RI turns to tax endowment, property of colleges and universities

PROVIDENCE — Lawmakers are once again trying to push private colleges and universities in Rhode Island to pay taxes to their host communities.

But schools say no to legislation that would force their hand.

On Thursday, Rep. David Morales and Sen. Tiara Mack, both D-Providence, held a press conference alongside Councilman John Goncalves and local activists, who both support House bills: one one that would allow the taxation of privately owned higher education, and another that would allow the taxation of endowments.

Property tax proceeds would be paid into the host community’s general fund. Proceeds from taxing the endowments would be earmarked for public schools in the host community.

“We are at a crossroads where legislative accountability is needed and long overdue,” said Morales, who is sponsoring the bills. He targets colleges in Providence, particularly Brown University.

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Morales argues that “wealthy private universities have taken advantage of our community by continually expanding their tax-exempt footprint, which has led to gentrification, the displacement of workers, and most importantly, forcing Providence to run essential city services. … with a limited tax base.

How much would institutions pay if they were taxed?

The legislation, which is enabling, does not specify at what rate the endowments would be taxed, but it does have a 2% cap. If passed, it would mean a big payout from Brown. As of October, the university’s endowment had a market value of $6.9 billion. A 2% tax would bring in $138 million for the City. Citing the latest real estate appraisals, Morales said Brown would pay $49 million in property taxes if he was not tax exempt.

Other institutions would generate much less. As of fiscal year 2021, the Rhode Island School of Design, which Morales said would owe $11 million in property taxes if it weren’t tax-exempt, had an endowment of nearly $443 million. of dollars. Providence College, which Morales said owes $16.2 million in property taxes, had an endowment totaling more than $294 million as of April 2021. No recent assessments were immediately available for Johnson University & Wales, who Morales said owes about $12.5 million in property taxes. .

Goncalves, who represents Fox Point, an area neighboring Brown and RISD, spoke out in favor of collecting those amounts, reflecting the changes in his neighborhood over the generations.

“Near Fox Point, for decades and decades, there was a vibrant community of Irish, Portuguese and Cape Verdean immigrants,” Goncalves said. “Most of these families, including mine, who had been living in this neighborhood for decades are completely gone. They were driven out of the neighborhood by the students and as a by-product of the unrestricted expansion of the university.

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Colleges say proposals reduce their contributions

Dan Egan, president of the Association of Independent Colleges & Universities of Rhode Island, which represents all institutions that would be affected by the legislation, described it as a “practice contrary” to the benefits of being tax exempt as a as a non-profit organization.

Egan pointed out that passing the bills would create “an aberrant situation” for Rhode Island, because tax-exempt status is granted to colleges and universities in each state.

“Quite frankly, there’s a concern that any tax on endowments will limit our ability to fundraise,” Egan said, pointing to Roger Williams University’s recent announcement of a $20 million partnership with the Philanthropic Foundation. Cummings and asking, “Would a donor like that reconsider this because Rhode Island would have a tax on that endowment donation?”

Egan also said the tax would put Rhode Island schools at a competitive disadvantage in education.

“Imposing a cost that we don’t currently have that would really impact operations undermines the value of a sector that is the second largest employment sector in the state. [and] brings a lot of economic vitality to the state,” he said.

Brown’s spokesman Brian Clark echoed Egan’s message, saying taxes would become an obstacle to Brown’s work.

“Each year, we spend funds from our endowment to support this essential work that benefits Providence and Rhode Island,” Clark said. “We oppose both the effort to tax property used for academic activity that allows universities like Brown to benefit the local economy so broadly, as well as the tax on charitable donations. to institutions that contribute to the public good in a meaningful and lasting way.”

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