New Tax Break Violations Alleged as Providence City Council Considers Proposals

Friday, June 06, 2014

 

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Tax Stabilization Agreements taking center stage in city

New allegations of violations of past Tax Stabilization Agreements in Providence have arisen, as the City Council currently considers new tax breaks for developments in the city -- as well as extensions on current ones. 

In a letter sent to the City Council this week, real estate professional John Jacobson wrote, "I would like to point out the Kinsley Building that is going for a TSA [on] June 4. This is a project being developed by Cornish Associates. As I understand it, Cornish is also seeking another five year extension on 3 of their projects. This after already receiving 5 year extensions. This has cost the City millions of dollars. Why would the City Council grant yet another TSA to Cornish until all the previous TSAs had run out and they were paying taxes?

Jacobson added, "I was curious to look at one of these TSAs and got a copy of one of Cornish's TSAs and I was shocked. I have attached it here. It violated every stipulation of the agreement, in particularly with the building at 93 Eddy. In fact the construction did not even start at 93 Eddy until 8 years after the agreement was signed. It does not have affordable housing or meet any of the other terms of the agreement. How is this possible? How can the City Council even be considering granting Cornish another TSA for Kinsley with past violations in question?"

Jacobson provided the council both with a copy of the TSA, as well as his notes on the sale of 93 Eddy to make his case.

In January 2014. Providence City Auditor Matt Clarkin submitted his "Analysis of Tax Stabilization Agreements in Providence" report which lists no violations of compliance with Cornish.  Clarkin did speak however to lack of oversight of the affordable housing requirements.

"One of the findings in my report on the current TSAs was that there was not a process in place to determine if a recipient was in compliance with the affordable housing requirements," said Clarkin.  "I cannot answer to the compliance of any recipients who have such requirements.  And I do not know the answer to the timing of construction."

Cornish's lawyer declined to comment on the record on the matter. 

Looking Back, Looking Ahead

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The Providence City Council is currently looking at tax breaks for seven property developments -- as well as proposals for extensions on at least three existing TSAs now, which would amount to millions of foregone tax revenue to enable the economic development projects to move forward.

Clarkin noted that the city had recently revoked the TSA for the RW brewery location and is in the process of revoking the TSA on 50 Agnes.

"The kind of TSAs the City has been granting are not the kind that helps smooth out the lack of income during construction and leasing and to provide predictable costs for financing. They are creating an actual subsidy to offset the lack of higher rents that the developers need to make their business models work," wrote Jacobson in his letter to the Council. "This is very dangerous because it involves speculation and City government should not be offsetting speculative risk in the private sector especially when the City has continually raised taxes over the years."

"It makes me very nervous to hear private developers say that they need city money so they can match the rents in Boston. Providence is not Boston and our economy or real estate market looks nothing like it," Jacobson continued.  "Will it in 10 years? I am not sure. That is risk that businesses take, not governments.

Of the 93 Eddy property, Jacobson noted, "They should be paying about $30,000 in taxes and [it] pays nothing. Cornish as of this summer has received 9 million in tax relief and is now going for more." 

City Councilman David Salvatore, who heads up the Ways and Means Committee, noted that compliance would be a major focus moving forward.

"The committee diligently examined current monitoring procedures relative to tax stabilization agreements. The committee anticipates issuing a report in the near future, which will include findings and recommendations," said Salvatore. 

Councilman Sam Zurier offered his perspective on the increased scutiny -- and need -- for tax breaks. 

"The hearings in the Ways and Means Committee earlier this year indicated historical gaps in the development and implementation of tax stabilization agreements.  The Committee is preparing a reported with analysis and recommended improvements, " said Zurier.

"In the meantime, the administration has begun incorporating some of the recommendations that came out of the hearing even as the report is being prepared.  I think all of us are more aware of the issues today than we were last December.  More recently we received a report from the Economic Development Task Force describing the important role that tax stabilizations can play in economic development; therefore, I believe our task will be to improve the TSA process to minimize the identified problems and maximize the benefits."

Change in Protocol?

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Councilman Luis Aponte spoke further the current changes underway to the manner in which the council monitors -- and enforces -- TSAs.

"Cornish just submitted a compliance plan with the [Kinsley Building] TSA proposal, said Aponte. "It basically states, 'We [Cornish] understand these are the terms, and here's where there's something to measure against.' I'd asked that they give us a document that shows that you've gone through, to memorialize the agreements of compliance.  We will be requiring this of all TSAs moving forward."

Aponte noted that along with Zurier, they were addressing the "year 13 problem."

"[Zurier] wants to put a deed restriction for five years at that year 13 mark for TSAs," said Aponte.  "If the buyer were sell to a tax exempt entity, then the city would be entitled to a portion of the profits." Aponte noted the proposal is in Ways and Means. "You get your 12 years, you get your shot, and that's it," said Aponte. 

In the meantime, Jacobson said that he would "urge the City Council to think more deeply about the use of TSAs."

"They are a very powerful tool and capable of positive economic development if used properly. Providence needs TSA policy, enforcement and a way to measure their success and to keep them in check so they don't hurt existing property owners and businesses," said Jacobson, who provided his suggestions to the City Council.

"I have also included some policy ideas on TSAs. I am not an expert on this but these are the type of questions and ideas that I would be asking on the TSA issue to ensure their effectiveness," said Jacobson.  "Providence's economy is at a very fragile state right now and the wrong decisions could be disastrous and stick with us for decades to come."


 

 

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

End Date of Agreement: 12/31/2022

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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

Tax Status: Current

End Date of Agreement: 12/31/2024

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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

Tax Status: Past Due

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

Tax Status: Current

End Date of Agreement: 12/31/2016

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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

Tax Status: Current

End Date of Agreement: 12/31/2024

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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

Tax Status: Current

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

Tax Status: Current

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

Tax Status: Credit

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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