 2011
They’re one of the city’s only growth industries or their tax exempt status is one of the many reasons Providence is suffering through a “Category Five” fiscal crisis. Or both.
The debate over what Providence should ask of its four private colleges and universities is heating up again as Mayor Angel Taveras attempts to navigate his city back to solid financial standing. To his credit, Taveras has remained on message. Since his campaign began over a year ago, he has said he wants to bring everyone together to talk about making shared sacrifices to help strengthen the city.
But shared sacrifice in the eyes of the universities seems to look a lot different than it does for some of the state’s finance experts. And while the universities say they’re willing to have a conversation, they appear unwilling to talk about being taxed and uninterested in altering a 2003 memorandum of understanding (MOU) that guarantees the city $48 million over two decades.
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University of Rhode Island economist Leonard Lardaro says Providence is in a different position than it was when Mayor David Cicilline signed the MOU at the beginning of his first term as Mayor. He says the recent drops in bond rankings from three national services proves the city is in dire straits and the universities should be willing to help.
“Extreme times call for extreme measures,” Lardaro said. “The bond vigilantes are not far from Providence at this point. The potential for the city is a freefall. I’d like to think the universities recognize this.”
Lardaro said he understands how much the private universities benefit the city, but it’s time to question what exactly “fair share” means.
“Maybe it’s time to actually have a definition of fair share,” Lardaro said. “The relationship needs to be two ways and they need to be willing to work with the city. Every little bit helps.”
The Only Sector That Has Stepped Up
But Dan Egan, President of the Association of Independent Colleges, says the city’s private universities have a proven record of working with the city. Egan, who speaks for Brown, RISD, Providence College and Johnson & Wales, said he hasn’t had a detailed conversation with the Taveras administration regarding the relationship between the schools and the city.
Egan said he is willing to have a conversation with the Mayor, but he believes Taveras should respect the MOU reached with Cicilline.
“We’re the only sector that has stepped up,” Egan said. “Others need to step up. It can’t be just one sector.”
Egan disputed Lardaro’s assertion that it may be time to define “fair share.” He said the universities are tax exempt for a reason.
“That smells an awful lot like a tax and that becomes a tax on learning, which we’re against,” Egan said. “You cannot define socially, economically and culturally what these universities mean to Providence and the state of Rhode Island. We aren’t interested in a dramatic overhaul of tax policy.”
Commission Recommendations
According to a report from the Lincoln Institute of Land Policy, Providence universities paid about $2.5 million to the city in the last fiscal year. That number accounts for .56 percent of the city’s total budget. In comparison, Boston received just over $15.5 million from its schools in 2009, good for .66 percent of the total budget. Cambridge received another $4.5 million, which equaled out to just under one percent of the city’s budget.
Last year, the City Council formed a commission to study tax exempt institutions. The commission made five recommendations to the city based on their analysis: Create a mutually beneficial partnership between the city and the nonprofits; give the city a share of “knowledge economy” revenue; achieve full funding of state’s payment in lieu of taxes program; use MOU’s to build trust, stability and predictability; and maximize the future revenue stream of the I-195 area.
It was a detailed report, but the final suggestions did not shine much light on what exactly the city should be asking from its institutions of higher learning. And the city has yet to initiate a conversation with the universities regarding a new agreement.
“We're working towards solutions that recognize the important contributions these organizations make to our economy while deepening support to the city,” Taveras spokeswoman Melissa Withers said. “The Mayor is committed to finding a path forward that's mutually agreeable for all.”
Sasse: Everything Should Be On The Table
But Gary Sasse, who serves as a fiscal advisor to the City Council, says it might be time to start asking for more from the universities. Sasse said the fiscal climate is different than it was almost a decade ago and just as with any business, it might be time to look for changes.
“Given the financial crisis the city is in, everything should be on the table,” Sasse said.
Sasse didn’t agree with Lardaro’s assertion that it was time to define “fair share,” however.
“We can’t agree on what fair share means as a tax structure,” Sasse said. “One size doesn’t fit all. The different universities and hospitals have different niches.”
Imagine Where Providence Would Be Without The Universities
But Egan maintains that the universities have given their fair share. He said they have made $30 million in contributions in the last eight years and will make $20 million more over the next twelve.
That’s stepping up, according to Egan.
“If you took the colleges and universities out of Providence, there would be an addition $20 million missing from the city,” Egan said. “Ask the small businesses where they would be without students. Any assertion that we cost the city money is false. Providence better because of the universities.”
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