PROVIDENCE – Ever since Lifespan officials announced earlier this month that Rhode Island’s largest hospital group had lost $55 million during the 2018-19 fiscal year, the threat of looming cost-cutting measures have left employees fearing that layoffs could soon follow.
In Providence City Hall, the shaky finances of the nonprofit that owns Rhode Island Hospital, The Miriam Hospital, Newport Hospital, and Bradley Hospital have left city leaders with a fear of their own:
Can Lifespan afford to make a $400,000 voluntary payment in lieu of taxes (PILOT) that the city included in its budget for the fiscal year that started July 1 or will officials be left scrambling to plug a hole in the budget?
“If I don’t pay my taxes, they’re going to put my house up for sale at a tax sale,” said Councilman James Taylor, a member of the Council Finance Committee who has been critical of the city’s nonprofit institutions for not offering more financial support to the city. “I think we should go back to the table and make sure those payments aren’t voluntary and make sure we know what their fair share is.”
Jane Bruno, a spokesperson for Lifespan, said the organization won’t decide on whether it will make the payment to the city until next spring, which would give the city only a few months to find savings or secure new revenue before its fiscal year ends June 30.
“We make the determination of our ability to make a PILOT payment in the third quarter of our fiscal year (April—June) based on past and current year’s performance,” Bruno wrote in an e-mail. “It is still too early in our current year to make a determination.”
The $400,000 payment is a tiny sum when compared to the city’s $770 million budget, but its symbolic meaning carries more value.
City leaders have for years tussled with hospital and college presidents over the amount of land their institutions own in Providence, leading to nearly-annual complaints from mayoral administrations and councilors that the nonprofits don’t contribute enough money to the city.
More than 40 percent of the land in the city is owned by nonprofits like Lifespan and Brown University, according to tax records. While it’s undeniable that the institutions provide economic value to the city, critics say the organizations should do more to cover the cost of police and fire services, or infrastructure improvements
Instead of paying property taxes, the nonprofit institutions enter into PILOT agreements with the city. In the current fiscal year, Providence expects to receive $7.6 million in the current fiscal year from various institutions.
The city also projects it will receive $3.6 million from Brown, $1 million from Johnson & Wales University and $500,000 from Providence College. Care New England, the state’s second-largest hospital group, is scheduled to pay $340,000.
Emily Crowell, a spokesperson for Mayor Jorge Elorza, said the administration is still expecting Lifespan to send the city $400,000 before the end of the fiscal year.
Lifespan officials said “a dramatic and unexpected reduction in Medicare rates,” the lasting impact of the closing of Memorial Hospital in Pawtucket, and the continued loss of specialized medical care to Boston were responsible for the organization $55 million last fiscal year.
The institution’s losses were partially offset by $20 million from investment income, but it is still offering an early retirement package to employees as part of an effort to end the 2020 fiscal year in the black. With more than 15,000 people on its staff, Lifespan is Rhode Island’s largest employer.
While Bruno said Lifespan won’t decide on whether it can make the PILOT payment until next year, she also acknowledged the organization isn’t currently in a position to negotiate a multiyear payment agreement – something it has done with Providence in the past –“due to state and federal budget issues that are outside of our control.”
Scenarios like the one Lifespan faces are why some state lawmakers have said nonprofits need to offer more predictable payments to cities and towns. State Representative Daniel McKiernan, a Providence Democrat, has sponsored legislation for several years that would require nonprofits to pay taxes on what he calls “non-mission-essential properties,” like parking lots.
“While I recognize that Lifespan has been a good corporate citizen there’s a problem larger than Lifespan,” he said. “Forty-two percent of the land owned in Providence doesn’t pay taxes. It puts an unfair burden on the rest of the city.”