Reforms to the policies governing tax deals that Providence offers to real estate developers will be put to the test on the city's most iconic skyscraper.
A tax stabilization agreement with the city is one piece of the public and private funding puzzle proposed for the $220 million “Superman” building redevelopment. Already, naysayers have voiced opposition to the prospective tax deal as an overly generous handout that puts the city at risk.
Many of those same arguments clouded past city TSA development deals, ultimately stopping the City Council from giving the go-ahead in some cases. But with new requirements around wages, minority business inclusion and council oversight on the books, at least some lawmakers say they’re not worried about cutting a tax deal for the long-vacant Industrial Trust Co. Building.
One cheerleader for the project is City Council President John J. Igliozzi, who joined Mayor Jorge O. Elorza and state officials in announcing the plans to renovate and redevelop the long-vacant structure.
Igliozzi said he was confident that incrementally increasing the property taxes that building owner High Rock Development LLC has to pay – rather than all at once – would be good for the city. Right now, the developer pays just over $500,000 in property taxes based on the $14.2 million assessed value of the empty building. Renovating and filling the skyscraper with apartments, retail and offices will presumably increase its assessed value, and therefore its tax bill, but by how much is unknown. Also unclear in the equation is the percentage of added taxes the city is going to shave off, and over what length of time.
Igliozzi said project partners are looking for an agreement that would last for 30 years, twice the length of the typical TSAs the city has approved on smaller projects. A longer time frame means a larger discount, and potentially opens the city up to more risk if the project fails.
Igliozzi wasn’t worried, though.
“Bigger projects sometimes need longer runways,” he said.
That the City Council will get to review and potentially modify the terms of the deal put Councilman John Goncalves at ease. Goncalves, who represents the district that includes the “Superman” building, pointed out that a city subsidy is still better than the alternative.
“What would you rather have, a vacant building or a building that's going to be revitalized?” Goncalves said.
Under the reforms approved by the council last year, High Rock will also have to meet prevailing wage and minority business contracting requirements on the project and provide regular updates to the council to show its meeting certain benchmarks. The labor standards are particularly important given the thousands of construction jobs the project is expected to create, said Michael Sabitoni, president of the Rhode Island Building & Construction Trades Council.
“That’s why we made those reforms,” he said. “When we do these incentives, there has to be a benefit to the taxpayers as well.”
While Sabitoni touted the stricter city requirements as the fix needed to assuage concerns for future TSAs, Councilwoman Nirva LaFortune was not convinced.
LaFortune, who is also a mayoral candidate, pointed out that the city policy still gives developers a loophole to get out of wage and minority business contract requirements if they show they made their “best effort” to meet the requirements.
And while she welcomed the affordable housing included in the project, she didn’t consider the income threshold set by the developer to truly be affordable. The plans call for 57 apartments restricted to renters who make 80%-120% of the area median income, or $48,450 – $72,650 a year for a single person.
LaFortune said she wanted to see those income thresholds decreased to better reflect the true definition of affordable housing and to justify discounting the city property taxes.
“For it to work for the city, that affordability component of housing is a major issue,” she said. “I want to see this development happen, but I also want to protect the best interests of the city.”