An old tax deal made under the Elorza administration is receiving new scrutiny after the Providence City Council hired a law firm to conduct a review.
Last week, the council announced that Wistow, Sheehan & Loveley was asked to review a 2021 consent judgment that gave tax breaks to 10 downtown buildings controlled by local developer Arnold "Buff" Chace and owned by LLCs under his name. Several are on Westminster Street while others are on Eddy, Fulton, Union and Clemence streets.
Bill Fischer, a local public relations professional who is handling communications for Chace's real estate development company, Cornish Associates, offered a brief statement in response to the news.
"In 2021, legal counsel for Cornish Associates worked collaboratively with the Providence city solicitor, and received the approval of a Superior Court judge, to reach a consent decree as it relates to the city's enforcement of state laws," Fischer said. "We have continued this collaborative approach to honor the consent decree and look forward to doing so with any and all city hired representatives."
As Internal Auditor Gina Costa explained in a confidential memo that has now been made public that Chace's buildings were given so-called 8-law treatment, "a special tax provision for low-income housing units."
As Costa put it, that "allows the property owner to pay 8% of the previous year's rent collected as its property tax instead of the full commercial or residential rate depending on the property."
In total, Chace would save about $42.5 million in taxes over 30 years for the buildings under that provision.
Consent order never got City Council approval or oversight from other bodies
Costa's memo, dated December 2022, raised several legal concerns: The consent order did not receive City Council approval, nor was it green-lighted by the Committee on Claims and Pending Suits or the Board of Tax Assessment and Review. Costa said City Solicitor Jeff Dana claimed that, by law, he had the authority to enter into the consent order, but according to Costa, the tax assessor's consent should also have been secured, and apparently was not. Dana did not immediately respond to a request for comment.
Furthermore, Costa took issue with the properties' partially commercial use, and affordability being defined in the order as 100% of area median income, or AMI. The Department of Housing and Urban Development defines affordability as no more than 80% of AMI.
Additionally, taxes on the properties can be retroactively abated to 2020 despite no covenant existing at that time. Costa said about $626,000 had already been abated for six out of the ten properties.
"I believe that it is in the best interest of the city for the City Council to hire their own attorney to challenge the unilateral action of the city solicitor, with the intent of preventing at least an $18-million loss in tax revenue to the city," Costa said.
To many Rhode Islanders, council's new attorney is a familiar face
Max Wistow of Wistow, Sheehan & Loveley is already familiar to locals, having represented the Rhode Island Commerce Corporation in the case against notorious failed video game company 38 Studios, in which the state invested $75 million. Wistow also advised the City Council on negotiations with the firefighters union in 2016.
This article originally appeared on The Providence Journal: Tax deal for Buff Chace-owned buildings probed by lawyer hired by Providence City Council