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Critics Question Tax Breaks Given to Providence Properties

Monday, April 14, 2014

 

The Biltmore Hotel was one of six delinquent TSAs in Providence as of January 31, 2014.

Scrutiny over tax stabilization agreements in the City of Providence is heating up, with one City Council member calling for a freeze on TSAs until a full review is done.

"There's a lot of information we should be paying into attention to....we don't have anyone in the city who's monitoring them. It's a disservice to the taxpayer," said City Council member Sabina Matos. "So I put in a resolution last week asking for the city council to call for a moratorium, to take no new obligations until we fully review the process. I'm not against TSAs, but we don't have a clear process."

At the end of January, City Auditor Matt Clarkin issued a review of tax stabilization agreements at the request of the City Council, reporting that the 36 current TSAs in Providence had a total assessed valuation of $429.4 million at end of 2012, and paid $5.2 million in taxes in 2013.

SLIDES: See Current Providence Tax Stabilizations BELOW

"The residents of Providence need to be having a conversation about this. I don't think people fully understand the level of property tax breaks that have been given out over the years," said John Jacobsonn, local real estate professional, entrepreneur and RISD professor. "Everyone points fingers at nonprofits and their tax exempt status, but these [TSA] deals amount to over a hundred of million of dollars in taxpayer money over the years."

While pending TSA projects are currently awaiting approval, Jan Brodie with the I-195 Commission spoke to the importance of TSAs in attracting development to the city.

"We've had a couple of information sessions, I've taken calls from interested parties. Without exception, I'm asked what kind of incentives are there -- are there tax stabilizations," said Brodie, Executive Director of the Commission.  

Brodie continued, "It's as much important as the taxes be in proportion to income levels -- rent from office, housing -- that proportion part is critical, but so is predictability. And there is a gap, and it needs to come from somewhere. Developers and interested parties to come and understand its a partnership, but everyone got to give something -- the the state, the owners, the developers. There are no freebies."

Closer Examination, Oversight

Providence Internal Auditor Matt Clarkin provided the following graphic as to how TSAs are currently overseen.

In his report, Clarkin noted, "TSAs when used judiciously and wisely are an important tool for the city to grow its economic base," adding that the "city should have a vision on what type of projects it prefers or will consider as well as a frame of how an agreement should be structured. At the same time, the city should remain flexible enough to respond to any opportunity that might arise."

Clarkin however added that of the process at present, "Currently, no one person is responsible for the compliance monitoring of the TSAs," adding that the "Director of Planning should be responsible for the task of confirming compliance."

Of the 36 properties, six were listed as delinquencies as of January 31st including the Bitlmore Hotel -- and for the affordable housing TSAs, under the category of "20% Rentals Below Market Value," Clarkin reported that "compliance is unknown at this time."

Real estate investor and broker Ric Santurri with First Realty offered his perspective on oversight of the tax agreements.

"TSAs do have an important role in helping developers re-use buildings, and helping cities change and grow," said Santurri. "However, in a city like Providence, where so much of the property is tax exempt, there is tremendous pressures on full paying taxpayers that their interests have to be considered and protected when evaluating whether a for profit entity gets a virtual free ride on contributing their fair share of property taxes for a decade or more."

Santurri continued, "There should be a vetting committee for granting TSAs and each TSA should be evaluated periodically for compliance with all clauses in the TSA, with the reports posted for taxpayer review. If I as a full boat paying taxpayer am forced to subsidize these for profit ventures with my tax dollars, I should at least get full transparency. Providence taxpayers pay 3% higher taxes because of the existing TSAs ($10 million in lost tax revenue yearly from existing TSAs on a $330 million tax levy)."

Looking Ahead

Jacobson noted what he saw as problematic as new TSAs are being considered, in light of the financial status of the current agreements.

"One of the most shocking things is that there is a portion of these TSAs that negotiated a 5 year extension on their 10 year TSAs behind the backs of City officials with the Statehouse. These deals will finally expire in 2016. It amounted to a bailout for these properties that cost the taxpayers of Providence over 11 million dollars at a time when the City was in a financial tailspin," said Jacobson.  "It is not clear how these developments are going to absorb the property taxes into their business models in 2016 and some are seeking yet more extensions. We are talking over $200 million in commercial real estate. If these properties start to fold, the financial implications for the City and State are very serious. It calls into question, the effectiveness of how these TSAs were structured."

