With many of the tax deals Providence has with nonprofit colleges and hospital systems set to expire soon, some say it’s time to devise a better way to ensure these institutions pay their fair share.
Because they are tax-exempt, universities and hospitals are excused from paying property taxes. However, cities such as Providence have struck deals, known as payments in lieu of taxes, to help offset some of the revenue they would get if for-profit owners were paying taxes on those properties.
In the capital city, tax-exempt organizations own nearly 40% of the tax base, according to a recent city report submitted to the City Council.
That means the city is losing about two-thirds of the $130 million it would be collecting in property taxes based on the full assessed value as of fiscal 2021, according to the report. The city can’t do much to change the $35.5 million it gets in state aid on these tax-exempt sites, but it could renegotiate the terms of what the universities, hospitals and other nonprofits pay – currently a combined $7.5 million a year.
Ahead of upcoming negotiations with Care New England Health System, Brown University and other major tax-exempt organizations whose agreements expire in 2022 and 2023, lawmakers are looking to consider how and if those deals should be changed. But they don’t all have the same kinds of changes in mind.
City Councilman John Goncalves, a Brown University alumnus who has been publicly critical of his alma mater’s growing presence in the Fox Point neighborhood he represents, said the current agreements are not working.
Specifically, Goncalves called out Brown for underpaying. Its property holding, assessed at $1.3 billion as of fiscal 2021, is the largest of any tax-exempt organization in the city, according to the report. Rather than the $49.3 million it would pay in property taxes, the university paid about $3.4 million in fiscal 2022 under two PILOT agreements with the city.
“What they are doing is frankly a drop in the bucket,” Goncalves said, also noting the university’s reported $6.9 billion endowment.
Goncalves said he’d like to see his alma mater contribute at least $10 million a year, though he stressed the importance of a data-driven and predictable formula to determine an exact amount.
But it’s not a one-sided relationship.
Brian Clark, a Brown spokesman, said the university provides 4,700 jobs, $200 million in research spending and “significant economic activity” from its students, graduates, programs and visitors. Brown also pays property taxes on its commercial building. Brown has given more than $70 million in the last 10 years to the city – the largest voluntary contributor among tax-exempt groups, Clark said.
Council President John J. Igliozzi agrees that reform is needed. But a combative approach doesn’t help anyone, he said.
“When you go in there adversarial, you are going to get the same limited results you always get,” he said. “It is time to apply pragmatic, reasonable approaches to these negotiations.”
Igliozzi also suggested adding clauses in which tax-exempt organizations would pay more if the city meets certain financial benchmarks. The terms of the deals should be revisited more frequently to account for changing economic conditions, he said.
The report recommended the city improve transparency and accountability under these deals while considering other ways to boost revenue, such as service and user fees.
Andrew Grande, a spokesman for Mayor Jorge O. Elorza, said in an email that Elorza supported the report’s recommendations.
Nancy Lavin is a PBN staff writer. Contact her at Lavin@PBN.com.
