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Providence and the Non-profits

January 20, 2012

  Once again, Providence politicians are looking to the city’s private colleges for money to help shore up the city’s poor finances. RIPR political analyst Scott MacKay says these non-profit institutions shouldn’t be seen as cash cows for the city.

 There has been more rhetoric than reality in the latest dispute between Brown University and Mayor Angel Taveras and his city council allies. With city government awash in red ink, the pols are hungrily eyeing the tax-exempt Brown property on College Hill as a source of sorely needed money.

You can’t blame the mayor or the city council. Residents are maxed out on real estate and car taxes. Businesses are fleeing. Two iconic downtown buildings – the Jazz Age Superman Building and the Biltmore Hotel – house tenants facing huge financial hurdles.

Now, Taveras and Brown President Ruth Simmons are jousting over how much Brown can, and should, contribute to the city.

A bit of history is required here. The town-gown relationship between working class Providence and the Ivy League College on the Hill has always been fraught. And pols viewing Brown as a Sugar Daddy or Mommy for city coffers isn’t anything new. Rhode Islanders of a certain age will recall the 1990 mayoral campaign, when Andrew Annaldo, the Democratic candidate, ran the famous television ads asserting that a janitor at the college “pays more in taxes than Brown University itself.’’

Brown can surely do more to help the city. But it and the city’s other private colleges cannot be seen as a panacea to the city’s chronic financial difficulties. Perhaps the biggest farce of the latest dust-up is the picket line protest thrown up by firefighters and police officers at a recent speech by the Brown president.

Hello. Do the firefighters and cops – the vast majority of whom no longer live in the city – really think they deserve to lecture Brown on the city’s financial solvency? When are the younger firefighters and police going to wake up and understand that it is the bloated pensions of their retirees and the five and six percent compounded cost-of-living-allowances  that are pushing the city to the brink of bankruptcy?  

Why should the colleges contribute more money so it can go to pay the bloated pensions of retired public safety employees, such as Gil McLaughlin, the former fire chief whose pension is nearly $200,000 a year?

Providence is mired in a 20th Century economy. Most of the 21st Century jobs in the capital are being produced by colleges, hospitals and other non-profits. There was a time when a middle-class Providence job was held by a machinist, factory foreman or jewelry designer. Now that job is as a college-teacher, nurse or physical therapist.

The four private colleges in Providence pay the city $8 million annually in payments in lieu of taxes and in taxes paid on property not used for educational purposes, such as the Brown Bookstore. Roughly half of that sum comes from Brown.

Taveras and Governor Lincoln Chafee are touting the Jewelry District as the next fulcrum of economic growth. This historic area is being rebranded as the Knowledge District and is intended to be a lodestone for health sciences and industries employing highly educated workers.

Well, who do the pols think is moving into this area? So far, the biggest investment in an area that is still a jumble of vacant lots, bars and empty, crumbling red-brick buildings is the $60 million Brown has poured into its new medical school there. If there are private sector companies lining up to move in, we haven’t heard about it.

Yes, other Ivy Schools, notably Yale, contribute more to their home cities than Brown gives to Providence. Brown has the smallest endowment in the Ivy League, dwarfed by the Yale endowment. Yale’s annual budget is more than twice Brown’s.

And Brown admits Rhode Island students at about twice the rate of students from the other 49 states.

Taveras, in cooperation with the City Council, has done much to reign in spending in Providence. Some of this has been done with cooperation from the city council and city unions.

Instead of trying to put the squeeze on the colleges, it’s time for Providence politicians to lobby at the State House for increased state aid in Payments in Lieu of Taxes to communities that host the storied colleges and hospitals that make Providence so much more than a more populous version of New Bedford.

Two years ago, the State House (under former Gov. Donald Carcieri) gave the cities and towns the ability to hike car taxes on vehicles worth less than $6,000 annually, leading many communities to install the disdained `clunker tax.’

Last year, the Assembly hit up state  workers to help the state financially via the pension overhaul measure. This year, it may be time to ask the better off to contribute by way of a slight in crease in the income tax, the most progressive and fairest tax the state levies.

 

 

Scott MacKay’s commentary can be heard every Monday on Morning Edition at 6:40 and 8:40. You can also follow his political reporting and analysis at RIPR’s `On Politics’ blog. Note of disclosure: Scott’s wife works at Rhode Island Hospital.

