PROVIDENCE, R.I. (WPRI) – With Providence officials still working behind the scenes on a plan to restructure the city’s tax-stabilization agreement program, Gov. Gina Raimondo has asked state lawmakers to set aside funds to reimburse cities and towns willing to offer those kinds of tax breaks for developers.
Raimondo wants the state to allocate $550,000 toward partially reimbursing communities for new tax-stabilization agreements beginning in the 2016-17 fiscal year, with the goal of creating “more construction projects and more jobs,” according to Marie Aberger, the governor’s spokeswoman.
“The governor has proposed a wide array of tools – from workforce training to small business assistance – to stimulate economic growth and put people back to work,” Aberger told WPRI.com. “One of our goals is to encourage more job-creating real estate construction, and tax stabilization agreements can be a make-or-break part of turning those projects into reality.”
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Aberger said cities and towns that offer tax-stabilization agreements would be eligible to be reimbursed for up to 10% of future property tax revenues that would be reduced by any tax break. She said priority will be “placed on higher-need communities” and municipalities would only be allowed to seek funds for new projects.
The governor’s plan would likely provide a slight boost to Providence, which has long used tax-stabilization agreements to help kick start commercial development projects, particularly in downtown.
In Providence, tax-stabilizations agreements have historically allowed developers to increase property tax payments on a sliding scale over the course of 10, 15 and sometimes 20 years in exchange for creating jobs and filling vacant buildings. Developers say the deals are essential for commercial projects in the city.
A report released last year by the City Council found that 36 tax stabilizations were considered active, generating about $5.2 million in tax payments to the city. The total assessed value of the 36 properties, which include several luxury apartments, was $429.4 million.
But those tax breaks have also come under fire for the city’s lack of oversight over the agreements. The city didn’t implement a system for monitoring the value of the deals until 2011, more than a decade after many of the agreements commenced. Last year, the city’s internal auditor reported that the Providence Redevelopment Agency (PRA) was owed $106,000 dating back to 2006 from payments that two developers were required to make as part of their deals. Those funds have since been collected.
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The council report released last year recommended the city create a uniform process for offering tax breaks, particularly on the land left vacant by the relocation of Route I-195. The two developers who have reached agreements to purchase parcels on the former highway land in downtown have indicated their deals are contingent on receiving a tax-stabilization deal from the city.
Councilman David Salvatore, who represents Elmhurst, said Tuesday he plans to reintroduce an ordinance that would grant 15-year deals to developers on the I-195 land that would include paying a base rate for five years and gradually increase until developers pay the city’s full tax rate by the final year of the agreement.
“Providence cannot afford to wait years for new development on the I-195 land,” Salvatore, a Democrat, told WPRI.com. And our residents cannot afford to wait years for new jobs. We have before us a unique and almost unprecedented opportunity to do something transformative for our city, our economy and our residents.”
Salvatore’s proposal is a separate from a plan being considered by Mayor Jorge Elorza and City Council President Luis Aponte. While details of Elorza and Aponte’s plan haven’t been released, Aponte said it will likely include a “multi-tiered approach” that would include short-term tax breaks as well as longer, more lucrative deals for developers willing to make significant investments in the city.
Elorza has also asked state lawmakers to approve legislation that would fully compensate the city for lost tax revenue as a result of tax-stabilization agreements for projects on I-195 land. The funding would be phased out as developers begin to increase their tax payments to the city.Dan McGowan ( email@example.com ) covers politics, education and the city of Providence for WPRI.com. Follow him on Facebook and Twitter: @danmcgowan