"To put things into perspective, according to information provided by [Clarkin], Rising Sun Mills pays only $80,535 of its $615,559 tax bill and it expires in 2016. Monahasset Mills is paying only $12,836 of its $396,300 tax bill and its TSA expires in 2016. Peerless Lofts pays $33,407 of its $438,599 and it too expires in 2016. These are just some examples," Jacobson continued. "These types of increases are difficult for investors to adjust to and will effect the people that occupy these buildings with increased fees and rents. The money has to come from somewhere. It would be unwise for the City to give these developments yet another extension as the City needs the money and enough is enough. It is a tough situation which could have been avoided by better oversight and structuring of the TSAs."

Councilwoman Matos noted that her resolution is not intended to shelve TSAs altogether, but to examine the manner in which they are chosen -- and awarded.

"I think that with all the development that's coming, we don't have a clear process, we're picking winners and losers," said Matos. "While we're granting these, our commercial tax rates are the highest -- the regular tax payer is making up the money those TSAs are not paying. We really aren't ready to take on more if we're not able to slow down what we've already granted."

 

Related Slideshow: Current Tax Stabilization Agreements in Providence

Prev Next

130 Westminster St.

The Arcade - 103 Westminster St. Associates, LLC

Approval Date: 12/31/2012

Assessed Valuation: $1,826,200

Actual Tax Prior to TSA: $44,137

2013 True Tax: $67,113

2013 Stabilized Tax Payment: $16,742

Tax Status: Current

End Date of Agreement: 12/31/2022

Prev Next

122 Fountain St.

Sportsman Inn - HM Ventures, LLC

Approval Date: 4/20/2012

Assessed Valuation: $1,607,800

Actual Tax Prior to TSA: $77,010

2013 True Tax: $59,087

2013 Stabilized Tax Payment: $9,601

Tax Status: Past Due

End Date of Agreement: 12/31/2022

Prev Next

244 Oak St. + 33 Magnolia St.

Roger Williams Brewery, LLC

Approval Date: 1/1/2012

Assessed Valuation: $496,800

Actual Tax Prior to TSA: N/A

2013 True Tax: $18,257

2013 Stabilized Tax Payment: $18,140

Tax Status: Past Due

End Date of Agreement: 12/31/2024

Prev Next

1 AT&T Plaza

Hasbro - Empire LaSalle, LLC

Approval Date: 7/1/2012

Assessed Valuation: $25,092,400

Actual Tax Prior to TSA: $547,553

2013 True Tax: $922,146

2013 Stabilized Tax Payment: $47,568

Tax Status: Current

End Date of Agreement: 12/31/2024

Prev Next

100 Weybosset St.

Providence G Building - Providence Capital, LLC

Approval Date: 3/20/2012

Assessed Valuation: $2,575,400

Actual Tax Prior to TSA: $129,610

2013 True Tax: $94,609

2013 Stabilized Tax Payment: $32,557

Tax Status: Current

End Date of Agreement: 7/1/2025

Prev Next

11 Dorrance St.

The Biltmore

Approval Date: 3/15/2012

Assessed Valuation: $20,162,400

Actual Tax Prior to TSA: $694,575

2013 True Tax: $740,698

2013 Stabilized Tax Payment: $124,506

Tax Status: Past Due

End Date of Agreement: 12 Years from Commencement

Prev Next

1 Park Row West

Johnston & Wales University Dorms - Capitol Cove, LLC

Approval Date: 3/11/2005

Amendment Date: 3/8/2010

Assessed Valuation: $2,252,500

Actual Tax Prior to TSA: $518,247

2013 True Tax: $82,779

2013 Stabilized Tax Payment: $968,606

Tax Status: Current

End Date of Agreement: 12/31/2023

Prev Next

125 Washington St.

Mercantile Block Assoc., LLC

Approval Date: 11/16/2009

Assessed Valuation: $1,758,000

Actual Tax Prior to TSA: $59,851

2013 True Tax: $64,607

2013 Stabilized Tax Payment: $34,248

Tax Status: Current

End Date of Agreement: 12/31/2020

Prev Next

1 Sims Ave.

Milhaus LLC - The Steel Yard

Approval Date: 1/8/2007

Assessed Valuation: $323,400

Actual Tax Prior to TSA: N/A

2013 True Tax: $11,885

2013 Stabilized Tax Payment: $19,641

Tax Status: Current

End Date of Agreement: 12/31/2016

Prev Next

60 Valley St.

60 Valley St. LLC (c/o Armory Revival)

Approval Date: 9/26/2006

Assessed Valuation: $2,797,000

Actual Tax Prior to TSA: $14,333

2013 True Tax: $102,790

2013 Stabilized Tax Payment: $11,730

Tax Status: Current

End Date of Agreement: 12/31/2016

Prev Next

160 Niantic Ave.

160 Niantic Ave. Morvco Realty LLC

Approval Date: 5/27/2004

Assessed Valuation: $1,305,300

Actual Tax Prior to TSA: $50,612

2013 True Tax: $47,970

2013 Stabilized Tax Payment: $38,550

Tax Status: Current

End Date of Agreement: 12/31/2015

Prev Next

50 Holden St.

Promenade Building Assoc. - The Foundry

Approval Date: 5/17/2004

Assessed Valuation: $4,238,200

Actual Tax Prior to TSA: $42,802

2013 True Tax: $155,754

2013 Stabilized Tax Payment: $104,814

Tax Status: Current

End Date of Agreement: 12/31/2015

Prev Next

21 Gordon Ave.

South Providence Development Corp. (Keith Fernandez)

