Universities agree to pay Providence more for hosting them. Not enough, critics say.

Providence city officials and higher education leaders presented a united front at City Hall Tuesday as they touted the benefits of agreements that would more than double what the tax-exempt institutions pay instead of property taxes to the city.

Already, though, cracks are showing. 

The newly unveiled payment-in-lieu-of-taxes (PILOT) agreements aren’t a done deal. The Providence City Council still needs to approve the voluntary agreements, which call for $223 million in funding from Brown University, Providence College, Rhode Island School of Design and Johnson & Wales University over the next 20 years. 

The 15-member council will take up the proposals at its meeting Thursday, with plans for additional review including opportunity for community input at a later, unscheduled date. 

Hours after the briefing Tuesday, State Rep. Enrique Sanchez, a Providence Democrat, voiced criticism on X.

Brown university sits on $7 billion dollars worth of land endowment as it is.
They’re still not paying enough in taxes.

An increase of 3 percent from 8% to 11% is not much of an increase on these institutions that don’t even have their commercial property taxed. Tax them more. https://t.co/vXtlpRNWu8

— Enrique Sanchez(RI State Rep) (@EnriqueForRI) September 5, 2023

His brother, Miguel Sanchez, who sits on the Providence City Council, was also not sold.

“I think if we don’t do due diligence in vetting this well, we could tie our hands in the future,” Miguel Sanchez said in an interview on Wednesday.

And while the existing agreements with the educational powers have already expired, Miguel Sanchez saw no reason to rush the proposal through the council.

“The administration had seven months to negotiate,” he said. “It would be very irresponsible for the council to pass this in a few weeks… I think, realistically, we are looking at at least four to six weeks.”

Council President Rachel Miller attended Tuesday’s announcement, praising the agreements as “mutually beneficial” and ensuring “predictable funds” for the city in a subsequent statement. Miller in an emailed statement Wednesday reiterated her “full support” for the agreements as drafted.

“In particular, the universities were responsive when I shared a concern about voluntary payments growing each year to match rising costs and promptly offered a proposal that brought $7 million more to the city and escalated payments from a 2% annual increase during the first five years to 3% annually in years 15-20,” Miller said,

She expected the council to take action in early October after a “thorough” review.

“Council is certainly excited to move forward with the quality of life programs we passed in the budget, in particular the new sidewalk repair plans, trash, and graffiti programs, but this is a 20-year agreement that will outlive all of our tenures in office and requires a thorough vetting process,” Miller said.

Meanwhile, the cash-strapped capital city remains on pause. As part of the fiscal 2024 budget approved in June, the council forced a freeze on city hiring and new programs until it struck new deals with the colleges. 

What the deals say

As tax-exempt nonprofits, colleges, universities and hospitals don’t have to pay the property taxes that account for most of the city’s revenue. Under deals inked in 2003 and 2012, the four universities paid $94 million over the last 20 years, a figure many residents, officials and advocates denounced as too low given the institutions’ sizeable endowments and growing footprint across the city. Nonprofits, including the nonprofit hospital systems, represent about 40% of Providence real estate. 

The new agreements, which include a 20-year deal with all four colleges and a separate, 10-year memorandum solely with Brown University, would funnel $223.5 million to the city in payments-in lieu-of-taxes over the next 20 years, starting in fiscal 2024. That represents a 138% increase over the existing, 20-year payment term, and, according to the city, “one of the most generous agreements in the country.”

“I am incredibly proud of the new agreement we are proposing today, which makes Providence a national example for collaboration and positively impacts our city for generations to come,” Mayor Brett Smiley said in a statement. “Our City needs these funds in order to keep paying our bills on time, and to provide the highest quality city services we all deserve. Our institutions also need Providence to be a city where students, faculty, doctors, researchers and their employees want to be. This proposed agreement sets us all up for long-term success.”

As proposed, more than half of the money would come from Brown, which would pay $174.6 million over the next 20 years. PC would pay $18.4 million, while JWU and RISD would each pay $15.2 million.

The 20-year payments would begin in fiscal 2025, starting with $7 million from Brown, $725,000 from PC and $625,000 apiece from JWU and RISD. Annual contributions would escalate in each year, reaching a combined $11.4 million in fiscal 2043.

In addition to cash to replace what it would otherwise pay in property taxes, the four institutions have also agreed to make “community contributions” valued at $177.4 million, according to the city. These in-kind donations include public services like snow removal and trash pickup, student scholarships and support for Providence Public Schools. 

The city also benefits from $3.4 million in commercial property taxes from the schools, previously subject to voluntary agreements, over the next 20 years, thanks to legislation approved in the 2023 General Assembly requiring commercial uses of institutional spaces be subject to regular city tax rates.