 

 

 

 

 

 

 

19 Comments leave one →
  1. Kiersten Marek permalink
    January 20, 2012 2:10 pm

    Interesting piece. It’s helpful to have the history woven in, and to give the comparison with Yale.

  2. January 20, 2012 3:27 pm

    No one has asked Brown or the non-profits to pay anything near what they would have to pay if they were taxed at the rate everyone else has to pay. To say that Brown should not be required to pay our fair share because a British King hundreds of years said so is absolutely ridiculous!
    Tax payers have taken a hit. Public employees have taken a hit. It is time for the non-profits to step up and do their share. I am so sick of Baby Boomers like MacKay making excuses for Brown because of bad deals made by the officials in the past that you elected. We finally have a Generation X group of public officials who are trying to clean up the mess of the previous generations. The young fire fighters that you criticize not only will not be getting the bloated pensions that the public sector workers of your generation are receiving, they are the ones who you will be asking to save your life when your house is on fire.
    I only hope that all of the people the post baby boom generations will be able to put out the fire and save our city, state, and country for future generations. Everyone over fifty, your generations made this mess. Now help us clean up your mess, or get the hell out of the way.

    • January 20, 2012 4:05 pm

      Mr. Dooley,

      You make some good points. But I am not holding my breath waiting for the public safety unions in Providence to denounce the bloated pensions, soaring disability retirement rates and unsustainable COLAs that so jeopardize city finances. The unions would have more credibility if they would get on board and lobby to clean up past abuses.

      • Keith Fernandes permalink
        January 20, 2012 11:30 pm

        Mr MacKay
        You think asking Brown to pony up $2 million more than they volunteer to give is putting the “squeeze” on them? With an endowment of $2.5 Billion? With an operating budget more than that of the city of Providence? Really? While I agree with you that the city should not look to the non profits as a panacea for it’s troubles, EVERY stakeholder has suffered. Do you know how much NOO properties in Providence have had their taxes raised in the last 2 years? Brown is getting a sweetheart of a deal. Do people really care how many jobs Brown brings to Providence if they can’t afford to keep their house because their taxes have been raised to unbelievable levels? Why do people on the southside care?

        I don’t dislike Brown, It’s great to have an ivy league institution here, and unions do have to do more, but these problems have been created over time and everyone needs to step up. This is a PR disaster for brown waiting to happen over a miniscule amount for them…

      • January 21, 2012 12:08 am

        The cops haven’t had a raise in the last 5 years. Has anyone at Brown not had a raise in the last five years?

    • Mister Guy permalink
      January 20, 2012 8:37 pm

      “The young fire fighters that you criticize not only will not be getting the bloated pensions that the public sector workers of your generation are receiving, they are the ones who you will be asking to save your life when your house is on fire.”

      No, they are not at all “getting the bloated pensions that the public sector workers of your generation are receiving”. They are no more important than the school teachers that have recently had their *current* & future retirement benefits slashed. The pension deal that many so-called “public safety employees” are getting from both the state & many RI localities is unsustainable & unnecessary.

  3. January 20, 2012 4:36 pm

    These universities provide a tremendous amount of indirect tax money to the city. I grew up on the East Side which is now dominated by private homes converted into student apartments. These landlords rent to Brown students and then pay outrageous East Side real estate taxes to the city. I still frequent the neighborhoods of my youth and seldom see a for rent sign, unlike here in Pawtucket where it seems those signs are more common than a mowed lawn. Also, the East Side business tax rate in 2011 was $18 per square foot! No business could ever afford to pay that rate without affluent students shopping in their stores.

    • Mister Guy permalink
      January 20, 2012 8:41 pm

      Are there many, many benefits to having an Ivy League school in one’s town? Sure, but there’s no doubt that Brown has drastically widened their footprint on both the East Side & the City of Providence as a whole. In doing so, they have, like it or not, displaced many pieces of real estate off of the property tax rolls on the City of Providence.

    • Keith Fernandes permalink
      January 20, 2012 11:33 pm

      As a landlord on the east side I can tell you with much certainty that the rents on the east side and the taxes on the east side don’t correlate. My sized similarly property in pawtucket brings in more cash flow. So much for your theory.

