The History of Plans to Tax the Non-profits

It’s not like the discussion over taxing non-profits is new to the city. A 1982 study of state and local government finances by a special Governor’s Advisory Committee chaired by then Brown President Howard Swearer recommended that public safety costs be paid by the institutions and that only “houses of worship” be exempted. The recommendations went nowhere, and in fact were roundly criticized and opposed by all of the organizations represented on the advisory committee.

Ten years later, Providence looked to legislate public safety fees on the institutions. Brown fought back, claiming among other things that they spent $2.25 million on their police force.

In 1994, in response to another attempt by Mayor Vincent A. Cianci, Jr. to tax institutions to make up lost property taxes, a loose coalition of the colleges and hospitals was formed to explore ways of helping the city without making cash payments. Brown, RISD, Providence College, Johnson and Wales, Rhode Island Hospital, Miriam Hospital, Women & Infants, Roger Williams Hospital, Butler Hospital and St. Joseph Hospital participated. A reading of their notes at the time points to the obvious, with each group detailing all of the free services they provide, while carefully avoiding the tax issue.

In 1995, the City created Institutional Zones for all of the colleges to better define their boundaries, but Brown was steadfast, refusing to give up any ground on the tax issue.

Under a 2003 memorandum of understanding, Mayor David Cicilline was the first to work out an agreement with Brown University, Providence College, Johnson and Wales University and the Rhode Island School of Design. The good news is for the first time, the universities would pump $48 million of voluntary payments into the City’s coffers over 20 years. What was not good was that the City agreed to not seek additional revenues during this time. In addition, any new land or buildings that the institutions would acquire would ease off the tax rolls over 15 years. In this case, RISD purchased the Hospital Trust Building for use as a dorm. And while they now pay taxes, in a few more years it too will come off the tax rolls. “It’s another example of how the universities think long term, while cities and politicians think short term. The 2003 deal was front-loaded to help deal with a cash crunch and not necessarily in the long-term interests of the city,” said one observer involved in the negotiations.

In addition, as noted significantly in the City’s Sustainability Report, “in response to agreeing to a $2 million/year PILOT, a group of Providence colleges and universities (including Brown and Lifespan) ceased their participation in HELP, an urban health and education program,” which they had been funding at over $1 million/year. Another key word in the 2003 agreement is the word “voluntary.” If things go south, there is technically an escape clause that doesn’t bind the institutions forever.