OP-ED: Time to Turn Up the PILOT Light

Memo to: Mayor Smiley

Subject: PILOT (Payments in Lieu of Taxes)

Purpose: Put the City and Taxpayers First

Your honeymoon is barely over and one of the most pivotal issues for your administration is already on the table. After 20 years, it’s finally time to renegotiate the PILOT programs between the city and our nonprofits. 

Our Capital city is unique in the disproportionate amount of real estate (about 40 percent) that is owned by our nonprofits and hence provides no tax income for the city. The annual budget for the city is $568,000,000, while the annual property tax revenue is $275,939,855. Therein lies the problem.

Brown University, Providence College (PC), Rhode Island School of Design (RISD), Lifespan, and other nonprofits are great assets for the city. They’ve grown, expanded, and created great new opportunities for both themselves and for the people who work for them. They are also able to use the value of their nonprofit campuses as a tax shelter for profitable research and private investors. As the knowledge economy enjoys meteoric growth, it’s quite likely Brown and Lifespan will become the financial titans in the Jewelry District, as well, and will in large part determine the future of our city.

But by the same token, it is also clear that the nonprofits directly benefit from the public services provided from the city police and fire protection, snow and trash removal, maintenance of roads, electrical grid, and municipal services while the cost of their property tax exemption is borne by the tax-paying residents of Providence. A robust PILOT program is essential to offset some of these costs. It’s difficult for many city residents to see how Brown’s not paying taxes on over $1.4 billion worth of real estate or holding an almost $7 billion endowment helps the average Providence resident make ends meet.

In addition, as some of the nonprofits grow, they also put pressure on their immediate neighborhoods. Additional student housing can create stress points, of course, but even around the hospitals, as our medical
institutions buy up physician practices, they change the nature of the neighborhood.

All of the nonprofits do good things for the city – or parts of the city. However, a working class, tax-paying family living in the Manton or Silver Lake neighborhoods (and probably eight of 15 Wards) don’t see the “contributions” of Brown, RISD, PC, or Lifespan. The majority of taxpayers don’t see the benefits of these institutions.

Brown president Christina Paxson has expressed all sorts of optimism about what she hopes to do to help the city. Recently, the school offered to provide free tuition for Providence public school children to attend their on-campus summer program regardless of family finances. It was a nice way for any academically oriented students to add some tangible academic buzz to their resume – but will there be more?

The good news is that at least verbally, the nonprofits acknowledge they need to play a larger role in the process. All have expressed a willingness to come to the table. We implore Mayor Smiley to set the table – he can even have it catered. But all the guests must realize that he is the host, and while we expect him to be gracious, this time he must be firm. Smiley got elected in part by touting experience with big-number negotiating. And it certainly is time for strong leadership and possibly some new approaches. 

Dartmouth College pays about $8 million annually in real estate taxes to the town. Even though it is a nonprofit educational institution, under New Hampshire state law it is required to pay local property taxes on dorms, office, commercial buildings, and rental properties. Classroom buildings and public spaces are exempted. Harvard and Yale have sweetened their payments to their host cities recently as well.

Previous mayors have been out-negotiated by the nonprofits with “give-gets” that have devalued the PILOTs. Brown and RISD got over $1 million in free parking on city streets among other givebacks in the last PILOT, proving a point made by the late Bob Reichley, Brown’s senior community representative, who for many decades was the university’s point person and observed on an issue, “if the city wants to negotiate about garbage, we’ll find a way to turn it into gold.”

And, we don’t have a problem with thinking outside the box and expanding the PILOTs to other nonprofits. Mr. Mayor, this is a shot in the city’s treasury our city could use right now.