City of Providence Tax Stabilization Agreements

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1 City of Providence Tax Stabilization Agreements Summary of Economic Impacts Prepared by City of Providence, Department of Planning and Development In collaboration with Anne S. Galbraith, AICP Principal, ASG Planning LLC

2 December, 2017 City of Providence Tax Stabilization Agreements: Summary of Economic Impacts This report documents the economic impact of the expired TSAs throughout the City of Providence, and projects forward the impact of the current Tax Stabilization Agreements on assessed value of projects, tax revenue collections and broader economic impacts of jobs, spending and other local revenue generated from these projects. Over the last 20 years, 69 development projects have received a financial incentive from the City of Providence in the form of a Tax Stabilization Agreement. TSAs stabilize property taxes during the construction period for a new development project and phase in the payment of the increased property taxes due to the City upon completion of the project. The terms for TSAs vary from 5 to 20 years and have various compliance terms. Of the 69 projects that have received Tax Stabilization Agreements, 23 of those projects have been fully built-out and the terms of their TSAs have expired. For every $1 invested in those projects, the City has seen $7 in increased property values, $15 in construction value and $19 in annual spending in the City of Providence. There are currently 46 development projects with active TSAs that have various terms and expiration dates. Projecting forward the impact of these projects, the City can anticipate a return of $8.50 in increased property values, $7 in construction value, and $7 in annual spending on every public dollar invested in the project. Using standard economic models, this report summarizes the broader economic impact of investing in Tax Stabilization Agreements. There are significant positive impacts to the City in property taxes collected, jobs generated, square footage of new development and other revenues collected. Tax Stabilization Agreements are a powerful economic development tool to spur jobs, development and tax revenue to the City. 1

3 December, 2017 Over the last two decades ( ), the City has approved 69 TSA agreements: 23 of these have expired, with projects fully built out 46 are active today; 19 of these agreements will expire between 2020 and No. of New and Expiring TSAs by Year ( ) TSAs initiated by year TSAs expiring by year EXPIRED TSA s: Summary Statistics Year 0 End Year 2017 Total Construction Value $241.6M (year of expenditure) Total Square Feet (renovated or new) 3.3 million SF Assessed Value IF annual 2.99% $36.9M $50.8M $151.3M Actual Assessed Value $36.9M $207.3 $259.9M Avg. Annual Increase in Value (over term) Total % Increase in Value (Year 0 to 2017) % 605% Taxes Paid $1.2M -- $7.7M % Increase Taxes Paid (Year 0 to 2017) % 1 % increase based on various start years for individual TSAs through year

4 December, ACTIVE TSA s: Summary Statistics & Projections Year Total Construction Value Total SF (renovated or new) Actual Assessed Value Projected Assessed Value 3 % Increase Value over Year 0 4 Taxes paid Projected Tax Receipts 5 % Increase Taxes Over Year 0 3 $839.5M (year of expenditure) 5.3 million SF $ $492.4M (stabilized) $1.22B 42% 250% $3.7M $8.1M $44.7M 119% 1100% $1.73B 397% $63.4M 1600% 2 60% of prior year assessed value for active TSAs is due to Charter Care Hospital (69 parcels). 3 Projected Value calculated using observed annual growth for expired TSAs (11%) % after expiration. 4 % increase Year 0 to 2017 based on various start years for individual TSAs. 5 Projected taxes based on Project Value and assume an average overall future mill rate of $36.70 per $1000. Assuming all active projects are fully built out as planned), standard economic multipliers can be applied to estimate a number of additional economic impacts. These impacts are summarized on the following page. Estimated Economic Impacts of TSA Agreements (at full build out) Job Creation & Preservation industrial space (about 875 SF per job) Over 10,000 person years in part-time construction jobs New Residents & More Visitors 4,234 new residents (1.5 persons in each of 2,823 new units) 676 new hotel rooms (plus 294 renovated rooms in the Biltmore) $22.0M in annual spending on dining, goods and services and entertainment New Local Revenues $22.8M in building permit fees (including TSA projects underway) $75,000 annually in local Meals & Beverage taxes from restaurants $325,000 annually in local hotel taxes once new hotels are open $1.3M in annual motor vehicle excise taxes (based on 2016 rates) Tangible tax revenues from equipment/assets in commercial spaces 3

5 December, 2017 First Source & Local Hiring Strong local hiring results. For example, from FY2013 through and Q1 2018, 759 Providence residents have found permanent employment as a result of First Source inclusion in TSAs. Hiring has been in the following industries: Hospitality/Hotel Industry = 245 Providence residents; Healthcare Industry = 423 Providence residents; and Commercial/Retail Industry = 91 Providence residents. Apprenticeship & MBE/WBE Participation Averaged 13,500 hours worked on by Apprentices per project; Averaged 72,000 hours worked on by Journeymen per project. Over $100M in construction value directed to certified MBEs. Over $100M in construction value directed to certified WBEs. Affordable Housing This document summarizes overall statistics for these agreements and estimates their broader economic impact. The analysis was based on the following assumptions: Economic impacts are estimated based on generally accepted industry factors: Commercial Real Estate Development Association factors for employment per SF US Bureau of Economic Analysis for jobs per $1M of construction value US Bureau of Labor Statistics factor for local spending per average household Other averages from: US Census, RI Department of Revenue, and Providence Tax Assessor Presidents Report- Estimate of Job Creation from the American Recovery and Reinvestment Act of 2009 Construction values and tax receipts are based on actual year of expenditure (i.e. are not inflated or normalized to 2017). Future values are in current (year 2017) dollars. Observed averages for the 23 expired TSA s are used to estimate the potential overall future value of the 46 active TSAs. Summary statistics are based on a wide range of project types (e.g. new development on vacant land vs. renovation of existing structures; small neighborhood retail vs large commercial developments; TSA terms varying from 5 to 22 years; etc.). Results are intended to demonstrate the broad trends and impacts of past and current TSA projects, and should not be considered demonstrative of any one project. 4

6 December, 2017 Appendix A: Development Details for the 69 TSA Projects 5

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9 December, 2017 Appendix B: Summary of Tax Assessor Data for the 69 TSA Projects 8

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