PROVIDENCE, R.I. (WPRI) — Providence Mayor Brett Smiley is criticizing a City Council legal strategy to challenge a multimillion-dollar tax break for a wealthy downtown developer.
The criticism comes one day after the City Council Finance Committee voted to pursue a legal challenge against a court-ordered 2021 agreement that allowed 10 downtown properties owned by Arnold “Buff” Chace and others to pay significantly lower property taxes over the next three decades.
Smiley spokesperson Josh Estrella said the administration doesn’t support the existing tax deal, but the mayor also doesn’t see eye-to-eye with the council on how to deal with it.
“This settlement was entered into under the previous administration and Mayor Smiley does not support it,” Estrella said in a statement. “For months, the city has been negotiating with Buff Chace, working towards a solution that is better for the city and taxpayers. The council’s current approach risks both not achieving a better deal while sending more resources to an outside council.”
The controversial deal was struck 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 that had spanned two decades.
The court-ordered tax deal has since drawn criticism from some inside city government, including internal auditor Gina Costa, who 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 May, City Council President Rachel Miller announced the council hired the Providence-based law firm Wistow, Sheehan, and Loveley. (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.)
Miller directed the Providence 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.”
Councilors heard a presentation from Sheehan and Wistow during a closed-door executive session meeting on Thursday. After the presentation, the Finance Committee approved a resolution to “authorize legal counsel to make a claim by demand letter, motion practice, lawsuit, or any combination the attorneys deemed appropriate.”
To move forward with the legal action, a majority of the City Council must approve the measure at its next meeting on July 20.