Providence Councilman Proposes Property Tax for Nonprofits
Monday, July 26, 2010
A Providence city councilman is proposing an alternative property tax for colleges, universities, and hospitals that are currently exempted.
Councilman Terrence Hassett says the city needs to take on the issue to stop the erosion of its tax base—something that he says is getting worse as institutions like Brown University buy up more land to expand their campus.
This year, Brown broke ground on two major projects—a new 135,000-square-foot building in the Jewelry District for the Warren Alpert Medical School and the expansion of its athletic complex on the East Side.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“Every time they take a foot off the tax rolls it’s dollars lost for the city,” said Hassett, who represents Ward 12 and is the majority leader on the council. “I think it’s a good glowing example of how poorly constructed our tax policies are and how they are not equitable.”
Besides its dorms, Brown owns other homes on the East Side which are likewise exempted from property taxes.
“They say, ‘We’re tax exempt from everything, so we’re not paying taxes,’” Hassett said. “That’s wrong.”
Time for Brown U. to Pay Its Share?
As many property owners face higher tax bills, he said it’s time for Brown to pay its fair share. He noted that Mayor David Cicilline has proposed eliminating the homestead exemption for apartments and other residential properties that are not occupied by the owner. Under the exemption, the owners were exempted from paying taxes on 33 percent of the value of their property.
In addition to the loss of that exemption, those owners are facing a 3 percent hike in the property tax rate that brought it up to $30.38 per $1,000 in property value this year. Many of those owners have properties on the East Side where Brown’s campus is located
“You can’t expect people to simply absorb that all at once,” Hassett said.
Hassett said he will seek a bill in the General Assembly that would allow Providence to create an alternative property tax for colleges and universities like Brown, Providence College, and Johnson & Wales University and hospitals like Women and Infants and Rhode Island Hospital. Churches and other places of worship would continue to be exempted for First Amendment reasons, Hassett said.
The councilman does not have a specific rate in mind, but he said it would be substantially less than both the residential property tax rate and the current commercial rate, which is $28.60. And he doesn’t expect that all properties owned by a nonprofit would fall under the tax. For example, he said it may make sense to tax dorms, but not buildings with classrooms.
How Much Nonprofit Property Is There?
The total assessed value of all tax-exempt property in Providence was $6.19 billion before the current re-valuation, according to the city council’s office. That represents about 40 percent of all properties in the city. The remaining taxable property totals $9.25 billion.
About half of the tax-exempt properties are owned by the state, the city, or churches, leaving roughly $3 billion that are held by colleges, universities, or hospitals, according to Hassett. Taxing them would do much to help city finances, but, until the details are hashed out, he said it was too early to say how helpful it would be in dealing with an estimated $50 million deficit for the 2011 fiscal year.
About a decade ago, Hassett said he wouldn’t have held out much hope that a proposal to tax nonprofits would get passed. But now, he says the recession bolsters his case. “I think this is an excellent time to make the argument that no people should go forth into the sunset without paying anything,” he said.
If the General Assembly does pass legislation allowing Providence to create the special tax, it would not go into effect until the 2011-2012 fiscal year, according to the city council’s office.
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