Where is the Oversight of Providence’s Tax Stabilization Agreements?
Monday, March 21, 2016
has raised more questions than answers, when the current owners said that an estoppel from a previous sale made it so they did not have to adhere to certain provisions of the tax break agreement.
The city has said that it could not find records responsive to the request for the estoppel certificates; city council members are saying that any changes to the ordinance would have had to be made at the council level to be valid.
"Prior to 2014 Providence's administration of TSA's was weak. Since that time the City Council adopted policies, completed an inventory and exercised appropriate due diligence over TSAs," said Gary Sasse, former Rhode Island Director of Administration and Executive Director of the Rhode Island Expenditure Council, and founding director of the Hassenfeld Institute for Public Leadership at Bryant University.
Council members, however, are calling for a review of the mall's standing, in light of the estoppel revelation.
“In an abundance of caution, I will be asking the auditor and staff to begin a review of the mall, the TSAs, and any amendments to ensure that any changes, if made, were done appropriately, and more importantly, were done in the city’s best interest,” said City Council President Luis Aponte in a recent interview.
TSAs Still Under Scrutiny
issued a set of recommendations for review and compliance moving forward. GoLocal reported that year what the cost of all TSAs in the city had been until that point:
Tax breaks for developers of some of the biggest projects in Providence have totaled more than $15.1 million since 2013, according to a GoLocalProv analysis of city data for the controversial economic development program. In tax year 2013, the deals, known as tax stabilization agreements, meant the city received at least $8.4 million less in tax revenue. For 2014, the loss in direct tax revenue was at least $6.6 million.
The following year in 2015, the council spoke to standardizing the TSA process -- and announced a new neighborhood TSA in addition to finalizing a structure with the state for the 195 land, to mixed reaction.
Now, in 2016, the city is grappling with a new slate of potential TSAs, as well as existing ones coming back for extensions, of which one was rebuffed by the council finance committee.
"The problem remains that TSAs have become essential in downtown development," said Sasse. "These agreements mean that other property owners have to pick up the bill because the cost of operating the City are not decreasing."
There should be one depository or keeper of the records when it comes to TSA. It is recommended that the tax assessor be responsible for maintaining complete files for all current or expired TSAs. In addition, all approved TSA applications, ordinances, and tax payment schedules should be available on the assessors webpage on the city's website.
"[TSA] oversight has always been the issue, with the city having such a huge investment and long term agreement with [the mall],” City Councilman Kevin Jackson told GoLocal in a recent article. “I think we should be making sure the neighborhood groups and nonprofits have the support they need, I think its absolutely worth revisiting. We want development, we want cranes -- but we only want cranes if it benefits everyone. If we're giving away things, there needs to be some benefit to the city.”
Related Slideshow: 10 Biggest Issues Facing Providence in 2016
The battle that started last year spills over into 2016. After Mayor Elorza announced he was going to reorganize the Fire Department from four platoons to three with a condensed shift schedule, the firefighters took the battle to court — and callback costs soared with injured firefighters out on leave. Elorza said the change could save the city “as much sat $5 million” in the next fiscal year (FY17) -- but the city is currently seeing red. "Through the middle of December, fire fighter "call back" expense has been $4.7 million, which represents almost all of the $5.05 million budgeted for the entire fiscal year," reported Councilman Sam Zurier on Sunday. "Should this trend continue, the cost of this line item could exceed the budget by $5 million by the end of the year."
Now it all rides on the outcome in the courts. If it ends in a negotiated settlement, the crisis could be averted. If not, firefighter union head Paul Doughty has said that Elorza can “hand over the keys to the city" for bankruptcy.
From the West Side to the East Side, residents across the city in 2015 were organized and mobilized to demand action from the Elorza Administration on crime in the city. GoLocal reported at the end of 2015 that over half of the police department is eligible to retire — and the city still needs to get a new class of officers underway as budgeted. Tensions were high following a Dunkin’ Donuts worker writing #blacklivesmatter on a police officer’s cup (and the Black Major Movement continuing to call for a black major in the department).
Councilman Seth Yurdin announced this week that he is introducing a resolution to establish a special commission to review relations between the Providence Police Department and the community it serves. The Special Commission on Community-Police Relations will review current public safety practices and create opportunity for public input.
Grafitti and Potholes
It’s been a mild winter so far, so perhaps at least one of the two scourges of the city will be mitigated this coming year. But addressing the conditions of the roads continues to be an issue for Providence. Last year, Mayor Elorza made a public display of commitment to addressing problematic potholes, and also pledged to respond to the rampant graffiti issue in the city that has seen the property destruction spread to private houses.
