PROVIDENCE, R.I. (WPRI) – Tax stabilization agreements (TSAs) awarded by the city of Providence over the last two decades have generated millions of dollars in additional tax revenue, according to a new report touting the value of the special deals.
The report, prepared by the city’s planning department and ASG Planning LLC, analyzed 69 development projects that have been granted tax breaks by Providence officials since 1996. The length of the deals has varied from five years to 20 years.
The 23 projects whose agreements have already expired now generate more than $7.6 million in annual tax revenue for the city, while the 46 still-active deals are projected to generate $44.7 million a year in taxes by 2023, according to the report.
“Tax stabilization agreements are a powerful economic development tool to spur jobs, development and tax revenue to the city,” the report states.
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Tax stabilization agreements allow developers to gradually increase their property tax payments to the city over a period of time in exchange for promises to create new jobs, living spaces or hotel rooms. Supporters say the deals are essential to kick start construction because of the city’s high commercial tax rate ($36.70 per $1,000).
By focusing exclusively on the economic impact of existing tax breaks, the report is extremely narrow in its scope. It does not address any of the common critiques of the special deals, including the effect they have on the commercial real-estate market or on businesses that have not sought tax stabilization agreements from the city.
For projects whose tax breaks haven’t expired, the report projects that 9,500 jobs will be created or preserved in “new or renovated retail, restaurant, hotel, and office or industrial space.” The report also predicts the city will see 4,234 new residents and 676 additional hotel rooms once all of the projects are fully built out.
Victor Morente, a spokesperson for the Elorza administration, said the report shows the agreements have had “wide-ranging positive impacts” on the city.
“The report underscores that TSAs have been a powerful economic tool for the city catalyzing development, employment and revenue growth,” Morente said. “Throughout two decades, investment in 69 projects has yielded increased property values, construction value, and local spending.”
The city’s use of tax stabilization agreements to incentivize development has become increasingly common in recently years. The report shows that 29 of the 69 tax deals reviewed took effect during the Elorza administration. Recent recipients of tax breaks have included the owners of the Providence Journal building at 75 Fountain St., a group seeking to build a hotel at 111 Fountain St. and the Wexford Science + Technology innovation campus.
The vast majority of city tax deals have been awarded on a one-off basis by the City Council, but Providence officials have also created standardized agreements for development in parts of downtown – the I-195 redevelopment district and the Capital Center redevelopment district – as well as smaller projects in neighborhoods outside of downtown.
Mayor Jorge Elorza and newly-elected City Council President David Salvatore have put forward a proposal to create a standardized tax break process for all projects based largely on their projected construction costs. For example, if the projected construction or rehabilitation costs of a project were between $3 million and $10 million, the developer would be granted a 10-year tax break.
The proposal has been met with skepticism from Council Majority Leader John Igliozzi, who has said he believes anyone seeking a tax break should be required to appear at a public hearing. Igliozzi chairs the Finance Committee, which will begin vetting the proposal in 2018.
A more comprehensive review of the city’s existing tax stabilization agreements is expected to be released by the city’s internal auditor next month. The auditor’s office is also seeking to hire an independent consultant to review city tax policy and the long-term financial impact of tax breaks.