Here we go again! Armed with a four-page term sheet, Gov. Dan McKee, Providence Mayor Jorge Elorza, and the Principal of High Rock Westminster Street LLC announced an “agreement” that …
Here we go again! Armed with a four-page term sheet, Gov. Dan McKee, Providence Mayor Jorge Elorza, and the Principal of High Rock Westminster Street LLC announced an “agreement” that conservatively will cost the state and the City about $100 million in direct subsidies, tax credits, and a tax stabilization agreement.
In return, the City allegedly will get taxes directly and indirectly from the residents who will ultimately live in the building and shop and eat downtown. If this sounds somewhat familiar, you heard the same song sung when a massive tax break was given to the developer of Providence Place Mall.
In 2000, The Taubman Center at Brown University did a study which showed that the promises of tax revenue pouring into state and local coffers from the mall were far off the mark. Later, the “error” in the revenue calculations was laid at the feet of the dastardly Jeff Bezos who started Amazon in Seattle.
For all its tax breaks to then-founder Dan Lugosch, who ultimately sold the Providence Place Mall for $522 million in 2004, the State and City Fathers forgot to have a provision in the agreement where either entity would reap any of the profit from a sale. In fact, Mr. Lugosch successfully sued Rhode Island for the return of a conveyance tax of $2 million plus interest on his sale.
How much do you want to bet that the four-page term sheet is silent on what monies the state and/or city would reap if High Rock flips the property?
The real question is why are these subsidies and tax breaks even being given to the development company? High Rock bought the so-called Superman Building in 2008 and leased it to Bank of America (BOA). High Rock recouped its investment from the rental of the building to the bank, and the investment by Bank of America of a $7 million new fire and safety and sprinkler system, as well as millions of dollars from BOA in a $54 million lawsuit which blamed the bank for the skyscraper’s deterioration. Both entities had pointed the finger of blame at each other, but High Rock ended up laughing all the way to the bank.
High Rock has strung out this eyesore in its effort to make taxpayers pony up. This deal reminded me of my days of inner-city work, where slumlords who were politically connected allowed their property to deteriorate, knowing that public funds were coming down the pike to rehab their property to make them even richer.
Meanwhile, landlords who didn’t have city hall connections were cited with violations and had to use their own dime to fix up the rentals.
High Rock was left alone from any citations as the building deteriorated with hundreds of cracks and crevices. The pile of money given to it in the lawsuit to fix it up was pocketed by High Rock, and now the company will have taxpayers on the hook.
I am as nostalgic as the next person over the Superman building, but not to the point where taxpayers are the ones flying in this pie-in-the-sky scheme. What really would have been super was to make the owners fix up the property.
Arlene Violet is an attorney and former Rhode Island Attorney General.