PROVIDENCE, R.I. (WPRI) – Providence officials could soon realize their longtime goal of forcing the city’s colleges and hospitals to contribute more tax revenue now that Gov. Gina Raimondo is asking state lawmakers to approve legislation that would allow municipalities to tax “non-mission essential” properties by the nonprofit institutions.
But the governor’s proposed $9.9-billion budget for the fiscal year that begins July 1 also slashes the state’s existing payment-in-lieu-of-taxes (PILOT) funding for cities and towns by more than $5 million, the bulk of which comes from the capital city. The budget calls for the state to distribute $40.8 million to municipalities through the PILOT program during 2019-20 fiscal year.
“Compared to PILOT programs in other states, including Massachusetts, Rhode Island’s current PILOT initiative is considerably more expensive to state taxpayers,” a passage in the executive summary of the proposed tax-and-spending plan states.
State officials say the ability to tax colleges and hospitals could help soften the blow to cities and towns from the loss in PILOT funding, but municipal leaders will be required to approve a new tax and determine which properties are owned by nonprofits aren’t mission-essential.
Brett Smiley, the governor’s chief of staff, said the state believes the total assessed value of non-mission essential nonprofit properties could be around $150 million, although the state does not maintain a list of those properties. He said tax assessors in every city and town would have to create the list.
A spokesperson for Providence Mayor Jorge Elorza said the city does not currently maintain a list of non-mission essential properties, but some are more obvious than others.
Rhode Island Hospital, for example, owns a vacant piece of property at 145 Globe St. – known as Victory Place – that is valued at $6.5 million, according to city tax records. Women & Infants Hospital owns a $4-million property at 45 Willard Ave. that city officials believe should be on the tax roll. Surface parking lots owned by several nonprofits are another example.
What is less clear is how communities will handle properties that have both a commercial component – like a coffee shop – and facilities that are clearly connected to an institution, like a classroom.
Another question is how Providence would handle its existing PILOT agreements with nonprofit institutions, which generated nearly $7 million during the 2017-18 fiscal years. The deals are on top of what the state provides for PILOT funding, which will come in around $29.4 million under the governor’s proposal.
Emily Crowell, the mayor’s communications director, said the city is still reviewing the proposal.
Elorza has been asking lawmakers to approve a bill allowing the city to tax non-mission essential properties owned by nonprofits for several years, but the proposals have never come close to a vote. Previous mayors have also unsuccessfully lobbied the General Assembly to allow the city to tax the colleges and hospitals.
The nonprofits are likely to oppose the governor’s proposal. Daniel Egan, the president of the Rhode Island chapter of the Association of Independent Colleges and Universities, issued a statement Thursday questioning whether the proposal is legal.
“AICU Rhode Island questions the legality of the Governor’s proposed enabling legislation; however, our members voluntarily make payments on such properties as part of their longstanding partnerships with their host communities,” Egan wrote in an email.
Brian Daniels, the executive director of Rhode Island League of Cities and Towns, offered mixed views on the governor’s proposals.
“We are disappointed to see a decrease in payment-in-lieu-of taxes (PILOT) funds, which are a critical funding source in numerous communities; however, we do appreciate that new tools were proposed to generate additional local revenues,” Daniels said.