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Providence City Council can intervene in controversial tax breaks for wealthy developer, judge rules

The city council will now attempt to overturn the 30-year tax deal granted by previous city leaders to Arnold “Buff” Chace and his 10 downtown properties

Rhode Island Superior Court Associate Justice Joseph McBurney read a lengthy oral decision from the bench Monday.Kyle Kane/Pool

PROVIDENCE — A judge on Monday granted the Providence City Council the right to intercede in a three-year-old court case over a wealthy developer’s taxes, paving the way for the council to try to overturn the controversial tax deal granted by former city leaders.

City councilors had called the tax breaks for 10 downtown apartment buildings — including the Alice Building and Peerless Lofts — owned by Arnold “Buff” Chace and his firm, Cornish Associates, a “sweetheart” deal granted by the administration of former Mayor Jorge Elorza.

The lawyer for the council, Max Wistow, even went as far as to call the deal a “corrupt transaction” during arguments in the courtroom earlier this month.

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The council’s ultimate goal is to overturn the tax breaks, which it argues would cost the city up to $42 million over the 30-year length of the agreement. Monday’s decision concerned only whether the council can become a formal intervenor in the lawsuit Chace filed against the city in 2020. (The tax deal was part of a consent agreement in that lawsuit in 2021.)

In a lengthy oral decision read from the bench, Superior Court Associate Justice Joseph McBurney agreed with the council that it did not have adequate information to intervene in the case sooner than this year. He also said the City Council should have had the opportunity to approve or reject the tax agreement, a key point of disagreement between the council and both the current and previous mayoral administrations.

“It’s what we’ve been saying all along,” Wistow told reporters outside court following the ruling. “I’m just absolutely gratified by the effort that he put into the decision.”

Wistow said he would file a motion to vacate the agreement within days. A protracted court battle is expected to follow.

Mayor Brett Smiley said the city would appeal the ruling.

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“While we want to thank Judge McBurney for his careful consideration of this matter, we are concerned with the incredible impact this decision will have on Providence moving forward,” Smiley said. “My administration honors agreements that are settled. This decision allows Wistow to attempt undoing an agreement with Cornish Associates and signals that settlements with the city may have no finality to them.”

“After today, we plan on filing an appeal and are still committed to finding a way forward that doesn’t intervene on a settled matter,” Smiley continued.

Nick Hemond, the attorney for Chace’s firm, said the company would continue to fight the motion to vacate the deal.

Under the agreement, Chace’s tax bill on the 10 buildings was slashed under a state statute known as “8-Law” meant for affordable housing, even though he was required to restrict only 25 percent of the apartments to moderate-income renters.

The law allows property owners to pay 8 percent of their gross rental income as their tax bill, rather than the commercial tax rate, as long as rents or tenants’ incomes are restricted. The 2021 agreement came after Cornish filed suit against the city in 2020, seeking the 8-Law treatment.

Councilors were outraged that the lower taxes apply to the entirety of the buildings, including commercial spaces and market-rate apartments, and have said the deal could set a precedent for future developers to pay lower taxes while the city struggles financially. Council President Rachel Miller has also said the deal should have come before the council for consideration.

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City Solicitor Jeff Dana’s office and Chace’s attorney, though on opposite sides of the underlying lawsuit, were united in their opposition to the council’s efforts, arguing the motion was not timely, the council didn’t have standing to intervene, and overturning the deal would harm future efforts to develop affordable housing.

“They had their bite at the apple,” Hemond said during oral arguments. He also claimed the two former council presidents, John Igliozzi and Sabina Matos, were well aware of the discussions at the time the agreement was being negotiated. (Matos, now the lieutenant governor, has said she doesn’t recall being provided information about the consent agreement, and Igliozzi declined to comment.)

All of those arguments were unsuccessful. McBurney said that while council staffers were aware of the existence of the deal after it was finalized, their efforts to get more information about the specifics were stymied by city officials, and no evidence was presented in court that individual city councilors were aware of the deal prior to May 2022.

Even after the council formally learned about the agreement during a meeting of the Finance Committee, McBurney said, the delay in filing a legal challenge was “not due to its desire to stay in the background, but rather was because [the council] lacked information” and thought the consent order would be brought to the council for approval or renegotiated by Smiley, who took office in January 2023.

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McBurney also ruled the settlement required the approval of the council’s claims committee, which never happened. Dana’s office had argued it did not need that approval because it was a tax appeal.

“The evidence before the court at this time shows this was not an appeal for relief from tax assessment but rather a settlement requiring approval of the Committee on Claims and Pending Suits,” McBurney said.

Reacting to the ruling, Hemond said court cases should not be able to be reopened years later just because “the political winds change.”

“Why would anyone develop anything in Providence if this is how we’re going forward?” he said.


Steph Machado can be reached at steph.machado@globe.com. Follow her @StephMachado.