Nonprofit hospitals and universities have long made voluntary payments to local communities that recognize the cost of emergency services provided by the hosts.
These same nonprofits also own land leased or occupied by commercial enterprises, including parking lots, coffee shops and buildings leased to physician practices that are not taxed, and in some cases are not part of the voluntary payments.
Gov. Gina M. Raimondo, in her fiscal 2020 budget, proposes allowing communities to require taxes be paid on such properties. The nonprofits, not surprisingly, are crying foul.
Dan Egan, president of the Association of Independent Colleges and Universities of Rhode Island, believes such a tax could void the long-standing voluntary payments by local schools, making it uncertain how much communities would end up gaining.
He also fears it could leave the schools subject to additional taxation. Association members include Brown University, Johnson & Wales University, Rhode Island School of Design and Providence College.
State officials estimate communities now lose $150 million annually in foregone taxes. The governor’s budget proposal includes a 13 percent, or $6 million, cut in state aid to communities that puts pressure on them to make up for the loss.
The greatest impact is on Providence, which hosts the most nonprofit entities.
Brett Smiley, the governor’s chief of staff, said the new authority would replace an inconsistent system of voluntary agreements, some signed, some informal.
While Providence has sought such taxing authority for years, it had little to say about the proposal.
A spokeswoman for Mayor Jorge O. Elorza said the city is waiting for clarification on the impact of the proposal.
Under the proposed budget, Providence would receive $29.4 million from the state for reimbursement of tax-exempt properties, a decrease of about $4 million from the current year.
Can it recoup the rest from nonprofit universities or hospitals?
David Levesque, spokesman for Lifespan Corp., which operates four hospitals, said the health system “strongly opposes the proposed real estate tax on nonprofit hospitals and related services.”
The tax policy would hamper a hospital industry facing ever-growing fiscal challenges, he said. Lifespan estimates it would cost up to $2 million a year.
Through voluntary payments over the past seven years, Lifespan has paid Providence $3.6 million, plus another $1.2 million for properties owned or leased by the system.
Teresa Paiva Weed, executive director of the Hospital Association of Rhode Island, which includes the Care New England system hospitals, noted hospitals must treat all people, regardless of their ability to pay.
“Our hospital doors are open and provide care to all people,” she said. “That’s the reason … for [the] tax exemptions.” The association is assessing the governor’s proposal.
Mary MacDonald is a staff writer for the PBN. Contact her at Macdonald@PBN.com.
