Panel to review $2.7B in property tax exemptions
All told, property worth more than $2.7 billion is not being taxed in Warwick.
That includes churches, non-profit organizations, educational institutions and, the grand daddy of them all, the airport.
Last week, by executive order, Mayor Scott Avedisian created a committee to examine tax-exempt properties. They are charged with reviewing those exemptions “and making recommendations to ensure more equity among all property owners in the city.”
In his order, Avedisian says a preliminary analysis of the properties has been completed and that, “If the city received only a portion of taxes that would be collected from these properties, it would help alleviate the burden on residents and businesses.”
Having tax-exempts share in the cost of city operations is hardly a new concept. The state has recognized this with its “payment in lieu of taxes,” or PILOT program, where municipalities are compensated for a portion of the taxes lost by hosting educational and correctional institutions. The airport is not included in the PILOT and, if it were, it would significantly reduce what other communities receive under the program.
In addition to the state program, the city has agreements that take into consideration the business activities of some non-profits. Earlier this year, the city reached a memorandum of agreement with Johnson & Wales University for the “voluntary payment” of $40,000 in lieu of taxes on the Radisson Hotel that the university operates. The university already pays taxes on the Legal Sea Food property, which it owns and leases.
Senator Michael McCaffrey said the issue of J&W paying taxes came to his attention when legislation to amend the university’s charter came to the General Assembly. He said he asked, “If Cranston and Providence are getting money, what about Warwick?” The agreement, that concludes June 30, 2023, provides an escalator clause that takes effect after the third year and a transition payment, should the university add to its real estate holdings. The escalation clause is based on the Consumer Price Index.
But the airport remains the elephant in the room.
According to city tax assessor and collector Ken Mallette, airport property is valued at $1.3 billion.
Mallette is quick to acknowledge that, if it weren’t for the airport; Warwick would not have the number of hotels, car rental companies and other tax-paying businesses that it does have. And he questions, “What would be there if the airport wasn’t?
He notes that, if the more than 1,600 acres of airport property were residential properties, the city would gain property taxes but it would also be faced with providing services, with schools being the most costly.
“My hope is that the commission will look at possible remedies for the state law that does not include the airport in the PILOT program. Although money is tight on the state level, I think it will be helpful to see what other states have done and look at creative ways to compensate the city for the property that the airport has taken,” Avedisian said in an email exchange about the committee’s work.
The mayor said, when he served on the Governor’s Municipal Fiscal Stress Task Force, it became evident that Warwick has a large amount of tax-exempt property, along with Providence and Middletown. Second to the airport, Avedisian says, are educational properties and Kent Hospital.
“New England Institute of Technology has been selling property and putting it back on the tax rolls and has consistently, for the whole time that I have been mayor, voluntarily paid taxes on a number of their properties,” Avedisian said.
“I would think that CCRI is really in a different category all together since they provide services to many residents. Kent Hospital pays for a large amount of uncompensated care and I also think that they would need to be viewed in a different light.”
A total of $144.9 million in hospital property value – all of it Kent, with the exception of a Bradley Hospital office – is exempted from city taxes.
Property owned by charitable organizations and non-profits is also exempt. Their collective value is $120.5 million. Avedisian doesn’t see the committee altering those exemptions.
“Smaller non-profits and churches often receive little [if any] services from the city, so their tax-exempt status would not need to change,” he said.
Mallette said Warwick is not alone in looking at tax-exempt properties, adding that there is a growing feeling that “we all need to contribute to help out.”
It’s not that the city hasn’t sought to tax the airport. Some years ago, the Rhode Island Airport Corporation was sent a tax bill but that went nowhere. For-profit companies that lease airport property are taxed. Also, the city receives a $500,000 payment for police and fire services provided to the airport, as well as the proceeds from a tax on airport parking revenues that amounted to $788,000 last year.
Ward 3 Councilwoman Camille Vella-Wilkinson, whose ward comprises most of the airport, will chair the committee. Other members include Mallette, a representative of the Central Rhode Island Chamber of Commerce, Rep. Joseph McNamara and Sen. Erin Lynch.
“The big goal here is to take the data, look at it creatively and make suggestions for ways to compensate the city for lost taxes. Perhaps one solution would be to rezone some airport-owned property for commercial, residential or business development that could then be added to the tax
rolls,” the mayor said.