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Local lawmakers are calling on Brown to pay more to Providence

Brown brings jobs, students, and investments to Providence, but the tax-exempt institution’s growth comes at a cost to the city.

Brown University alumni of 2020 pass through the Van Wickle Gates during commencement services on the campus of Brown University, Sunday, May 29, 2022, in Providence, R.I.Stew Milne/Associated Press

PROVIDENCE — On the morning of May 1, 2012, in the State Room of the Rhode Island State House, Providence Mayor Angel Taveras and Brown University President Ruth J. Simmons were beaming. Brown had just entered into a memorandum of understanding to pay the city $60 million over 10 years, helping to “position Providence for the future,” Taveras said at the time.

That agreement ended in 2022, and a 2003 agreement between the city and four institutions – Brown, Johnson & Wales University, Providence College, and the Rhode Island School of Design – to make “voluntary contributions” to Providence ends this May. The city has relied on these payments and, as the institutions and the city prepare to negotiate a new agreement, local lawmakers are calling on Brown, in particular, to pay more.

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Nonprofits like universities and hospitals are legally exempt from paying property taxes, from which Providence generates most of its revenue. The four schools make voluntary contributions to the city each year in recognition of this fact.

Brown, by far the richest of the four schools, already makes the highest payments to Providence. The university has seen its own wealth flourish in recent years: its endowment has grown from $4.7 billion in 2020 to $6.5 billion today.

It is “problematic” that the university “isn’t coming forward with the recognition that they need to give more money,” said Rhode Island State Senator Sam Bell.

But Brown has been equivocal about its plans for the next agreement. “We would all benefit from a less transactional model, one where our interests are more aligned,” Brown President Christina Paxson told WPRI 12 in December 2022, when asked if the school anticipates paying more. “Brown is shifting toward a view that we can be more of a catalyst for economic development.”

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Brown and the three other universities also declined a mid-May request from the city for additional, one-time contributions this fiscal year — in Brown’s case, for $2 million, according to emails obtained via a public records request.

The emails show that the city sought the contributions in order to “sustain” past levels of support during the upcoming negotiations, given the schools’ preference to wait for newly inaugurated Mayor Brett Smiley’s administration. Under the existing agreements, Brown is giving $4.5 million to Providence in fiscal year 2023, compared to $6.5 million in fiscal year 2022. Because of the way the previous agreements were structured and the expiration of the 2012 memorandum, the amount paid decreased over time. Future amounts are undecided.

“As you know, the City is in a challenging financial position and sustaining this payment outside of the 2012 agreement would be incredibly helpful,” Diana Perdomo, former chief of policy for Providence, wrote in an email to Albert Dahlberg, Brown’s assistant vice president of government and community relations, on May 18, 2022.

Daniel Egan, president of the Association for Independent Colleges and Universities of Rhode Island, confirmed in a phone interview that the four institutions declined the city’s requests for additional money. Egan argued that the requests, which came six weeks before the beginning of the fiscal year, showed Providence officials “didn’t have an understanding of their budget.”

“That showed a serious lack of understanding and was concerning to our membership,” he said. “I don’t know how anyone would think that’s an appropriate ask of a partner.”

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Steve Rosenthal, a senior fellow in the Urban-Brookings Tax Policy Center, said Brown’s move could reflect the university’s position heading into negotiations. “Is there a chance Brown will contribute less?” he said. “Maybe alternatively, will Brown ask for some new consideration?”

For his part, Mayor Brett Smiley told WPRI 12 in December 2022 that he thinks the institutions’ payments “absolutely” should be increased. “I think every resident and taxpayer in Providence thinks it should be more,” he said. “By the way, I think the institutions think it should be more.”

Brown brings jobs, students, and investments to Providence, but its growth also comes at a cost. When a tax-exempt institution buys what was once a commercial or residential property, the city no longer receives tax revenue from that property. According to a 2022 report by the city’s financial department, “The outsized burden of property taxes has fallen on non-exempt residential property and business owners.”

“There’s no doubt that a university’s success is tied to the success of its community,” said Adam Langley, associate director at the Lincoln Institute of Land Policy. “They’re not like footloose corporations seeking the best tax arrangement.”

Unlike the early 2010s, Providence currently enjoys a budget surplus, due in large part to federal funding from the American Rescue Plan Act. But the current surplus may belie the fiscal reality, according to the Rhode Island Public Expenditure Council.

“I understand that Brown is trying to look out for their economic situation, but our city is simply not generating enough revenue,” said State Representative Enrique Sanchez. “With the high cost of living and increases in utility rates, it’s becoming unbearable, unlivable for a lot of folks in our community.”

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Among Brown’s peer institutions there is some precedent for fiscal generosity. In 2021, for example, the city of New Haven reached an agreement with Yale University under which the school will boost its voluntary contributions to $135 million over the next six years. New Haven’s mayor has called it a “historic commitment.”

A greater commitment from Brown would also help compensate for the other large nonprofits that make voluntary contributions to Providence, namely hospitals and educational institutions, as they face deficits and devaluation. Last year, health system Care New England agreed to extend, but not increase, its annual contributions to the city for the next three years, according to a former spokesperson for Mayor Jorge Elorza.

In calculating its economic impact on Providence, “Brown quantifies its positive impact, but not its negative impact,” City Councilman John Goncalves said. “Communities like Fox Point were vibrant immigrant communities—I know this because I grew up in the neighborhood—30 years ago, but now it’s completely different. Residents that lived here a long time unfortunately got displaced and priced out of the community. Those are things Brown never acknowledges.”

“We can find common ground,” he said. “It just needs to be more of a symbiotic relationship.”

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Sacha Sloan is a student at Brown University and a senior editor at the College Hill Independent.