Together, the payments in lieu of taxes, in-kind contributions and new commercial tax payments amount to $442.4 million over the next 20 years, according to the city calculations. 

Quid pro quo

But Providence isn’t the only beneficiary of these agreements. The pair of memorandums include fine-print provisions that would benefit the universities, most notably Brown, which could take ownership of five city blocks spanning parts of the Jewelry District and College Hill, according to the memo. 

Brown University in a statement said its plans for the area, which is surrounded by university-owned buildings, are still being developed, but could include “opportunities for pedestrian-friendly green spaces.” In the short-term, parts of Jewelry District land along Richmond Street would grant construction access for the new, 30,000-square-foot life sciences laboratory building, according to Brown spokesman Brian Clark.

Clark declined to provide further detail on the university’s plans for the space.

The Providence Police Department substation on Cushing Street, within the proposed area of conveyance, would be relocated, according to the agreement. Brown would also get city support for a zoning change for its dormitory on the corner of Brooks and Power streets.

Brown University in a statement described  itself as an “invaluable community partner” to the city through payments and other in-kind support.

“Investing in the success of our home city is embedded in our mission of education, research and service,” Brown University President Christina H. Paxson said in a statement. “The commitments reflected in these agreements will have a meaningful and positive impact in our local community, and will enable Brown and city leaders to address common challenges, foster community and economic development and improve the quality of life for those who call Providence home.”

Critics emerge

But critics, including the Sanchez brothers, insisted the university should be paying more, given its $6.5 billion endowment.

“Of course, this is better than the last agreement,” Miguel Sanchez said. “But in the greater scheme of what they should be paying, it does get a little depressing, not going to lie.”

A city assessment published in early 2022 put the university’s property holding at $1.3 billion in fiscal 2021, which, if taxed normally, would have come with a $49.3 million bill for fiscal 2022. Instead, Brown paid $3.4 million that year. Under the new proposals, the most Brown would pay in any year in direct payment would be around $11 million, with an average of $8.7 million per year.

Councilman John Goncalves, a Brown alumna whose district includes large swaths of the university’s footprint, has also criticized his alma mater in the past for not paying its fair share. Goncalves could not be reached for comment on Wednesday. 

The dollar figures weren’t the only element in dispute.

Sen. Sam Bell, a Providence Democrat and vocal critic of the existing agreements between the city and tax-exempt institutions, said the entire proposal looked “not real.”

“A lot of what they are counting is stuff we are already getting,” he said, naming the commercial tax payments as one example. He added that accounting for inflation, a cursory look suggested that the payments might actually be a reduction.

Bell also expressed concern about the timing of the news – unveiled in the midst of a busy special Primary Day when many news outlets and residents may be paying attention to other things.

“I am extremely suspicious of that, because I think you would only release that kind of agreement [on that day] if you don’t want people to dig through the details so closely,” Bell said.

Josh Estrella, spokesman for Smiley’s office, said in an email Wednesday that the timing coincided with the council’s return from summer recess, and in preparation for its meeting Thursday, when both agreements will be introduced.

While Bell acknowledged he had only given the documents a cursory glance, Miguel Sanchez had delved into the details. Among his hesitations: a stipulation that the city can’t try to negotiate for a better deal if the agreements are approved. The city also wouldn’t be able to make any law changes to its tax structure that affect university payments for the length of the agreements.

The deals are also voluntary, with little enforcement power on the city’s ends if the schools don’t pay. 

The hospitals 

Meanwhile, new deals with the two nonprofit hospital systems, Lifespan Corp. and Care New England Health System, have not been reached. Lifespan made voluntary payments to the city totaling $3.6 million from fiscal 2012 to 2021. No PILOT payments were made in fiscal 2022 or fiscal 2023, according to Estrella. 

Kathleen Hart, a Lifespan spokesperson, declined to say why the hospital system has not made PILOT payments the last two years, referring back to an emailed statement about the “social service supports” it provides to the city and state. 

“We are in discussions with the mayor’s office on ways Lifespan can provide strategic assistance that benefits city of Providence residents and the economy of the state as a whole,” Hart said in the email.

Long plagued by financial woes, the hospital system’s money problems intensified during and in the wake of the pandemic, losing $77 million in fiscal 2022, which ended on Sept. 30, 2022, according to its most recent annual report. 

Negotiations between the city and Lifespan executives over a new agreement are beginning, according Estrella. 

Care New England pays $350,000 to $400,000 a year under its agreement, which expires in fiscal 2025, according to Estrella.

The Providence City Council meets at 6 p.m. Thursday. Both agreements will be introduced and referred to its Committee on Finance for future review and public comment.