Legislators to consider tax break for fire-code costs

A bill introduced in the R.I. House of Representatives this month would finally give some relief to business owners who have incurred costs associated with complying with the new fire code adopted in the wake of the deadly fire at The Station four years ago.
Introduced by Rep. Rene R. Menard, D-Lincoln, the bill (H5408) would give taxpayers an income tax credit of up to $1,000 per year for up to five years to offset the cost of installing new fire alarm systems, sprinkler systems and making other upgrades required by the code.
Menard introduced an identical bill last year, but it didn’t pass. He said he believes it is the only legislation that has been introduced since the fire code was amended to try to ease the tougher law’s financial impact on business owners.
Menard said he is uncertain of whether the bill will pass this year, especially considering the large budget deficit. It has been referred to the House Committee on Finance for review.
As Menard sees it, $5,000 is a “drop in the bucket” when compared with the hundreds of thousands of dollars Rhode Islanders are spending on fire safety upgrades.
But he introduced the bill anyway because, he said, he believes the state should offer some type of financial assistance to offset the huge cost burden created by the amended fire codes.
“We have to find a way to protect the people who reside in the state but also allow business owners to survive in this state,” said Menard.
Steve Lombardi, owner of organized dining hall Lombardi’s 1025, said he knows of at least eight restaurants that have closed because they could not afford the cost of installing sprinkler systems.
Lombardi said he has had to sit down with his own accountants to determine whether it would be necessary to move the Johnston banquet hall to a building that already has sprinklers instead of installing a $400,000 fire sprinkler system.
“There’s no way of supporting the cost of it,” he said.
Lombardi called the $5,000 income tax credit “a start,” but he said it’s hardly significant compared with the cost of compliance.
Lombardi recalls seeking some form of financial assistance from the state in the form of low-interest loans. That was at least three years ago, when the new requirements were first being enforced. But nothing came of it because there was no state-funded program.
Also about three years ago, the Rhode Island office of the U.S. Small Business Administration gathered lenders and asked them to implement special SBA-backed low-interest loans for business owners seeking to comply with the new fire code.
Some lenders did offer the loans, said Norm Deragon, spokesman for the agency’s local office. But because the loans aren’t processed in the office, it is impossible to know how many business owners took advantage of them.
“We can’t create programs on a local level,” Deragon said, adding that’s also why the office can’t identify the number of SBA-backed loans used specifically for that purpose.
In addition, in 2003, the R.I. Economic Development Corporation set aside $500,000 of its revolving loan fund, called the Small Business Loan Fund Corporation, to assist Rhode Island-based nonprofit entities with fire code upgrades.
Since then, only four nonprofits have taken advantage of the funds, said Andy Cutler, spokesman for the RIEDC. There is still $370,000 left.
Last month, the SBLFC board was asked if the remaining funds could be used for for-profit entities as well. The board agreed, Cutler said.
At the local level, officials in Pawtucket last year created a program to provide low-interest loans to help businesses within the city pay for fire code upgrades. A lengthy approval delayed the availability of funds until this month.
City Planner Michael Cassidy said there is $250,000 available for the program through the Pawtucket Business Development Corporation’s revolving fund. Businesses can apply for as much as $30,000; so far, one business, a law firm, has qualified for a $12,000 loan.
Even with those small programs, however, there are hundreds of small businesses in the state still struggling with fire code compliance costs.
Lombardi said perhaps a more effective solution to the problem would be funneling a portion of the proceeds from the 1-percent food and beverage tax back into the hospitality industry for fire code upgrades.
Another solution might be a more consistent approach to the enforcement of fire codes, said Grafton “Cap” Willey, a shareholder at Tofias PC in Providence and chairman of the National Small Business Association.
Willey said confusion among fire inspectors when implementing the codes has led to inconsistencies in how the codes are enforced. Those inconsistencies can cost businesses a great deal of time, money and frustration.
Menard said he hopes the $5,000 income tax credit will relieve some business owners, at least from the money end of the frustration.
“The price of doing business in the state is astronomical,” he said.
“I’m trying to give some relief to keep them here.”

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