    • January 21, 2012 12:26 am

      Brown only allows Seniors and Grad students to live off campus. They also own a ton of housing and other commercial property that they don’t pay taxes on.The tax rate in Providence is over 50% higher than Pawtucket for those small investors of 1-4 family homes. If Brown paid taxes on all of it’s commercial property (non-class room and faculty offices), Providence would not have to have a tax rate that is 50% higher than Pawtucket for small investors and commercial investors. That would attract more investment and jobs to Providence.

      • Mister Guy permalink
        January 21, 2012 10:19 pm

        Well, it’s not like businesses or jobs are fleeing to Pawtucket instead of Providence because of tax rates. The Bucket has basically been a dead city for many years now.

  4. Mister Guy permalink
    January 20, 2012 8:30 pm

    “When are the younger firefighters and police going to wake up and understand that it is the bloated pensions of their retirees and the five and six percent compounded cost-of-living-allowances that are pushing the city to the brink of bankruptcy?”

    Well, that’s exactly what I’ve pointed out before. What those union officials are engaged in is an attempt to shift part of the blame for the City of Providence’s financial situation from their pension system (which is bloated for sure) to Brown University, which is not the best strategy in the world by any measurement.

    Brown could well afford to pay more in PILOTs, and you seem to agree with that as well, since you say above:
    “Brown can surely do more to help the city.”

    No one is really looking to make Brown a “panacea to the city’s chronic financial difficulties” though, and I suspect that even you know that Mr. MacKay.

    “Taveras and Governor Lincoln Chafee are touting the Jewelry District as the next fulcrum of economic growth. This historic area is being rebranded as the Knowledge District and is intended to be a lodestone for health sciences and industries employing highly educated workers.”

    Brown’s already down in that section of the city though, and who knows if they are paying property taxes on all their real estate in that section.

    “Brown has the smallest endowment in the Ivy League, dwarfed by the Yale endowment”

    …and it’s growing.

    “Instead of trying to put the squeeze on the colleges, it’s time for Providence politicians to lobby at the State House for increased state aid in Payments in Lieu of Taxes to communities that host the storied colleges and hospitals that make Providence so much more than a more populous version of New Bedford”

    …but realistically, where will that money come from??

    “This year, it may be time to ask the better off to contribute by way of a slight in crease in the income tax, the most progressive and fairest tax the state levies.”

    Sure, and I’m all for that, but how politically viable an option is that at this point & time? In the meantime, Brown needs to pay more in PILOTs to the City of Providence, since they too can well afford it.

  5. Kiersten Marek permalink
    January 23, 2012 12:58 pm

    Reblogged this on Kmareka.com and commented:
    Scott MacKay considers the question of whether Brown University should pay more to the city of Providence.

  6. Ace Frehley permalink
    January 23, 2012 2:57 pm

    Brown pays 100% property taxes on every building that it has acquired since 2003, despite the two largest (222 Richmond/Med School and 121 South Main) being predominantly used for educational purposes. In addition, in 2003, Brown signed the MOU to make voluntary payments to the City. So, do the math, since 2003, Brown has drastically increased its payments to the City / without taking any property off the tax roles, yet somehow over the past 9 years the City has fallen further into insolvency.

    • Mister Guy permalink
      January 23, 2012 11:40 pm

      Brown has been taking property off of the Providence property tax rolls for a lot longer than 9 years Mr. Kiss Army.

  7. Oh, the humanity. permalink
    May 1, 2012 7:14 pm

    Haha, this is cracking me up because I know some of Dooley’s tenants. He arbitrarily increased all of their rents and yet he’s complaining here about taxes and how he’s just scraping by when he’s ripping off his own tenants at the same time. Pot, kettle, black.

    • May 1, 2012 8:15 pm

      Thanks all!

      • Keith Fernandes permalink
        May 1, 2012 11:53 pm

        Oh, the humanity, while you are obviously scared to post your real name, Dooley has raised rents because his assessments are through the roof, just like mine are. And I hate doing that to my tenants. It’s not going into the landlords pockets. Contrary to most people’s ideas of RE renting, a landlord seldom makes a profit on operating income. And Scott, thank you for the opportunity to discuss this on here.

    • John Dooley permalink
      May 2, 2012 1:04 am

      I wish I could raise rents to cover the increase in taxes. “Oh, the humanity” , I hope that you are a friend just busting my balls, and not just some random lying coward who hides behind a stupid alias.

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