PROVIDENCE – The City Council on Tuesday authorized the hiring of a Providence law firm to pursue legal action to overturn an agreement approved by the previous administration that gave millions in property tax breaks for 10 properties owned by Arnold “Buff” Chace and affiliates.
After a special meeting in executive session, the 13 to 1 vote to tap Wistow, Sheehan, and Loveley to fight the agreement that as stands would save the developer $42.5 million over the next 30 years, the result of a 2021 consent order issued in R.I. Superior Court between the Jorge Elorza administration and Chace’s real estate development firm.
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Council member Jo-Ann Ryan was the sole dissenter.
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.”
The report also alleges the consent order was signed by City Solicitor Jeffrey Dana without its approval and highlights the Area Median Income level used in the order defining “affordable units” at 100%, rather than the 80% income threshold used by the U.S. Department of Housing and Urban Development.
In a statement after the council vote, Providence Mayor Brett P. Smiley reiterated he did not support the 2021 consent agreement but questioned the decision to engage “external legal counsel.”
“My team entered negotiations with Mr. Chace to secure a better deal. We provided the City Council a resolution that addresses the challenges of the old settlement and claws back 30% of the tax subsidy provided,” he said. “The City Council has still not shared external counsel’s proposal with the Administration, which does not allow us to assess its likelihood of success.”
On Wednesday Chace spokesperson Patti Doyle said the developer and Smiley’s administration had been in discussions for months over potentially amending the previous agreement “while under no legal obligation to do so.”
“[We] entered into these discussions in good faith and as a means to collaboratively ensure the continued creation of workforce and affordable housing in downtown Providence,” she said.
Doyle said the council action now precludes them from continuing negotiations “as it now appears that there exists the possibility of litigation.”
“We further regret that it also now appears as though the Council is seeking to reverse a legal judgement designed to bolster additional, much-needed housing which clearly will have a chilling effect on all such initiatives contemplated throughout Providence,” she said.
WSL attorney Max Wistow previously 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.
Wistow, who has been involved in numerous high-profile court cases over the years, including representing the state in its lawsuit against 38 Studios and victims of the Station nightclub fire, said he intends to vacate the 2021 order.
“The consent order is not only harmful to the city but completely unjustified and hurts Providence’s low-income residents,” he said.
Under the contract, the firm 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 order.
Christopher Allen is a PBN staff writer. You may contact him at Allen@PBN.com.
Kudos to the Council.