PROVIDENCE, R.I. (WPRI) – Under the watchful eyes of labor leaders, the Elorza administration and the City Council president, a key city panel on Tuesday approved a 12-year tax break for a developer to build a $40-million extended-stay hotel in downtown Providence.

The $2.5-million tax-stabilization agreement for the Cranston-based Procaccianti Group to build a 150-room hotel in place of the vacant Fogarty building at 111 Fountain St. must still be approved twice by the full City Council, but Council President Luis Aponte said he expects the deal to move forward.

The City Council Finance Committee voted 3-0 to send the agreement to the council for first passage on Dec. 3. Two other members of the committee, Councilwoman Carmen Castillo and Councilman Terry Hassett, were absent. Castillo, who works for the hotel union that opposed the project, was seen in City Hall prior to the vote, but did not stay for the meeting.

Under the terms of the deal, the Procaccianti Group, which has owned the Fountain Street property since 2005, would pay full taxes on the current value of the vacant property – about $1.6 million – for three years before it begins to gradually phase in tax payments based on the actual value of the building over the following nine years.

A fiscal note prepared by the city’s tax assessor shows the Procaccianti Group will pay about $2.8 million in taxes over the life of the deal. Without a tax break, the company would have paid $5.3 million. Supporters of the project say the hotel wouldn’t be possible without the tax arrangement.

The Procaccianti Group will also be required to make an annual payment to a trust fund created by the City Council designed to fund parks and recreation programs in the city. Over 12 years, the contribution will be around $123,000, according Matt Clarkin, the city’s internal auditor.

Tuesday’s vote marked another twist in the months-long saga that pitted both city and state government leaders as well as the construction trades against Unite Here Local 217, the scrappy hotel workers’ union that wields significant influence on the City Council.

Unite Here has clashed with the Procaccianti Group for several years, arguing that the company’s hotels should be staffed by union workers. (Just last week, hotel workers at the Procaccianti-owned Renaissance hotel voted to unionize.) On the other side, the laborers said the project would create hundreds of construction jobs and spur economic development in the city.

As recently as two weeks ago, it appeared as though the Procaccianti Group was considering walking away from the project altogether. But after city officials conferred with the Raimondo administration, the deal was back on track. (Three of the Finance Committee’s five members work in state government.)

On Tuesday, hours before the Finance Committee meeting, state Commerce Secretary Stefen Pryor sent a letter to Aponte making it clear his staff would be willing to consider a partial state reimbursement on the tax-stabilization agreement if the council approved the deal. (The reimbursement is one of many economic development tools included in Raimondo’s first budget.)

Meanwhile, Unite Here was working behind the scenes to convince the City Council to tie the hotel tax break to a $14.25 minimum wage, an amendment that appeared to have broad support in the 15-member legislative body. A spokesman for the Procaccianti Group told he considered the provision “against the law.” (Last year state lawmakers approved a bill banning municipalities from setting their own minimum wage.)

By the time the Finance Committee went into session shortly after 6 p.m., the minimum-wage provision had been abandoned.

With a dozen hotel workers on one side of the room and project supporters that included Rhode Island AFL-CIO President George Nee, construction trade leaders and the Elorza administration on the other, the committee approved deal.

Jenna Karlin, vice president of Unite Here, said Wednesday the union plans to “continue to stand up for Providence residents against out-of-town developers who are looking to profit,” but declined to expand on her strategy.

“It’s common sense that there should be a guarantee that Providence residents will benefit when we’re giving away our tax dollars,” Karlin said.

Continue the discussion on FacebookDan McGowan ( ) covers politics, education and the city of Providence for Follow him on Facebook and Twitter: @danmcgowan