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Establishes website to educate public on important issue: http://fairshareplan.com
***Watch video of the Mayor’s State House testimony***
PROVIDENCE – Mayor David N. Cicilline today testified before the Rhode Island House and Senate Finance committees on legislation that would ensure that private colleges and hospitals do their fair share so that taxpayers are not carrying an unfair burden.
Mayor Cicilline’s Testimony:
Mr. Chairman and distinguished members of the Finance Committee,
Thank you for the opportunity to testify before you today on this important legislation.
These are extraordinary times. As you know, we are experiencing the most serious economic crisis since the Great Depression. I understand the enormous challenges you and other members of the General Assembly face in trying to balance many interests. We at the local level are faced with many of the same challenges.
But there’s nothing like a crisis to bring things into focus and cause new and better thinking. At the local level, we are charged with protecting the level and quality of services to our constituents and at the same time prevent additional financial burdens from being imposed on the families who live in the neighborhoods of our cities.
My responsibility to protect the residents of my city from the crushing burden of increased property taxes has focused on three areas: reducing the costs of government, earning concessions from our employees, and generating revenues outside of the traditional property taxes.
I am asking Departments to do more with less, cutting jobs and spending. I am asking our unions to do their part by agreeing to a wage freeze, increases in their healthcare co-shares, pension reform, and other cost-saving measures. For all management employees, I have imposed furloughs, higher healthcare co-shares, cut vacation pay, instituted a wage freeze, and more.
I take my responsibility to control spending seriously. In every year that I have been Mayor of Providence, our budget increases have been less than the increases in spending in state government, the federal government and the Consumer Price Index. I will continue to aggressively pursue significant structural cost-savings measures throughout city government.
However, these efforts alone will not protect residents of most of our cities and towns from facing an increased property tax burden. I am here today to ask you to enact legislation that will provide local governments with the ability to ensure that large tax-exempt institutions, that is any institution that owns more than 2o million dollars in real estate, pay their fair share to their host communities.
In Providence this is limited to the four private colleges and the four large hospitals.
For many years, Rhode Island has wrestled with the question of what responsibility our large tax-exempt institutions have in supporting their local community. As you know, under current state law, they are not required to pay state sales tax or local property taxes.
Let me be very clear. I understand fully the tremendous value of our institutions of higher learning and our great healthcare facilities. They add to the vibrancy of our city and state and are critical to the quality of life we enjoy. Without question, we would be a very different and much less spectacular city without Brown University, RISD, Providence College, Rhode Island Hospital and the other large institutions.
In addition, I recognize that the universities and hospitals are key engines in our state and local economy and two of the fastest growing sectors. I and members of my administration have been working intensely with both sectors, the Chamber of Commerce, the Providence Foundation, and others to grow the knowledge economy and focus on creating 21st century jobs.
This work must continue, both as an economic necessity for our city and our State and because the survival of our world-class hospitals and universities require it. Make no mistake about it, this partnership is driven by a shared and mutual interest between the city and state and these institutions.
With regard to state government the growth of these institutions results in significant increases of income tax revenues. Every person the institutions employ is contributing to general revenue. So for the state, institutional growth means more revenue and more jobs. Both important goals.
When it comes to local government, the financial implications are different. When institutions expand, they remove land and buildings from the tax rolls. Cities and towns must continue to provide basic services to these large institutions and their populations but are not permitted to collect property tax revenues. This means local property taxpayers are footing the bill. This kind of growth, without a fair share plan, imposes an unreasonable burden on local property taxpayers.
There is universal agreement, even among the institutions, that they owe something – that they are part of their communities, and every member of a community has an obligation to contribute. The only question is what is the proper level of contribution and the system for making that calculation.
The unfairness of allowing large institutions to own an unlimited amount of real estate completely free from taxation, while families who live in our neighborhoods continue to bear the increasing costs of city services, is obvious. That is why over the years as this issue has heated up, the State has stepped in to help balance the equation. This was what the PILOT program was designed to address. This framework is, of course, the best answer – returning to local communities what they would receive if tax-exempt properties paid taxes, so that the interests of the state, local government, and the institutions are aligned.
General revenue sharing was also designed to help offset these imbalances.
But there have been three major forces at work that have thrown the equation seriously out of balance.
First is the downturn in the economy that has required everyone to do more to get our cities and towns and our state through this economic crisis.
The second is that these institutions have been expanding rapidly. Much more property has been taken off of the tax rolls. When the tax-exemptions at issue here were conceived, these institutions represented a single building or a very limited area. Things are obviously very different now. No one could have imagined that these large tax-exempt would own 3.2 billion dollars of real estate, which if taxed would generate 88.2 million dollars.
The third is that the State budget is no longer able to fill the void. PILOT has never been fully funded and has been seriously under-funded for several years, and now General Revenue Sharing has been eliminated altogether.
Let me convert those facts into numbers:
- Today in Providence, nearly 40% of all appraised property is tax exempt
- The major colleges, universities, and hospitals own $3.2 billion worth of real estate in Providence, all of it exempt from taxation.
- Brown University has an annual budget that is larger than the City of Providence’s budget.
- Lifespan’s budget is more than twice the size of the City’s entire budget.
- Revenue to Providence from these large institutions through various agreements makes up less than 1% of our annual budget – less than one percent.
- Meanwhile, Providence has seen its State PILOT payment decline by $5.5 million since 2005.
- And the elimination of the remaining general revenue sharing means a loss of an additional 6 million dollars.
Who is hurt the most because of this scenario? The local property tax payer.
In Providence, the people who own just over 60% of the assessed value pay 100% of the property taxes. This is just wrong. Even though these institutions do not contribute to the tax base of our city, professors, students, and hospital employees are still driving on city roads, enjoying our city parks, and benefiting from police, fire, and emergency services. Who is paying for these services? -- the local property taxpayers.
And it’s not just Providence. Newport, Smithfield, Warwick, and any city or town with a large institutional presence faces this imbalance.
It has reached a point of serious unfairness to the local taxpayer. As elected officials it is our job to respond to this and ensure that everyone pays their fair share.
I recognize that these large tax-exempt institutions are not the only source of the heavy burden of local taxpayers, and I am in no way singling out the institutions. There is also work to do with our public unions, and I have been pressing hard for fairness there too.
Some have argued that this legislation “targets” or “is going after” certain groups or institutions. Requiring everyone to pay their fair share and assessing impact fees or imposing assessments to accomplish this represents a shared sense of responsibility to a community that you are a part of. This is no more targeting than requiring developers to pay fees associated with a new development or asking residents to pay their annual property taxes.
It’s easy to pit groups against each other – to say we’re “going after” this group or “targeting” that one -- but I think I speak for all of us in saying we’re not fighting against anyone. We’re fighting to protect local property tax payers who are already overburdened.
Others have argued that students are important consumers who spend lots of money in their host communities and do substantial volunteer work. This is true and will continue to be true. But so do residents and taxpayers of the host communities and in addition residents pay property taxes for city services they receive.
The good news is we have the opportunity to help them in a way that is fair to everyone. That’s what this legislation is all about.
First, it is enabling legislation as opposed to a mandate. It may be used to a greater or lesser degree as the city or town finds necessary.
Second, it upholds the tradition of recognizing the unique contributions these institutions make to our society. The maximum they could pay under this legislation is only 25% of their assessed value – still a 75% exemption – and this could only apply to very large institutions with over $20 million in assessed value.
Third, the memorandum of understanding we have in Providence with the institutions contemplated this possibility and becomes void if this is enacted. So this would represent a replacement instead of an addition.
Fourth, it is a way for the state to uphold its traditional role of helping to bring balance back to the equation and to protect local property taxpayers without spending additional public funds.
To close, I want to tell two short stories.
The first illustrates the great benefit our institutions provide to our culture and our economy. At the initiative of Dr. Josiah Rich, who is affiliated with both Brown University and Lifespan, I joined a coalition that will advocate to help people better understand the disease of addiction and help them get treatment. We applied for and secured a grant from the Soros Foundation of $600,000. to do this work. It will save lives and health care costs for all of us. This has real value and it is a good example of why these institutions continue to deserve deep subsidies.
The other is a story from someone who recently came to my office in search of help. This was a senior who has lived in Providence her entire life. She explained that she desperately wants to remain in her house and is barely holding on. Any increase in her property taxes will make this impossible. She may well be forced to move out of her house where she has lived for decades because others are not paying their fair share. She, and many others in the same situation struggling to support themselves and their families need and deserves your help.
I believe that we have to do everything in our power to keep from adding to the burden of families who live in our neighborhoods. This fair share legislation is a critical step in that effort.
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