Brown-Providence Agreement: A Closer Look at the Fine Print

The proposed deal between Brown University and Providence promises $46 million for the cash-strapped city but also contains concerning loopholes. A closer look reveals a complex agreement warranting scrutiny before signing.

Rhode Island News: Brown-Providence Agreement: A Closer Look at the Fine Print

September 13, 2023, 1:08 pm

By Uprise RI Staff

The proposed agreement between Brown University and the City of Providence, released publicly last week, promises substantial funds for the cash-strapped city in exchange for land transfers, zoning approvals, and other concessions to the Ivy League school. While the deal’s $46 million price tag suggests a windfall, the complexities buried in the fine print warrant a measured, in-depth review before signing.

Payments to the City: Boon or Bust?

At first glance, payments totaling $46 million over 10 years appear transformational for a city facing daunting budget deficits. The infusion of $4-6 million annually could preserve threatened jobs and services. However, the “Credits Against Payments” section allows Brown to decrease these contributions significantly through new tax revenue and other means.

For example, if Brown develops a new dorm generating $3 million in annual property taxes for Providence, it can deduct 50% of that ($1.5 million) from its payment for that year. This recurring credit provision extends over the 10-year duration of the agreement. Based on its long-term expansion plans, Brown is well-positioned to open new taxable properties potentially worth millions in credits.

The agreement also enables Brown to receive 100% reimbursement for direct investments in development projects “in collaboration with the City.” The vague language provides leeway for Brown to claim full credit for minimal contributions to city initiatives. When combined with the 50% tax credit on new revenue, these reimbursements could feasibly shrink Brown’s payments to just a few hundred thousand dollars per year.

However, the agreement does require these credits to be validated by an independent accounting firm. This third-party verification offers a degree of protection for the city’s interests. Furthermore, the credits incentivize Brown to expand in ways that are mutually beneficial, returning more of its non-academic property to the tax rolls. If applied judiciously, this clause has potential to encourage growth and offset credits through new revenue.

Controversial Land Transfers Consolidate Brown’s Footprint

Perhaps the most contentious aspect is Providence conveying ownership of nearly 35,000 square feet of public streets to Brown for just $1. These streets run through campus, bordered on both sides by Brown’s existing property. For the university, acquiring these streets would consolidate its footprint in College Hill and the Jewelry District.

Critics argue relinquishing public streets sets a troublesome precedent, regardless of location. They contend Providence could have leveraged the streets during negotiations for greater public benefit. Supporters counter the streets have minimal use beyond serving Brown, and the $1 price reflects their limited value. They also highlight that Brown has agreed to provide easements preserving public access and city utilities.

While reasonable people can disagree on the merits of the transfers, language in the deal strips Providence of leverage. Clauses specify the entire agreement must be renegotiated if the city does not approve Brown taking ownership of the streets. This places the onus entirely on the city to either complete the transfers or lose the deal entirely. Removing or adjusting these clauses would enable more equal footing during future talks.

Zoning Changes Streamline Brown’s Development Plans

In addition to the transfers, Providence must greenlight zoning changes empowering Brown’s near-term development. This includes allowing Brown to construct a bridge over Elbow Street connecting two health sciences buildings and approval for a new 350,000 square foot academic facility on the street level below.

Streamlining these projects provides Brown, one of the city’s anchor institutions, flexibility to upgrade amenities and increase academic capacity. However, it also grants Brown extraordinary influence over planning decisions typically made through established zoning procedures involving multiple stakeholders. codifying expedited approvals gives Brown leverage to shape the neighborhood that some suggest should reside with the city planning commission and impacted residents.

Despite these qualms, Brown stresses the projects comply with the comprehensive city plan and will undergo public review. Ensuring robust public input and mitigating any negative impacts would enable zoning changes to be a win-win for both the university and surrounding community.

Default Clauses Prioritize Brown’s Interests Over Accountability

Several default provisions favor Brown over accountability to taxpayers. If Providence fails to deliver on conditions like the land transfers, Brown can cease making payments without penalty. Yet if Brown defaults on payments, the city’s only option is to pursue damages through legal action – a costly and uncertain process. This imbalance provides Brown an accessible exit clause while burdening the city with onerous enforcement obligations.

Supporters counter that the conditions are integral to Brown’s long-term campus planning, and the university should not be penalized for the city failing to hold up its end of the bargain. They also note Brown has no recourse to compel the city council to approve the negotiated zoning changes and land transfers, as those decisions reside fully with the city.

Perhaps designing reciprocal default penalties that mirror each other’s obligations would be more equitable. Another option is bringing in an independent arbitrator to determine appropriate remedies in the event of a default.Adding proactive measures like these could enable the deal to be mutually enforceable by both signatories.

Property Tax Exemptions Remain Entrenched for Brown

Buried at the end, the agreement affirms it does “not affect, alter, diminish, or modify the legal status, force, and effect of Brown’s tax-exempt status in any way.” This means that aside from the new revenue addressed earlier, Brown’s blanket exemption from property taxes remains fully intact.

This has sparked fierce debates about nonprofit tax exemptions and PILOTs (payments in lieu of taxes) in Providence and beyond. Critics argue wealthy nonprofits like Brown drain city coffers while relying on public services. Others contend nonprofits provide substantial economic activity, jobs, and community funding that offset uncollected taxes.

This deal cannot resolve that complex, polarizing issue. However, it does provide opportunities for Brown and the city to have productive conversations about how an institution so critical to Providence’s past, present and future can equitably support its long-term fiscal health.

Final Analysis: Weighing the Pros and Cons for Providence

Upon comprehensive inspection, the Brown-Providence agreement contains positives and negatives for both the university and local taxpayers. While $46 million and other provisions would assist the city’s balance sheet, clauses allowing substantial credits, land transfers and zoning powers also favor Brown’s interests. Weak default penalties for Brown compared to strict enforcement obligations on the city reinforce this dynamic.

However, reasonable people can disagree on the appropriate balance between leveraging a major institution’s resources to benefit residents and accommodating its growth to spur economic activity. There are also encouraging stipulations like requiring third-party verification of credits and opportunities to channel expansion in ways that maximize public revenue. Above all, the agreement opens possibilities for greater ongoing partnerships between the city and university.

Before signing any binding deal, Mayor Smiley and the City Council should ensure the final terms contain ironclad provisions guaranteeing tangible returns for taxpayers while recognizing Brown’s significance to Providence. Amending problematic clauses, guaranteeing community input and exploring creative solutions could transform a controversial deal into a collaborative model for equitable growth. What emerges has ramifications for the fiscal footing and collective future of Rhode Island’s capital city.

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