Approval Date: 1/16/2004

Assessed Valuation: $1,042,600

Actual Tax Prior to TSA: $5,708

2013 True Tax: $38,316

2013 Stabilized Tax Payment: $10,984

Tax Status: Past Due

End Date of Agreement: 12/31/2016

Prev Next

10 Memorial Blvd.

GTECH Corp. Headquarters

Approval Date: 7/15/2003

Assessed Valuation: $54,767,800

Actual Tax Prior to TSA: $236,619

2013 True Tax: $2,012,717

2013 Stabilized Tax Payment: $1,100,000

Tax Status: Current

End Date of Agreement: 12/31/2026

Prev Next

65 Eddy St.

Peerless Lofts

Approval Date: 11/22/2002

Assessed Valuation: $12,843,700

Actual Tax Prior to TSA: $80,100

2013 True Tax: $472,006

2013 Stabilized Tax Payment: $33,407

Tax Status: Current

End Date of Agreement: 12/31/2016

Prev Next

235 Promenade St.

Promenade Building Assoc. - The Foundry

Approval Date: 11/22/2002

Assessed Valuation: $15,810,300

Actual Tax Prior to TSA: $58,201

2013 True Tax: $581,029

2013 Stabilized Tax Payment: $30,345

Tax Status: Current

End Date of Agreement: 12/31/2015

Prev Next

236 Westminster St.

Alice Building LLC c/o Cornish Associates

Approval Date: 12/28/2001

Assessed Valuation: $3,680,500

Actual Tax Prior to TSA: $25,531

2013 True Tax: $135,258

2013 Stabilized Tax Payment: $13,439

Tax Status: Current

End Date of Agreement: 12/31/2014

Prev Next

100 Providence Place

The 903

Approval Date: 12/21/2001

Assessed Valuation: $68,573,700

Actual Tax Prior to TSA: $200,000

2013 True Tax: $2,520,083

2013 Stabilized Tax Payment: $620,474

Tax Status: Current

End Date of Agreement: 12/31/2015

Prev Next

95 Chestnut St.

Hacht Development, LLC

Approval Date: 4/15/2012

Assessed Valuation: $3,091,300

Actual Tax Prior to TSA: $110,665

2013 True Tax: $113,605

2013 Stabilized Tax Payment: $20,453

Tax Status: Past Due

End Date of Agreement: 12/31/2022

Prev Next

265 Oxford St.

Institute for Non-Violence

Approval Date: 1/1/2012

Assessed Valuation: $1,393,700

Actual Tax Prior to TSA: $32,928

2013 True Tax: $51,218

2013 Stabilized Tax Payment: $1,000

Tax Status: Current

End Date of Agreement: 12/31/2021

Prev Next

145 Globe St.

Victory Square - JAG Investment Realty, LLC

Approval Date: 7/18/2011

Assessed Valuation: $7,234,800

Actual Tax Prior to TSA: $294,485

2013 True Tax: $265,879

2013 Stabilized Tax Payment: $252,750

Tax Status: Current

End Date of Agreement: 12/31/2013

Prev Next

25 Eagle St.

Butcher Block Mill, LLC

Approval Date: 1/1/2011

Assessed Valuation: $590,500

Actual Tax Prior to TSA: $23,469

2013 True Tax: $21,701

2013 Stabilized Tax Payment: $11,431

Tax Status: Current

End Date of Agreement: 12/31/2023

Prev Next

50 Agnes St.

50 Agnes, LLC

Approval Date: 1/1/2012

Assessed Valuation: $521,800

Actual Tax Prior to TSA: $21,422

2013 True Tax: $19,176

2013 Stabilized Tax Payment: $16,807

Tax Status: Current

End Date of Agreement: 12/31/2024

Prev Next

103 Dike St.

Music House, LLC - Fete

Approval Date: 1/1/2012

Assessed Valuation: $589,700

Actual Tax Prior to TSA: $17,555

2013 True Tax: $21,671

2013 Stabilized Tax Payment: $5,417

Tax Status: Current

End Date of Agreement: 12/31/2024

Prev Next

41 Central St.

Yet Another LLC - Art Recreation Center

Approval Date: 4/16/2007

Assessed Valuation: $287,100

