Providence sees big spike in tax breaks under new programs

A new extended stay hotel on Exchange Street is one of the projects that was approved for a tax stabilization agreement.

PROVIDENCE, R.I. (WPRI) – From the high-profile Wexford Science + Technology innovation campus in downtown to a pizza place on Chalkstone Avenue, Providence officials have granted millions of dollars in tax breaks over the last two years for a dozen projects using new ordinances that don’t require public vetting of the deals.

A Target 12 review of the fiscal impact reports for each of the 12 administrative tax stabilization agreements (TSAs) signed by the city since July 2015 shows the deals – which range from five years to 20 years – are projected to forgive approximately $25 million in property taxes that would be due to Providence if the projects were taxed at the city’s current commercial tax rate of $36.70 per $1,000 of assessed value.

The projects are still expected to generate at least $33.2 million in property taxes over the next 20 years, and supporters of the tax deals argue that it’s nearly impossible for economic development to occur in the city without incentives.

But while they both agree that tax stabilization agreements may be necessary, internal auditor Matt Clarkin and City Councilman John Igliozzi told Target 12 they are concerned by a lack of transparency when deals can be approved by the planning department rather than going before the City Council.

“The real weakness is that there is a lack of transparency with the administrative TSAs for the public,” Clarkin said. “No public hearing. So zero opportunity for the public to voice their support or opposition.”

The administrative tax stabilization agreements were created by the city in 2015 at the urging of state leaders – including now-Senate President Dominick Ruggerio – who claimed Providence needed to streamline its tax incentive programs in order to stimulate economic development on the old 195 land.

Like many cities, Providence has long had a tax-stabilization agreement program in place, but the deals have historically been approved one at a time by the City Council. Those TSAs require council vetting and a public hearing before they can move forward, leading critics to argue the process of seeking tax relief is too political. City Council members say they should have input over economic development in their neighborhoods.

With Ruggerio and other state leaders threatening to step in and create their own tax stabilization plan in 2015, the City Council agreed to establish an administrative tax break for projects within the I-195 redevelopment district and the Capital Center redevelopment district.

Under the administrative plans, the city grants  15-year tax breaks to projects worth at least $10 million and 20-year deals to five projects worth more than $50 million, so long as developers agree to make an effort to hire minority contractors and that all trade construction contractors offer apprenticeship programs. The deals allow developers to gradually increase their commercial property tax payments until they are paying full taxes in year 15. Developers are not required to receive City Council approval and the deals are not subject to public hearings.

As of Friday, the city had approved four deals under the I-195/Capital Center program: A 20-year tax break for the Wexford Science + Technology innovation campus that is projected to forgive $13.6 million in taxes; an extended stay hotel on Exchange Street that will see its taxes reduced by $3.3 million; a mixed-use development on Pike Street that is getting a $2.9-million tax break; and a 169-unit apartment building on Smith Street near the train station that is having its taxes reduced by $4.4 million over the life of the deal.

The eight other administrative tax breaks granted by the city are known as “neighborhood TSAs” because they are designed for projects taking place outside of downtown. The five-year deals, which largely result in tax relief under $100,000 for each project, have included Federal Hill Pizza on Chalkstone Avenue, a cat veterinary center on Hope Street and apartments on Harrison Street.

Igliozzi, a Democrat who represents Silver Lake, said he supports the traditional one-off tax deals approved by the council because they must go through “the full public process.” Clarkin is currently in the process of reviewing all of the city’s existing tax stabilization agreements and will publish his findings in a report to the City Council before the end of the year.

The Elorza administration disagrees with the criticism from Igliozzi and Clarkin. Victor Morente, the mayor’s press secretary, said the ordinances establishing the administrative tax breaks “went through a public process in which residents were allowed to voice input.”

“The purpose was to produce a predictable and standardized process that balanced public interests and private development,” Morente said. “The agreements are drafted pursuant to the publicly-vetted ordinances that went before the City Council and its committee on finance and are considered public documents.”

But Igliozzi said he won’t rule out seeking changes to the ordinances.

“That public discourse, those types of public accountability measures, have to be plugged in somehow,” Igliozzi said. “So this way the public knows exactly what we’re doing with their tax dollars.”

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Dan McGowan ( dmcgowan@wpri.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan