PROVIDENCE — Four colleges and universities in Providence have agreed to pay the cash-strapped city $223 million over 20 years, as part of a new voluntary agreement between the private institutions that are exempt from paying taxes.
The private institutions — Brown University, Providence College, Rhode Island School of Design and Johnson & Wales University — negotiated collectively with the city over the past several months on a new deal to replace the previous agreement, which expired this year.
The payments are more than double what the four entities agreed to pay over the previous 20 years.
“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 news release. “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.”
Providence routinely seeks voluntary payments from large, private nonprofits such as colleges and hospitals, which occupy a substantial amount of land in the city and are exempt from paying property taxes. The state also separately pays Providence (and other communities) an annual payment-in-lieu-of-taxes of more than $35 million to compensate the city for hosting the nonprofits.
At a news conference inside City Hall Tuesday, Smiley called the deal a “win-win” for the city and Brown University. While Providence is getting more money out of the Ivy League school, the city is helping Brown with its plans to grow its life sciences facilities.
The payment-in-lieu-of-taxes, or PILOT, agreements require City Council approval. They will be introduced at Thursday’s council meeting and referred to the Finance Committee for vetting, according to Council President Rachel Miller, who expressed support for the deal.
Here’s what to know about the new agreements.
The colleges will pay up to $223 million, and Brown is paying the most
The new deal comprises two different agreements. The first, struck with the four colleges, calls for $177 million in payments over 20 years.
The first payment would be $7 million this year from the four colleges. Brown would pay most of that at just over $5 million, while Providence College would pay $725,000, and RISD and Johnson & Wales would pay $600,000 apiece. Those same four institutions paid a combined $2.3 million last year, according to the city’s chief operating officer, Courtney Hawkins.
Miller noted that she pushed to escalate the annual increases in the payments over the 20-year term. The payments will initially increase by 2 percent annually, and will eventually increase by 3 percent toward the end of the deal.
The Smiley administration also struck a separate deal with Brown for an additional $46 million over 10 years, though that deal includes various provisions that would give Brown a “credit” on their payment. For example, development projects by Brown that generate tax revenue for the city, or a property owned by Brown returning to the commercial tax rolls that previously had been tax exempt.
In total, the payments add up to $223 million over two decades, compared to $94 million under the previous agreements.
Separately, the colleges agreed to make “community contributions” valued at $223 million total. Those contributions could include services like snow and trash removal, support for public schools, scholarships and more. The contributions will be publicly detailed online, Hawkins said.
The city could give Brown five city blocks
As part of Brown’s supplemental agreement with the city, Smiley has agreed to support a plan to give five city blocks in the Jewelry District and on College Hill to Brown. All of the blocks are fully occupied by Brown University buildings, Hawkins said.
They include two blocks of Richmond Street, two blocks of Elm Street, and one block of Cushing Street.
The conveyance of the city streets would need to be approved by both the City Planning Commission and the City Council.
The city also agreed to move the Providence Police substation on Cushing Street, paid for by the city. A new location on the East Side has not yet been identified.
“Specific plans for the blocks, including opportunities for pedestrian-friendly green spaces, will be developed over time in consultation with neighborhood and community partners,” said Brian Clark, a spokesperson for Brown University. “In the shorter term, some of the Jewelry District blocks will provide access for construction on Brown’s planned integrated life sciences building.”
At a news conference, Brown president Christina Paxson would not immediately commit to keeping the five blocks open to public access.
“We are committed to working with the city and the community as we develop plans to use that land,” Paxson said. “We don’t have any plans at all.”
The Smiley administration will also support a zoning change that Brown is requesting near its new dorm on the corner of Brook and Power streets.
Properties could come off the tax rolls faster
Under the old agreement, when Brown University or another institution purchased a property and turned it into a university building, the property would slowly transition off the tax rolls over a series of years.
Those existing 49 transitions will continue under the new deal, according to Hawkins, but new properties purchased by the universities for mission-specific purposes will taken off the tax rolls immediately, without a transition.
A new law passed by the General Assembly this year will allow the city to tax portions of buildings owned by the nonprofits that are being rented out for commercial use. Smiley administration officials have not yet calculated how much revenue that will bring in, and a spokesperson said they don’t expect to send out tax bills for those properties until 2025.
The payments are voluntary
While the four higher-ed institutions are agreeing to make these payments, they remain voluntary under the agreements, which are not the same as contracts.
The payments allow the city to budget for the money, but the memorandum of agreement says each institution will be able to decide whether to make the payments. They agreed to give 14 months’ notice if they don’t intend to pay the money.
In exchange for the voluntary payments, the city agrees not to challenge the colleges’ tax-exempt status.
What about the hospitals?
Smiley has not yet struck new agreements with the city’s large nonprofit hospital groups, Lifespan and Care New England. A previous agreement with the latter has not yet expired.
Lifespan has notified the city it does not plan to pay anything to the city this fiscal year, Hawkins said. Negotiations have not yet begun for a new agreement.
“Lifespan is now the only large nonprofit institution in the city of Providence with no PILOT agreement,” Smiley said. “That’s a problem.”
He said the hospital group’s CEO said they would start to name a negotiating team after Labor Day.
“Those negotiations need to start, and they need to start in earnest,” Smiley said. “We need to have an agreement that is commensurate with the success of the agreement that we’re announcing today.”
In a statement, Lifespan spokesperson Kathleen Hart said the hospital group “remains committed to continuing to support the city of Providence and its residents.”
“Our first and foremost responsibility is to our patients,” Hart said. “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.”
Lifespan officials have previously pointed to the services they provide to the community, including helping patients regardless of their ability to pay.
Care New England paid $350,000 this year, according to city officials. That hospital group’s deal has one more year left.
City hiring freeze will end upon approval
In the city budget approved back in June, Smiley had put a $7.1 million placeholder for PILOT payments, even though new agreements hadn’t yet been reached. City Council leaders amended the plan, putting a freeze on new city hiring and initiatives until the agreements with the colleges were reached.
If the agreement with the four colleges is approved, the new city spending will unfreeze. It includes hiring new staff to tackle graffiti removal, sidewalk repairs and more.
“We’ve got a backlog of city service issues that we’re excited to get to work on,” Smiley said.
This story has been updated.