Providence seeks more tax revenue from hospitals, universities

PROVIDENCE, R.I. (WPRI) — Mayor Brett Smiley is seeking a change in state law that would bring the city more money from large, tax-exempt institutions in Providence.

The new proposal would tax properties rented out by those tax-exempt universities and hospitals to for-profit commercial tenants.

For example, if a college rents out part of its tax-exempt building to a coffee shop, that portion of the building would be subject to property taxes.

“You could have two nearly identical buildings, both full of profit-making doctors’ practices,” Smiley said. “One is privately owned; that building pays taxes. The other one is owned by one of the hospital corporations; that building is tax-exempt. We believe that is totally unfair.”

The city has not calculated how many such properties exist, and does not yet have an estimate for how much money the new law would bring in. Smiley said he expects the institutions to pass on the cost of the new tax bills to their commercial tenants.

Hospital and university properties currently make up 44% of the land in the city, according to Smiley’s administration, but are not taxed. Property taxes make up the vast majority of the city’s budget.

Some of the institutions pay a voluntary annual payment to the city — much smaller than what their tax bill would be — and the state also reimburses the city a portion of its lost tax revenue, roughly $37 million this year.

City officials estimate the institutions would pay a total of $138 million if taxed.

If the General Assembly approves the proposal to tax the commercial tenants, it would apply to the entire state, not just Providence.

Smiley said he has also started the process of renegotiating the voluntary payment-in-lieu-of-tax agreements with the nonprofits, four of which expire this year.

The agreements with Brown University, RISD, Providence College and Johnson & Wales University all expire this spring.

The city doesn’t currently have a PILOT agreement with Lifespan, which hasn’t made a payment to the city since 2021. The agreement with Care New England doesn’t expire until 2026, though Smiley’s office says it has a clause for updating the agreement sooner if the other nonprofits reached a new deal with the city.

In regard to your second question, while several universities voluntarily pay commercial, the proposed legislation would make it an obligation and ensure that all of the large nonprofit institutions do the same.

“I’ll be leading negotiations with my team and in conjunction with the City Council, for direct payments from the large nonprofit institutions to the city of Providence,” Smiley said, calling it a “shared responsibility.”

Dan Egan, president of the Association of Independent Colleges & Universities of Rhode Island, said in some cases the colleges and universities already pay taxes on their commercial tenants, so this proposal would codify an existing practice for them.

Brown University spokesperson Brian Clark said the Ivy League school paid $2.4 million in taxes last fiscal year for its commercial buildings and spaces.

Asked if Brown is willing to contribute more through its voluntary payment agreement, Clark said the university is “proud of the significant number of ways” the school supports the city.

“There are many models across the nation for agreements between cities and universities; we think the City of Providence and Brown could benefit from an agreement in which our interests are more aligned and where we bring not only our financial resources, but our intellectual resources as well,” Clark said.

Egan said the four private universities are interested in coming to an agreement as a group, similar to a 2003 agreement where the four institutions agreed to pay roughly $50 million to the city over the course of two decades. (The Angel Taveras administration negotiated subsequent agreements in 2011.)

“The four institutions are committed to making Providence stronger and being a partner with this administration,” Egan said. “They’re excited to have that dialogue.”

Spokespeople for Lifespan and Care New England, the two largest hospital groups in the state, did not immediately comment on whether they’d be willing to pay more in their voluntary agreements.

Regarding the new legislation, Lifespan spokesperson Kathleen Hart said the hospital group would review the bill language when it’s filed.

Smiley is also asking lawmakers to give Providence a cut of state taxes from employees at the large nonprofits, but only if there is job growth.

The proposal would require the large institutions to report their number of employees each year. If the number of jobs grows, the state would give the city 25% of the payroll taxes from the new jobs.

“Only if there’s job growth, and only on new jobs,” Smiley says, arguing it gives the city “incentive to facilitate job growth.”

Smiley said the three proposals will “reset the relationship and ensure the city receive its fair share from the obligation that we take on by providing services to these large nonprofit institutions.”

Smiley also unveiled several other legislative priorities Thursday. The city is asking the state to move forward with the redevelopment of the Cranston Street Armory this year. A current proposal on the table includes turning the drill hall into indoor soccer fields, and the towers into office space.

“We need to ensure that that building reaches its full potential and becomes an asset for the neighborhood and for the greater community,” Smiley said. “That building is a source of constant expense and maintenance on the state.”

The historic property in the city’s West End is currently being used as a warming shelter for people experiencing homelessness. It’s unclear what the plan is for those people in the spring.

The mayor is asking state leaders to use American Rescue Plan Act funds to do the renovation of the armory.

“This is the perfect project,” Smiley said. “It is shovel-ready, it is one-time.”

The city is also proposing enabling legislation for ProvPort’s new 30-year tax deal, which requires General Assembly approval because it’s longer than the usual 20-year maximum.

Smiley is also asking the state to provide 100% of its scheduled PILOT and distressed aid to the city, and for dedicated funding for multilingual learners in the state’s education funding formula.

The legislation for the city’s various proposals is still being drafted, according to city officials, and the exact language was not yet available. It’s not yet clear when the bills will be introduced at the General Assembly.

Senate President Dominick Ruggerio gave a positive initial reception to the proposals.

“I have been briefed on Mayor Smiley’s proposals, and at first glance they seem to have merit.” Ruggerio said in a statement. “The Senate will review all aspects of the bills through a thorough, public committee hearing process.”

House Speaker Joseph Shekarchi also said he’s been briefed on the proposals.

“I have been briefed on the bills and look forward to receiving more information from Mayor Smiley and his team,” Shekarchi said. “We will have robust public hearings on all the legislation and I am keeping an open mind.”

Gov. Dan McKee’s office did not immediately comment on the new proposals.