PROVIDENCE – The Providence Committee on Finance on Thursday approved a resolution recommending the City Council “take action” against a previous court settlement approved under the Elorza administration that awarded millions of dollars in tax breaks to local developer Arnold “Buff” Chace and his affiliates.
The agreement allows Chase to save approximately $42.5 million over 30 years for 10 downtown buildings, utilizing a tax provision, intended to spur low-income housing, whereby an owner pays 8% of previous year’s rent collections rather than regular property taxes.
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The resolution, approved in executive session, would “authorize legal counsel to make a claim by demand letter, motion practice, lawsuit, or any combination the attorneys deemed appropriate.” A majority of the City Council must still approve the measure at its next meeting scheduled for July 20.
The conflict arises from a consent order, signed by associate justice Melissa E. Darigan, that settled a suit in Providence County Superior Court between Harrisburg Associates, LLC and the city.
The consent order was signed by City Solicitor Jeffrey Dana, without council approval.
A 2022 report by Providence Internal Auditor Gina M. Costa included several “legal concerns” regarding the consent agreement, including the inclusion of students with zero income as low-income tenants in order to justify federal tax credits, the fact that many of the properties in question are mixed-use developments without the commercial portions being separated for tax purposes, the stipulation that the city tax assessor reviews lease agreements and income levels rather than R.I. Housing, and the $624,000 in retroactive tax abatements dating to July 2020 “even though there was no restricted covenant in place at the time, as required.”
Notably, the Area Median Income level used in the order to define “affordable units” is 100%, rather than the 80% income threshold used by the U.S. Department of Housing and Urban Development.
“It is my opinion that this consent order was created specifically to allow certain properties that have already exhausted twenty years of tax stabilization to obtain further preferential tax treatment that may not have been allowable without the Consent Order,” wrote Costa. “If not challenged, these properties will receive fifty years of tax relief.”
City Council back in May approved an initial $15,000 flat fee plus up to $7,500 in out-of-pocket expenses to hire the Providence-based law firm Wistow, Sheehan & Loveley, P.C. to formulate legal opinions on the agreement that could inform potential legal proceedings “to defend the city and taxpayers from the impacts of the consent judgment,” according to a city press release issued after the meeting.
The contract with WSL allows the firm to investigate the court settlement, “making use of records, research, consultations, and investigatory subpoenas” at their discretion, according to city documents.”
If the firm is successful in vacating the agreement or modifying its terms, they would be paid a 50% contingent fee of up to $1.4 million for all past and future property tax revenue payable to the city related to the properties subject to the consent order.
In an April letter to Providence City Council President Rachel Miller, WSL attorney Max Wistow said the city is projected to forgo $1.4 million from the ten properties this fiscal year, with annual losses increasing 2.5% each year thereafter.
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
