PROVIDENCE — Lawmakers are renewing an effort to start making private universities and colleges pay property taxes.
Representative David Morales, a Providence Democrat, introduced two new pieces of legislation Thursday that would “hold [these institutions] more financially accountable to the communities that host them.”
The first bill would place new limitations on the tax-exempt real and personal property a private nonprofit college or university may currently hold, including any and all real property owned or leased, buildings, structures, and vacant lots. In the first year that the property is taxed, the value of the property would be determined by an assessor.
This legislation only impacts “nonprofit institutions of higher education,” but does not change the tax-exempt status of other nonprofits, like K-12 schools, libraries, religious institutions, hospitals and community centers, and other organizations. The bill has seven co-sponsors. Senator Tiara Mack, a Providence Democrat, introduced that bill in the Senate.
The second bill, also introduced by Morales, would impose a tax of up to 2 percent on the endowment of a private institution of higher education located in that municipality. All revenues from this tax would be restricted to only be used for the public school district of that municipality. The bill had nine co-sponsors, including Minority Leader Blake Filippi, a Block Island Republican.
In a press conference on Thursday at the Rhode Island State House, Morales spoke surrounded by grassroots organizers and local college students holding signs that said “You pay tax. Brown should too.” And “Be slaveholders to tax-free landlords.”
A lack of property taxes among large nonprofits, like universities, “has caused the displacement of working people,” said Morales. “We’re at a crossroads. Legislative accountability is necessary, and long overdue.”
These funds, Morales said, “are owed to our community.”
Municipalities do receive funds from Rhode Island’s Payment In Lieu of Taxes, or PILOT, program. The PILOT program reimburses municipalities 27 percent of the appraised value on properties owned by nonprofit, tax-exempt institutions. In 2021, the PILOT program brought in more than $32 million into Providence.
Several spokespeople from the eight nonprofit, private universities in the state referred a Globe reporter to Dan Egan, president of the Association of Independent Colleges & Universities of Rhode Island, to speak for them.
Egan said the association and colleges were “opposed to any threat to our tax-exempt status.”
“This would really make us an outlier. It’s a tax on education,” Egan said in a phone interview Thursday. “Our institutions compete regionally and nationally. Adding a cost that our competitors don’t have — like right over the border in Massachusetts and in New York — will have its disadvantages.”
Egan questioned why the legislation did not also include other major nonprofits, like hospitals, and said that universities were being singled out. When asked why hospitals weren’t included, Morales told the Globe that health care institutions were still struggling from the financial pressures of the COVID-19 pandemic.
On the endowment tax, Egan said many of those funds are “tied to donor intent” and that it’s the obligation of the university to spend it as the donor pleases.
“There could be a long-term impact to that,” said Egan, and mentioned the $20 million donation that Roger Williams University received for a real estate program on Wednesday. “How could this impact fundraising? Will donors who want to give to Rhode Island’s universities then give right over the border, to say UMass Dartmouth?”
Endowments are “not just a pile of money,” he said.
Brian Clark, a spokesman for Brown, said the university opposed both bills.
“Each year we spend funds from our endowment to support this critical work that benefits Providence and Rhode Island,” he said in an email to the Globe late Thursday. “Endowments are not kept in reserve to be drawn on only occasionally or on a rainy day. In fact, the collection of thousands of restricted, donor-designated funds that makes up an endowment supports a significant and growing portion of our operations, providing a bulk of annual revenues, and enabling us to make a positive impact.”
Clark said Brown pays taxes on commercial properties, makes voluntary payments to Providence, and is a top employer — including 4,700 local residents. He said the university injects more than $200 million in research spending into the local economy annually and has invested more than $225 million to the Jewelry District.
“Legislative efforts such as these tend to overlook that Brown provides extensive contributions to the community we call home in significant areas that meet public need and offset the need for greater public resources,” said Clark. “...The university makes a significant impact every day.”
Mack said these are not just “feel good pieces of legislation,” but are backed by data. She said while these institutions are cherished parts of Providence, much of the city is tax-exempt.
In fact, a newly published report by the city’s chief financial officer Lawrence J. Mancini and finance director Sara Silveria sheds light on the controversial PILOT agreements that rule tax structures for nearly 39 percent of the city’s land parcels (or 44 percent of all properties), accounting for about $8 billion in assessed value. And property taxes are the largest revenue generator for the city of Providence in particular, and where this new round of legislation would impact the most.
Like other nonprofit colleges and universities across the state, Brown University, which has the highest endowment at $6.9 billion, is tax-exempt and is not required to pay property taxes. According to a Globe investigation last year, if Brown University was not tax exempt, it would owe the city of Providence about $49 million annually in property taxes. Johnson & Wales University would owe nearly $13 million, Rhode Island School of Design would owe about $11.6 million, and Providence College another $16.2 million. (Brown does pay some taxes, but only pays for parts of properties that are not “mission-driven” — that is, those that are for commercial use, not for education. That amounts to approximately $1.7 million annually. This legislation would require them to pay taxes for properties that are not “mission-driven.”)
Universities in Providence also pay into Memorandums of Agreement. For instance, Brown pays about $4.4 million each year through a 20-year memorandum of understanding that was signed in 2003 and a second agreement signed in 2012. They also pay about $2.3 million in fees each year for their space at 121 South Main St., which is occupied by Hemenway’s restaurant.
“We are proud of the MOU that we have in Providence, and in other communities,” said Egan.
But all together, the total assessed value of the land owned by the city’s largest tax-exempt institutions (specifically large hospital groups and higher education institutions) is over $3.56 billion. So if those parcels were taxed in full, like they are as other businesses, the city would see more than $130 million in revenue flowing in annually.
Instead, in 2021, the state doled out a little over $34 million to Providence through the PILOT program. And despite new development and property improvements among properties that can be taxed, the city isn’t seeing an expansion on its tax base — less than 1 percent each year.
“While universities contribute to our municipalities in innumerable ways and we appreciate their local impact, their simultaneous harm is seemingly never quantified: their challenging impacts on quality of life, their strains and demands on limited city services, demolition of historic housing stock, their impact on rising rents and property taxes, and their historical displacement of people who once lived in vibrant long-standing communities, such as Fox Point,” said Providence Councilman John Goncalves, who said he supports both bills.
Goncalves said he is a “proud two-time Brown alum,” but that he also “loves the city of Providence,” which he said has crumbling infrastructure, pension fund, and city services that needs financial stability.
Egan, however, said he hopes these bills will open further dialogue between the universities and their host cities, which he said are “strong partnerships.”
“This shouldn’t just be about what the universities want, or what the cities want,” said Egan.
Andrew Grande, a spokesman for Providence Mayor Jorge O. Elorza, told the Globe in an email the city has not begun formal negotiations with Brown or other institutions of higher education regarding a new agreement.
“While the City was not involved in the introduction of these two bills, we are interested in and supportive of bills that would reduce the burden on municipalities to negotiate PILOT agreements on an individual basis and provide a standard that could be applied across the largest land-owning non-profit institutions,” said Grande.