PROVIDENCE, R.I. (WPRI) — After an hours-long meeting on Tuesday night, the Providence City Council voted to pursue legal action against a court-ordered 2021 agreement that allowed ten downtown properties owned by Arnold “Buff” Chace and others to pay significantly lower property taxes over the next three decades.
The council heard multiple presentations on the issue during a closed-door executive session at a special meeting. The first came from city solicitor, Jeff Dana, followed by council-hired attorneys Stephen Sheehan and Max Wistow.
City Council President Rachel Miller announced in May the council hired the Providence-based law firm Wistow, Sheehan, and Loveley. Miller directed the firm to review the 2021 consent order and provide legal options to the council, and “if necessary, to initiate legal proceedings to defend the city and taxpayers from the impacts of the consent judgment.”
After both presentations on Tuesday, councilors voted in favor of a resolution that formalizes the agreement between the Providence City Council and the law firm, spurring Wistow to tell reporters he plans to file a motion to intervene in the court in the coming days.
“The consent order was entered into without authority by the city solicitor,” Wistow said. “He had no right to do that without the City Council approving it.” (Wistow famously represented the state of Rhode Island in its high-profile lawsuit against former Red Sox pitcher Curt Schilling and other key players tied to the failed 38 Studios deal.)
Wistow said he could not get into specifics about what his presentation to councilors entailed, but that his firm would now try to vacate the consent order.
“We’re going to ask a court to allow the council to become a party to the case and will argue that as far as the council is concerned, this consent order that was entered into should be wiped out because the lawyers who entered into it on behalf of the city had no authority to do it,” he said.
The controversial tax deal was reached in June 2021 after R.I. Superior Court Judge Melissa Darigan ordered the property owners to receive lower taxes in exchange for turning a portion of their units into affordable housing. The deal came at the same time the properties were poised to lose previously approved tax deals — some spanning two decades.
“If this thing stands, other developers will say, ‘I want the same thing, and if you don’t give it to me, you violated my rights to equal protection of the law. How do you benefit this guy, and not me?’ So, it has serious consequences,” Wistow explained.
Internal auditor Gina Costa outlined a series of concerns in a confidential memo sent to councilors in December.
The memo, which has since been made public, shows Costa raised issues with the deal moving forward without approvals from the City Council, the Committee of Claims and Pending Suits or the Board of Tax Assessment and Review. Costa also criticized the terms of the deal, questioning whether they complied with local tax regulations and federal affordable housing laws.
“It is my opinion that this consent order was created specifically to allow certain properties that have already exhausted 20 years of tax stabilization to obtain further preferential tax treatment that may have not been allowable without the consent order,” Costa wrote. “If not challenged, these properties will receive fifty years of tax relief.”
Costa estimated the new 30-year agreement means the city is facing a potential loss of tax revenue totaling $18.8 million, according to the memo, and she recommended the council hire outside counsel to challenge the deal.
In a subsequent letter engaging attorney Wistow to review the deal, Miller said it could actually be $42.5 million.
The findings of the law firm have been kept secret for weeks. Lawyers first presented their findings to the City Council Finance Committee in an executive session earlier this month.
Councilors approved the resolution in a 13-1 vote, with Councilwoman Jo-Ann Ryan as the one vote in opposition. (Councilwoman Helen Anthony was absent.)
Last week, Miller said there was an agreement on the table that would authorize the law firm to receive half of what is recovered, should the agreement be overturned. Wistow explained that figure would not exceed $1.4 million.
Patti Doyle, a spokesperson for Chace and his development company Cornish Associates, said they had been negotiating with the Smiley administration in good faith even though they had no legal obligation to do so. But she said the council’s action Tuesday likely killed that effort.
“We regret that the actions of the City Council this evening preclude us from continuing those discussions as it now appears that there exists the possibility of litigation,” Doyle said in a statement. “We further regret that it also now appears as though the Council is seeking to reverse a legal judgment designed to bolster additional, much-needed housing which clearly will have a chilling effect on all such initiatives contemplated throughout Providence – slowing the development of housing across the city.”
Mayor Brett Smiley has said he doesn’t support the existing tax deal but has expressed that he didn’t see eye-to-eye with the council’s legal strategy.
“I did not support the settlement the previous Administration agreed to and given the legal assessment of our counsel, my team entered negotiations with Mr. Chace to secure a better deal,” Smiley said in a statement following Tuesday night’s meeting.
“We provided the City Council a resolution that addresses the challenges of the old settlement and claws back 30% of the tax subsidy provided,” he said. “The City Council has still not shared external counsel’s proposal with the Administration, which does not allow us to assess its likelihood of success.”
In a July 19 letter obtained by Target 12, Smiley told councilors Chace was willing to enter into new terms that were “more favorable” to the city.
“This potential settlement would provide the City with $1,300,000 for affordable housing while also paying the full commercial taxes on the commercial components of the properties in question,” Smiley wrote.
The mayor said he was also concerned about the deal with Wistow, saying entering an agreement with the attorney would reward him for “lengthy litigation” and would provide a bonus of up to half of the city’s anticipated recovery.