October 23, 2014
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Non-profit 'meds, eds' fear taxation

A bill introduced by Rep. John Carnevale has non-profit universities and hospitals worried about their checkbooks. The proposed bill, heard by the House Finance Committee last Thursday, would allow municipalities to tax non-profit “meds and eds” up to 25 percent in property taxes.

“Obviously this issue is front and center across the state this year,” Jim Beardsworth, director of marketing and public relations at Kent said yesterday. “But this would cause great hardship for the hospital.”

“[Kent] should be paying the city of Warwick $4 million a year,” Carnevale said in his testimony. “But they pay zero.”

Beardsworth contends that Kent is a valuable institution, and provides the community with a strong, stable hospital that people can rely on.

Twenty-five percent, about 520 of the 2,100 Kent employees, are from Warwick, and 60,000 patients are cared for annually. Kent provides $13.9 million annually in uncompensated care.

“There are many ways we’re giving back to the community,” he said.

Steve Kitchin, vice president, Corporate Education and Training at New England Institute of Technology (NEIT), feels similarly. He said the bill, if passed, would require the institution to review all financial commitments.

NEIT currently pays more than $100,000 annually to Warwick in property taxes on properties that are not currently being used for education purposes.

But Kitchin said NEIT’s contributions to the city go beyond the monetary compensation.

“One has to evaluate more than just the financial relationship,” said Kitchin.

NEIT has provided computers to schools, carpeting for city buildings and automotive equipment to municipal organizations.

“We feel a community commitment to the city of Warwick,” he said. “You can’t legislate the intangibles. I don’t know if people are going to bring those things to the table.”

An additional tax would cause NEIT to cut back on the current services and items the college has been able to provide to Warwick.

“We’re very fortunate to have a great relationship with our host communities,” he said. “And we see no reason not to have this in the future.”

Warwick currently receives just short of $1 million in PILOT (payment in lieu of taxes) payments annually for New England Institute of Technology, Johnson & Wales and Kent Hospital.

“I am not sure that we would assess at 25 percent,” said Mayor Scott Avedisian. “But I think that we would look at the numbers and see what kind of property tax relief it would mean.”

Carnevale said he introduced the bill to help mayors whose cities are facing financial crises.

“This bill would generate approximately $28 million per year for the city of Providence,” said Mayor Angel Taveras, who testified in favor of the legislation. “It’s a bill whose time has come.”

More than 20 people testified in favor of the bill at last week’s hearing; three were in opposition.

Mike Souza, senior vice president of the Hospital Association of Rhode Island, was among those to testify against the bill. He said the state’s 11 hospitals bring $6.3 million of economic impact to the state and incur a combined annual cost of $170 million in uncompensated care.

Rep. Frank Ferri, who serves on the House Finance Committee, said last week he was on the fence about the issue. For him, determining what the tax percentage would be is a critical point.

“They have to be part of the solution,” said Ferri of the institutions. “It’s reasonable to think that everyone should be contributing. But I don’t know if that legislation is necessarily it.”

Carnevale opened last week’s hearing with a lengthy testimony about non-profit institutions, citing six-figure salaries and high profit margins as reasons to tax them.

“They’re like the Wizard of Oz,” he said. “They hide behind the curtain of their 501c3. Are all non-profits truly non-profits?”

Pulling from a stack of papers to support his testimony, Carnevale referenced a document declaring Brown University’s tax exemption. The document is from 1764.

“The records are from the colony of Rhode Island,” said Carnevale. “Does the state of Texas still fall under Mexican law? Does Alaska still fall under Canadian law?”

Brown owns 250 properties in Providence; properties Carnevale believes should be taxed.

“Yale pays $75 million a year to the city of New Haven,” he said. In Providence, $112 million in commercial property taxes were never paid to the city of Providence, said Carnevale.

Taveras said that if the capital city is in trouble, so is the rest of Rhode Island.

“As goes Providence, goes the rest of the state,” he said.

He did add that the issue is not just about the capital city, but about the 13 other municipalities that would be affected.

The proposed enabling legislation would allow the municipality to determine the taxation rate, but Carnevale said his research shows 25 percent of resident’s taxes go toward paying for city services like police, fire and rescue.

Last week Johnson & Wales University finalized an agreement with Mayor Allan Fung and the city of Cranston to pay $150,000 annually to the municipality until 2022.

“At least they stepped forward and are making an attempt,” said Carnevale.

Carnevale introduced the same bill last year, but it was not voted on before the session ended. The current bill is being held for further study.


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