The Hummel Report

Investigative Reports That Get Results

A Rhode Island 501c3 Non-Profit

A Matter of Exemption

Nearly 40 percent of all property in the city of Providence is now tax-exempt - double what it was just a decade ago. This week we take a look at some businesses run by tax-exempt institutions that are competing for consumer dollars.  Jim Hummel finds one college-owned store and restaurant  not  charging sales and meal tax required by the state. Find out where - and the response to our investigation.


Over the past decade the value of tax-exempt property in Providence has doubled - the amount of land and buildings now accounting for nearly 40 percent of all property in the Capitol city. And that has renewed the debate of whether the tax-exempt  institutions - including universities and hospitals - should be helping the city more financially.


After he took over as mayor in 2003, David Cicilline negotiated an agreement with

Brown University, Providence College, Johnson and Wales University and Rhode Island School of Design that calls for the four institutions to voluntarily pay more  than $40 million between them over 20 years  - a so-called payment in lieu of taxes.


Demings: ``That's like me paying $200, If you look at the ratio and how much the universities have that's like me paying $200 on my taxes each year.''


In February we introduced you to Tony Demings, who owns the Brooklyn Coffee and Tea House on Douglas  Avenue - which doubles as a haven for budding artists. Demings is surrounded by tax-exempt property, which he says puts him - and other businesses - on an unlevel playing  field.


Demings: ``I'm paying $7,000 taxes on this building alone, almost $7,000. I can't compete.''


Nine months ago Demings raised the issue of vacant properties owned by Brown University and the Catholic Diocese of Providence and whether they should go back on the tax rolls.  Brown's response: to place a sign on one of the houses we highlighted - informing the public of its historic significance.


It still sits vacant - and untaxed.


Now Demings is questioning businesses run by non-profit institutions that are competing with those that have to pay property taxes on their buildings. So we did an investigation of our own.


Johnson and Wales owns a building at the corner of Chestnut and Pine Streets that houses a Starbucks on the ground floor. A university spokeswoman tells the Hummel Report J & W students work there as part of their curriculum. She also says the university has a financial agreement with Starbucks,  which she would not disclose.


Next stop: the Portfolio cafe, located in the old Hospital Trust building in the heart of downtown. It serves as a RISD cafeteria, but is open to - and welcomes  - the public. So we stopped in, making three different  purchases where each time no sales tax - or meal tax - was charged, as required by the state.


On the final purchase we asked: ``No tax?'' The cashier responded: ``Well, we're  supposed to, but...'' her voice trailing off.


Next stop: the RISD Store - which touts no sales tax for students. But we weren't charged either for this notebook that you could buy at any office supply store, even after we told the cashier we had no RISD ID when she asked for it. The sales slip lists the Rhode Island sales tax, then zeroes it out.


Conversely, we bought a similar notebook at the Brown Bookstore  and *were* charged the sales tax.


A spokeswoman for RISD tells the Hummel Report that in both cases, the failure to charge tax was quote: ``inadvertent.''


She said they were not sure why Portfolio did not charge the tax, attributing it to new temporary staff in training.


As for the RISD store purchase the  school issued this statement:


``We believe it was an inadvertent, isolated incident, and we will do our best to be sure it doesn't happen again by re-doubling our efforts to remind staff of the policies for RISD student-faculty purchases versus public sales and of the need to be diligent about charging as appropriate.''


Demings: ``If they're not charging taxes and they're drawing businesses away from the public sector what's happening is the city and state are not receiving the taxes - it's like a funnel.''


Hummel: ``During the Providence mayor's race this fall, then-candidate Angel Taveras said the 20-year agreement with the non-profits should be renegotiated . So this week we caught up with now mayor-elect Taveras to see if that position still holds.''


One of Taveras's first public appearances as mayor-elect was - coincidentally - in a tax-exempt Brown University building used for research. Taveras said he does want to revisit the financial agreement between the city with the tax-exempt.


Then we asked him specifically about vacant buildings owned by the non-profits...


Taveras: ``I think the whole relationship needs to be revisited, you bring out a good point in terms of vacant property not being used for any purpose, which could actually be on the tax rolls. so I think it's part of the relationship that needs to be revisited and find ways we can work together that make sense and is fair to everyone, not only to the institution and the city but other taxpayers as well.''


And what about the failure to charge tax at the two RISD entities?


Taveras:  ``I was unaware of that, but it's certainly something - now that you've brought it to our attention - something that is important not only to the city of Providence but for the state of Rhode Island, for obvious reasons.''


In Providence, Jim Hummel, for The Hummel Report.