City Councilman Michael Correia recently put up a $1000 reward to find who was tagging properties in his district. Residents of the city want to feel safe, and that includes driving on roads that won’t inflict damage on their cars (or take out runners and bikers) and that their personal property won’t be destroyed. Graffiti continues to crop up, and it needs to be addressed quickly when it does.
Taxes - Commercial
The city’s commercial tax rate might be frozen — for now — but there are a lot of moving pieces. The $36.75 per $1000 rate on commercial properties is among the highest in the country -- a point well-known in RI circles.
“Providence has a problem with the commercial tax rate,” said developer Colin Kane. “With new construction or significant rehab -- the costs aren't supported by current rent.” The property revaluations expected shortly will shed some light how the city will move forward addressing tax rates, but in the meantime, the TSA extensions before the Council are the 600 pound elephant in the room. “The City Council is looking for nickels in the couch cushions because of the fiscal challenges facing the city,” said Kane. “And they weren't caused by this council or mayor, but by the fact that they were kicked down the road. And now we want to malign people like Buff Chace who made the city what it is?”
Taxes - Residential
The owner occupied residential tax rate could be in the crosshairs as the city looks to address revenue issues in the coming year. “Everything’s on the table,” Aponte told GoLocal. And with the revaluation, things could be in flux for the current owner-occupied rate of $19.25 per $1000 .
“Suppose you had a city where there was a wild appreciation of real estate values — that used to happen here, Providence has seen 10% before. State law says you can only increase the levy unilaterally by 4 and a quarter,” said City Counciman Sam Zurier. “So supposed you have a situation where your values go up 10% and you want to collect 4 — you have to reduce the rate by 6%. "
"If values go up enough — even 5% - then the city will get additional money without raising the rate. During a [revaluation] year - you have to get into tax bills versus rates. And when you factor in commercial and non-owner occupied values and rates, it’s tricky.
Providence Schools face a tall order ahead of them. The search is on for a new superintendent following the departure of Dr. Susan Lusi. The current School Board President is stepping down at the end of the month. Providence High Schools scored among the worst in the state following the release of the first year of PARCC test scores. Current School Board member Nick Hemond is slated replace outgoing President Keith Oliveira, but question remains for the choice of the new super. Council President Aponte told GoLocal this week that stability in leadership in the school department is one of the greatest challenges facing the city moving forward. Can that be achieved in 2016?
Lights have been spotted on recently in the Superman Building - i.e. Industrial National Bank Builcing — but the fact remains that the city’s iconic skyscraper remains vacant, which former Mayor Joseph Paolino called one of the biggest issues facing the city (stating that the fact that it remains empty cost him a mortgage from a top bank for an adjacent property).
Citizens Bank is eyeing a new corporate campus somewhere in Rhode Island, and while indications point to one most likely going in the suburbs, a number of business and community leaders are hoping Superman isn’t ruled out completely. Previous efforts to get state support to turn the building into apartments fell flat, and Providence residents are gun-shy about any project looking for public support. But the fact remains that the empty anchor is an eyesore for the city, and getting a tenant — or tenants — in should be a top priority in 2016.
Lack of Development
Providence needs more cranes. The city has seen its first one in a while by the Jewelry District with developments at Johnson and Wales, which is a good sign — but the city needs more.
“Owners and property developers want to be treated fairly and play on a level field. Providence does not have a business friendly reputation. This is why there are few cranes in the sky in Providence and very few new businesses coming to the city or planning to expand in the city,” URI Distinguished Professor of Business Edward Mazze told GoLocal earlier. So in order to get the construction equipment in — Providence has to figure out how best to lure businesses here in the first place.
Providence needs a win — or a least a path to victory. Whether that be getting a tenant in Superman, bringing in a notable business, or articulating a concrete plan to move Providence forward, residents want to feel that the city is on the right track.
The City Council recently announced that it received the results of its cluster analysis study to identify where opportunities lie — and now we need to see results. The Mayor made multiple trips abroad in 2015. He campaigned on a promise of doubling exports from Providence in five years. What results will we see from those overseas meetings? Providence wants a concrete vision moving forward.
“Absolutely not,” said City Council President Luis Aponte, as to whether the city could go into receivership in light of its current precarious financial condition.
“If the city loses, Elorza can hand over the keys, because the city will go bankrupt,” has said firefighter union head Paul Doughty regarding the firefighters legal battle over the Mayor’s platoon reduction.
Financial advisor and GoLocal MINDSETTER Michael Riley said receivership is almost a certainty.
“Essentially Providence is bankrupt and insolvent. It is only by illegally borrowing from the pension fund the last 10 to 15 years that have saved them from being sued by creditors, and the lies continue,” said Riley. “Until Providence goes into receivership nothing else can happen — no railroads, no Superman, they are sunk. I consider everything else irrelevant.”
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