Paolino request for tax break for new hotel faces opposition

A group of opponents to a proposed tax break for a new hotel.

PROVIDENCE, R.I. (WPRI) – Former Providence Mayor Joseph Paolino’s request for a tax break to build a boutique hotel downtown faced opposition at a City Council Finance Committee meeting Thursday, with the proposal’s original sponsor saying he no longer supports the deal.

Ward 10 Councilman Luis Aponte told the committee he sponsored the original tax stabilization agreement proposal for 59 Westminster St. because he was told Paolino was seeking to rehabilitate the building and reuse it for office space. He said Paolino should be required to “go back to the starting line” and request a new tax break for the hotel proposal.

“I cannot in good conscience support this given the precedent it sets,” Aponte said. “It smacks of a bait and switch.”

The committee took no action on the proposal, except to schedule a second public hearing sometime early next year.

Neither Paolino nor any lawyer representing him attended Thursday’s meeting, but more than 20 individuals carrying signs showed up in opposition to the proposal. The group appeared to be organized by Unite Here Local 26, the local hotel workers’ union. The union typically asks hotel developers to agree to not interfere with unionization votes in exchange for labor peace.

Ward 9 Councilwoman Carmen Castillo, who serves on the committee and is a member of Unite Here, also criticized the proposal, arguing that the ordinance no longer had a sponsor. She also noted there is no registered lobbyist for the project, which raises questions about who negotiated several changes to the proposal.

But Committee Chairman John Igliozzi said the hotel proposal has been on the table for several months and was discussed at a public hearing earlier this year. He then volunteered to become a sponsor for the ordinance.

“We’re trying to set people up for success, not failure,” he said.

The proposed 48-room hotel and restaurant would be built on 34,000 square feet of space inside the former Exchange Bank downtown. Paolino has already been approved for $4.25 million in tax increment financing by the R.I. Commerce Corporation and has said he wants to break ground early next year. He is calling it The Hotel Beatrice, named after his late mother.

The initial proposal called for a 12-year tax break, but an attorney for the city introduced a substitute ordinance Thursday that would increase the agreement to 15 years.

The fiscal note for the tax break shows a company formed by Paolino – 30 Kennedy Partners LLC – would pay $2.7 million in property taxes over the life of the deal, approximately $904,000 less than it would pay without a tax break. The annual taxes would be phased in over 15 years, starting at $107,523 for the first three years and gradually increasing to $272,871 by year 15.

Correction: Unite Here Local 26 is the local hotel workers’ union. It was formerly Unite Here Local 217.

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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