Actual Tax Prior to TSA: $12,879

2013 True Tax: $10,551

2013 Stabilized Tax Payment: $5,862

Tax Status: Past Due

End Date of Agreement: 12/31/2024

Prev Next

200 Allens Ave.

200 Allens Ave. LLC (Capstone Properties)

Approval Date: 1/8/2007

Assessed Valuation: $1,834,300

Actual Tax Prior to TSA: $74,754

2013 True Tax: $67,411

2013 Stabilized Tax Payment: $23,537

Tax Status: Past Due

End Date of Agreement: 12/31/2016

Prev Next

35 Hylestead St.

65 Pavillion LLC

Approval Date: 8/1/2005

Assessed Valuation: $675,500

Actual Tax Prior to TSA: $13,345

2013 True Tax: $24,825

2013 Stabilized Tax Payment: $9,752

Tax Status: Current

End Date of Agreement: 12/31/2016

Prev Next

203 Weybosset St.

Zampalis Realty (Zampalis Realty LLC)

Approval Date: 8/1/2005

Assessed Valuation: $547,900

Actual Tax Prior to TSA: $12,565

2013 True Tax: $20,135

2013 Stabilized Tax Payment: $31,300

Tax Status: Current

End Date of Agreement: 12/31/2024

Prev Next

166 Valley St.

Rising Mills Project (166 Valley St. LLC, Struever Bros)

Approval Date: 12/1/2003

Assessed Valuation: $16,749,900

Actual Tax Prior to TSA: $91,763

2013 True Tax: $615,559

2013 Stabilized Tax Payment: $80,535

Tax Status: Current

End Date of Agreement: 12/31/2011

Prev Next

100 Exchange St.

Intercontinental Fund IV F/K/A Cap Hill Prop

Approval Date: 1/16/2004

Assessed Valuation: $107,237,400

Actual Tax Prior to TSA: $1,888,763

2013 True Tax: $2,910,464

2013 Stabilized Tax Payment: $1,086,829

Tax Status: Current

End Date of Agreement: 12/31/2023

Prev Next

5 Avenue of the Arts

Masonic Temple - RP Providence Owner LLC

Approval Date: 7/15/2003

Assessed Valuation: $45,974,100

Actual Tax Prior to TSA: $79,072

2013 True Tax: $1,689,548

2013 Stabilized Tax Payment: $215,843

Tax Status: Current

End Date of Agreement: 12/31/2025

Prev Next

532 Kinsley Ave.

Monahasset Mills LLC

Approval Date: 11/22/2002

Assessed Valuation: $10,857,600

Actual Tax Prior to TSA: N/A

2013 True Tax: N/A

2013 Stabilized Tax Payment: $12,836

Tax Status: Credit

End Date of Agreement: 12/31/2017

Prev Next

210 Westminster St.

Harrisburg Assoc. LLC and Lerner Assoc. LLC

Approval Date: 11/8/2002

Assessed Valuation: $1,188,300

Actual Tax Prior to TSA: $19,404

2013 True Tax: $43,670

2013 Stabilized Tax Payment: $6,349

Tax Status: Current

End Date of Agreement: 12/31/2016

Prev Next

220 Westminster St.

Harrisburg Assoc. LLC and Lerner Assoc. LLC

Approval Date: 11/8/2002

Assessed Valuation: $2,004,800

Actual Tax Prior to TSA: $10,302

2013 True Tax: $73,676

2013 Stabilized Tax Payment: $10,302

Tax Status: Current

End Date of Agreement: 12/31/2016

Prev Next

100 Fountain St.

Steelwood (Palmer Building) (LAF Realty LLC Inc.)

Approval Date: 4/25/2002

Assessed Valuation: $503,300

Actual Tax Prior to TSA: $48,935

2013 True Tax: $18,496

2013 Stabilized Tax Payment: $22,970

Tax Status: Past Due

End Date of Agreement: 12/31/2016

Prev Next

77 Reservoir Ave.

Mashpaug Associates LLC

Approval Date: 11/9/2001

Assessed Valuation: $6,953,300

Actual Tax Prior to TSA: $113,538

2013 True Tax: $255,534

2013 Stabilized Tax Payment: $108,829

Tax Status: Current

End Date of Agreement: 12/31/2015

 
 

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