Former highway land reignites tax-treaty debate

What started as a strategy to help save the vacant Industrial Trust Building in Providence is now part of the statewide debate over how to redevelop the city’s former Interstate 195 land.
In April, an ad hoc economic-development task force of Providence business and community leaders, assembled by the City Council responding to the plight of the downtown tower known as the Superman Building, recommended an overhaul of the city’s property-tax treaty program for large development projects.
The idea, which would take approval of “tax stabilization agreements” out of the hands of elected officials, went nowhere with the council or with Mayor Angel Taveras’ administration.
But now City Council President Michael Solomon has brought the plan back as part of his mayoral campaign and pitched it as part of the solution to generating demand for the I-195 land.
The I-195 Redevelopment District Commission, which is marketing the 19-acre developable strip of state-owned property it calls The Link, thinks he’s on to something.
“I saw it, and I did a back flip coming out of my chair,” said 195 Commission Chairman Colin Kane about the Solomon proposal. “It is terrific. We have been talking for some time about something like that. Having prescriptive tax treatment with the city is as important as wetlands or other permitting. It is really one of the key economic components of underwriting.”
Whether the proposal has any chance of going into effect, however, may depend on whether Solomon wins the upcoming mayoral election.
There is no sign his fellow councilors have warmed to the idea any more than the current mayor.
“Our position is we are looking at tax stabilizations as they are coming through,” said Providence Economic Development Director James Bennett in a phone interview last week.
Under fire for spotty monitoring, opacity and inconsistency from project to project, the city’s tax-stabilization program at times this year looked like it may not be available for future projects at all.
City officials reached an impasse with some developers seeking new or extended deals and Councilor Sabina Matos proposed a 2014 moratorium on new stabilizations in order to revamp the system.
The debate added a layer of uncertainty for developers looking at The Link, just as the commission was trying to attract its first round of proposals for the land, Kane said.
Since the early spring, however, the pipeline of tax deals has begun moving again, with four tax stabilizations approved or nearly approved in the past two months. They include deals for the Kinsley Building, Foundry, South Street Landing and CharterCare. Solomon’s tax-stabilization proposal, which his campaign described as mirroring the task force recommendation, would extend the existing 12-year model agreement to 15 years.
Like the 12-year template supported by Taveras, the task force plan would increase the tax paid by the project owner each year until it reaches the full assessed value and expires.
Unlike the current model, which includes an initial three-year period of no tax payments, the task force’s stabilization plan would always charge the owner a “base tax” of what they paid on the unimproved property for five years after construction starts.
Alan Litwin, managing director of Kahn, Litwin, Renza & Co. and chairman of the economic-development task force, said the proposal was designed to be at least revenue neutral and may generate more taxes per agreement than the current template because of the base tax.
And unlike the current system, the proposal would award stabilizations administratively to all projects that qualify, in this case any construction or rehabilitation of $500,000 or more and worth at least half of the current assessed value. They would not, as is the case now, need City Council approval.
It’s that part, removing the uncertainty of public approval from elected officials, that the task force, Solomon and real estate industry professionals say would be the biggest difference from the current procedure.
Since the I-195 Commission was formed, its central strategy has been to arrange as much of the permitting, utilities and other aspects of site pre-development as possible to provide a faster and more predictable process than a developer could expect on a privately owned parcel.
The absence of a master tax-stabilization agreement with Providence officials has been one conspicuous area of uncertainty and potential government-related risk for anyone interested in The Link.
Perhaps surprisingly, Kane said neither he nor anyone else connected with the commission has approached any Providence officials about it. The commission has been working extensively with city planners and engineers on the design and build-out of The Link, but Kane said it had never seemed like the right time to bring up property taxes. “I think for a tax-stabilization discussion, now is the appropriate time because we are in the market, whereas two years ago there was so much engineering and other work to be done,” Kane said. “We have been advocating for it, but until [Solomon’s] initiative, I had seen the recommendation, but we have never had any discussion with the city around it.”
But Bennett said although the city is trying to standardize tax deals and make them more predictable, losing the ability to tailor agreements to individual projects would be detrimental.
“Our administration, with the City Council, has tried to make the system pretty transparent and predictable, and it leaves us a certain amount of flexibility, because building a garage is different from building an office building,” Bennett said.
Asked whether the city should make any accommodations for the I-195 land because of the state’s investment in it, Bennett said not necessarily.
“If we were looking at millions of proposals maybe, but having the flexibility we have in place has been working,” Bennett said. “Is it a [tax stabilization] for a company that is going to create 10 jobs or one that would create 500 jobs? It’s not where the project is, but how much it is bringing to the table economically.”
Gary Sasse, director of the Hassenfeld Institute for Public Leadership at Bryant University and a former budget adviser to City Council, said he would be wary of granting automatic approval to all projects of a certain size.
“I think that is dangerous, because when someone gets a tax stabilization, the cost of services doesn’t go down and someone else has to pay,” Sasse said about the Solomon proposal. “While tax stabilizations are an important tool, they should be strategically used and not for favorable tax treatment for activity that is not an essential part of the city’s economic plan.”
Sasse said he agreed with the economic-development task force’s goal of making tax stabilizations more predictable, standardized and transparent, but taking City Council review totally out of the process may go too far.
“There should be a middle ground with clear standards in granting [tax stabilizations], but still require approval of each individual agreement and not give carte blanche,” Sasse said. “It is important to maintain checks and balances so tax agreements don’t become political footballs.” •

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