Providence leaders want new program for special tax deals

PROVIDENCE, R.I. (WPRI) – Providence Mayor Jorge Elorza is supporting a proposal put forth by seven members of the City Council that would standardize special tax deals depending on the amount of money developers plan to spend on construction.

Under an ordinance set to be introduced at Thursday’s council meeting, developers would qualify for tax-stabilization agreements (TSAs) ranging from five years to 20 years based on “certified project development costs for construction or rehabilitation.”

But unlike the majority of city tax breaks approved over the last 20 years, those authorized through the proposed Providence Tax Stabilization Investment Act would not require public hearings or a City Council vote for projects to receive the incentive. Instead, the agreements would be approved administratively, with multiple city departments reviewing different aspects of the deals along the way.

“For too long, Providence’s economic strategy has not delivered the predictability that is necessary to grow our local economy,” Ward 14 Councilman David Salvatore told Eyewitness News. “This proposal responsibly employs a good government approach to economic development and improves a process that historically benefited political insiders.”

Salvatore, a Democrat who is considering running for mayor next year, has long advocated for a more predictable program for awarding tax breaks rather than allowing the council to approve them on a one-off basis. Critics say the existing process allows for too much political interference, but some councilors say they deserve to have more authority when it comes to development in their neighborhoods.

“Implementation of an administrative process addresses both the immediate and long-term economic development needs of our city,” Salvatore said.

While Salvatore’s proposal does have six co-sponsors, acting President Sabina Matos (Ward 15), Majority Leader Bryan Principe (Ward 13) and Finance Committee Chairman John Igliozzi (Ward 7) are not among its public supporters at this point. In a text message Tuesday, Matos she was still waiting for more details on the program.

Victor Morente, a spokesperson for Elorza, said the mayor supports the proposal, but declined to comment. The mayor’s office will instead be sending out its own press release, Morente said.

Under the ordinance, projects with estimated costs between $250,000 to $3 million would be eligible for a five-year tax break; between $3 million and $10 million, a 10-year tax break; between $10 million and $100 million, a 15-year tax break; and more than $100 million, a 20-year tax break.

TSAs are designed to provide tax relief to developers at the beginning of their projects, phasing in property tax payments over time so that full taxes are being paid by the end of the deal. Supporters say they are crucial to jumpstarting construction in a city with a commercial tax rate of $36.70 per $1,000 of assessed value.

The city already has two administrative tax break programs: one covers the former I-195 land as well as the Capital Center District and the other is a smaller program for projects being done in other neighborhoods across the city. The programs, created in 2015, have resulted in 12 TSAs over the last 18 months.

The City Council has more authority over other TSAs, like the one it granted for a proposed hotel at the site of the former Fogarty Building downtown as well as a micro-loft project on Dorrance Street. Those deals must be vetted by the Council Finance Committee, are subject to a public hearing and must be approved twice by the full council.

The ordinance introduced by Salvatore would not require council votes or a public hearing, but the council would have the opportunity to review each agreement for a period of 30 days. All of the deals require the city’s tax assessor to produce a fiscal note outlining the projected amount of taxes that would be forgiven over the life of each agreement. And recipients of a TSA would be required to submit an annual report to the City Council.

The proposal would also prohibit certain types of projects from receiving a TSA, including ones that would have an adult use, like an adult theater or bookstore; compassion centers; contractor storage yards; fraternities or sororities landfills; spaces that would be used for processing scrap metal; outdoor storage yards; and self-storage centers.

Potential recipients would also be barred from having a bar, nightclub, liquor store or indoor amusement facility – like a pool hall – from taking up more than 25% of the usable square footage of the project.

The ordinance would also create a separate 12-year tax stabilization program for tangible property for certain industries, including food research and development and production; the blue economy; arts and design; information technology and innovative hardware; bio-technology and healthcare; and alternative energy, smart city infrastructure and alternative transportation.

The full proposal will likely be sent to the Finance Committee for further vetting.

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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