Labor & Business

As taxes rise, Elorza Administration gives huge tax break to one of the richest property owners in PVD

One of the richest men in Providence, Arnold “Buff” Chace, is saving around $30 million on his property taxes over the next 30 years, under a secret deal struck by the Elorza Administration.
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Published on May 16, 2022
By Steve Ahlquist

At their best, tax stabilization agreements (TSAs) are a stimulus to encourage investment in a city. In exchange for hiring local minority and women owned businesses and perhaps providing low-cost housing opportunities, the city offers the developer a break on their taxes. At their worst, TSAs are giveaways to wealthy, connected businesspeople looking to maximize their profits by lowering their tax burden, to the detriment of renters and homeowners who never get such a break.

TSAs are valuable, and though not exactly rare, they are not easy to get, and virtually no one ever simply gives them up – unless they have figured out a way to pay even less in taxes.

This appears to be what downtown realtor and developer ArnoldBuffChace has down with ten of his buildings. With the help of his attorney, Nicholas Hemond of DarrowEverett LLP (yes the same Nicholas Hemond fighting to bring more fossil fuel industry into the Port of Providence) Chace has entered into an agreement converting ten of his his downtown Providence holdings from TSAs to 8-Law.

8-Law, or 8%-Law, is relatively obscure, because unlike TSAs, these were never intended to stimulate development or reward connected businesspeople. Instead, as described in Rhode Island General Laws § 44-5-13.11, 8-Law is intended to develop and maintain affordable housing. The law reads:

Any residential property that has been issued an occupancy permit on or after January 1, 1995, after substantial rehabilitation as defined by the U.S. Department of Housing and Urban Development and is encumbered by a covenant recorded in the land records in favor of a governmental unit or Rhode Island housing and mortgage finance corporation restricting either or both the rents that may be charged to tenants of the property or the incomes of the occupants of the property, is subject to a tax that equals 8% of the property’s previous years’ gross scheduled rental income or a lesser percentage as determined by each municipality.”

UpriseRI first became aware of the issue after a short exchange in the middle of a Providence City Council Finance Committee hearing on May 12. During the hearing, there was a discussion of tax collections from TSAs. During the discussion, it was stated that “One of the TSAs went back off TSA. So they are now in the tax order as an 8-Law.”

Here’s all the video discussing the situation from that hearing:

It took some digging, but UpriseRI secured a copy of the consent decree and determined that it wasn’t one property converted from TSA to 8-Law, but ten. All the properties are owned and operated by LLCs controlled by millionaire realtor Arnold Chace. The buildings include:

The case brought by Chace came to be known as Harrisburg Associates, LLC et al. v. The City of Providence et al. and was filed by Attorney Hemond on June 24, 2020. Initially about just one property, the case was amended to included the ten properties above. It took just under a year before the consent decree settling the case – and rewarding Chace with around $30 million over the next 30 years – was signed by Providence City Solicitor Jeffrey Dana and Chace’s lawyer Nicholas Hemond. The consent decree is dated June 9, 2021.

Under the terms of the consent decree, the entirety of the properties, including the ground floor commercial parts of the buildings, are taxed at the new lower rate. When an 8-Law agreement is reached through Rhode Island Housing, only the residential units of a mixed use development would be taxed under 8-law. Whatever percentage of the property was for commercial use would be taxed in full. Somehow, Attorney Hemond convinced the City to sign a deal that allowed the entirety of the properties to be taxed at a lower rate, as long as 25% of the residential parts of the building are for workforce housing, or affordable housing based on area median income (AMI).

In some cases, it appears that students were counted as residents whose income fell below the area median income. After all, students generally have very low-incomes – the parents paying for their apartments aren’t living there.

The deal seems to set a dangerous precedent. Under this consent agreement, virtually any property owner renting to students could avail themselves of 8-Law (as long as 25% of residential units on the property are occupied by student) and precipitously cut their taxes on the entire property, including those parts of the property used for commercial interests. The floodgates may well be open.

UpriseRI asked Providence Mayor Jorge Elorza and City Solicitor Jeffrey Dana for more information on this deal, and have yet to hear back. Some of the questions we want answered include:

  • Was a fiscal note ever done for this deal?
  • Since the power of levying taxes and making tax deals rests with the City Council, by what authority are the Mayor and City Solicitor making this deal?
  • As far as UpriseRI can tell, the deal is contingent on Chace giving up the TSAs on the ten properties listed above. So far, four properties are still listed in the TSA rolls.
  • The City Council will have to approve at least some aspects of this deal. What happens if they don’t?
  • Why was this deal conducted behind doors, with no public or City Council discussion at all?
  • In Providence, virtually every property owner and renter is facing increased taxes and rents, except for one of the richest property owners, Arnold Chace. Is this fair?
  • Signs are popping up all over the city asking people to “Save Providence” and pass the referendum allowing the city to borrow the money needed to stabilize the pension system. Can we trust that this is the best idea given that Providence is forsaking tens of millions of dollars over the next three decades under this deal?
  • How many more deals like this are in the offing?

Unrelated to the Elorza Administration, but related to the mayoral race:

  • Arnold “Buff” chase has endorsed Ward 3 City Councilperson Nirva LaFortune as the next Mayor. Is she aware of this deal, and will she reject this endorsement?
  • Mayoral candidate Brett Smiley has accepted the endorsement and the campaign funds from a lavish dinner in his support from Nicholas Hemond, who authored this deal. Will Smiley reject Hemond’s endorsement, given this information?

UpriseRI has also reached out to RI Housing to get more information on 8-Law.

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