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Nearly broke Providence seeks cash from Brown University

By Jason McLure

(Reuters) - With the mayor of Rhode Island's capital warning it may run out of cash by June, the city of Providence is looking to raise funds from one of its wealthiest landowners: Brown University.

As a non-profit institution, the Ivy League school is exempt from local taxes. Brown, the state's sixth-largest employer, owns more than $1 billion of property in the city and has a $2.5 billion endowment yet makes a relatively modest "voluntary payment" to the city of $3.6 million per year.

Without the tax exemption, its bill would be $26.9 million, more than enough to close Providence's $22 million budget deficit this year.

As bankruptcy looms Mayor Angel Tavares is trying to increase the pressure on Brown to "voluntarily" contribute more. He met on Wednesday with Brown University President Ruth Simmons to discuss upping the school's payments.

After the meeting the school released a statement saying "discussions are going well and we are confident that they will lead to a constructive, fair and equitable outcome."

A spokesman for Tavares also called the meeting "very productive" and said "the mayor feels more hopeful than he did a week ago" that an agreement can be reached.

With the city cutting 200 staff positions and teachers, firefighters and police all agreeing to lower pay or benefits, Tavares singled out non-profits, which own about $3 billion in property in Providence, in his annual state of the city address on Monday.

"We stare into that black hole because some have failed to sacrifice," Tavares said in the speech before the city council. Brown and the city tax-exempt colleges and hospitals "have yet to join the rest of our community in helping to save our city," he warned.

The pressure increased on Wednesday after Tavares announced a deal with Johnson & Wales University under which the school would at least triple its voluntary payments to the city to $958,000.

In addition to the revenue shortage, municipal spending on retirees has skyrocketed as contracts for retired city workers require annual cost of living increases of up to 6 percent annually.

The city has released data showing top pensioners, including a former fire equipment superintendent, collect more than $150,000 annually in pension benefits. One police patrolman who retired at an annual salary of $39,481 now collects a pension of $117,319.

Cities including Boston and Chicago have sought to raise funds from non-profits in recent years by increasing so-called payments in lieu of taxes, or PILOTS.

For the moment Providence's situation is dire, Tavares said.

"We won't know how many residents will be in need of services, or how many will have called to complain," Tavares warned. "Because there will be no one at City Hall answering the phone."

(Editing by Barbara Goldberg and Daniel Trotta)

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