Providence forgoes millions in tax stabilization deals
Providence has the highest commercial tax rate in the country, but select developers are paying only a fraction of their tax bills.
The city has 36 projects under special tax agreements. The special deals have helped a few, but the city is hoping that it will start getting the full tax bills soon.
The rehabilitation of the Peerless Building on Westminster Street undeniably brought life to downtown Providence. About 100 apartments in the building bring people to the street.
Developer Buff Chace said he couldn't have done it without a tax stabilization agreement.
The new G Building has a similar agreement, and the celebrated return of the Arcade -- with apartments and stores -- also, according to owner Evan Granoff, couldn't have happened without the tax breaks.
But eventually, these deals have to come to an end.
"It's not necessarily the responsibility of the taxpayers to underwrite private business investment risk," said Scott Gibbs of the Economic Development Foundation of Rhode Island.
The Peerless Building benefited from a 10-year deal, but when it ended it got five more years of paying only $10,300 in tax. Sources tell NBC 10 it is seeking another five years after the deal runs out in 2016.
It keeps that building viable, but homeowners elsewhere in the city are picking up the slack.
"Every time you give a tax stabilization agreement, somebody else is paying to provide the service," said Gary Sasse of the Hassenfeld Institute for Public Leadership at Bryant University.
The reality of a tax stabilization means that a building like the Arcade -- with its lofts and shops -- is paying about the same in taxes as a little bar around the corner called the Red Fez.
"You want to make sure in every case that you are getting an adequate return for the investment you're making in the tax stabilization agreement," said City Councilman Sam Zurier.
Many of the tax agreements with high-profile projects expire in 2016. The city will need to decide then whether to continue to subsidize the developments.
"But sometimes it may require simply saying, maybe this product needs to be repositioned in the marketplace because it's just not competitive anymore," Gibbs said.
"Tax stabilizations are not forever, and I think that has to be understood going in," Sasse said.
Two years from now, either the market will support these projects on their own or the new mayor and the City Council will have to decide, once again, to forgo millions of dollars in taxes.