No Local Representation? More Taxation

unions oppose AS220's tax plan

by by Katie Lindstedt

At a City Council hearing on October 15, representatives of local carpenters’ and painters’ unions protested AS220’s request for a tax stabilization plan—intended to aid its upcoming renovation project—on the basis of economic and ethical concerns. The unions disapprove of what they deem the Providence arts space’s disregard for locally prevailing wages and apprentice hires. Lucie Searle, AS220’s real estate development director, views this critique as a purely pro-union sentiment.

AS220—a non-profit community arts organization—plans to renovate the Mercantile Block, one of its three "mixed use" buildings comprised of work studios, galleries, performance spaces, and affordable residences. The tax that commercial properties like the Mercantile is charged by the city includes both a land tax and a building tax. Rhode Island state law also allows a municipality to tax proprietors of affordable housing at eight percent of the total income that residents pay for rent. With the combination of these various taxes, the Mercantile’s grand total currently runs just under $60,000.

AS220 hopes to use a tax stabilization program, which would prevent the city from raising taxes on the property for a designated length of time, as both immediate relief and a means of attracting tenants.
“Commercial taxes [make] it very hard to make a project work without getting some relief,” Searle said.
She added stable taxes would also help AS220 attract and retain diverse tenants. Commercial properties typically divide their tax bill among the tenants, whose leases usually run for a range of five to 10 years.
“We want to be able to give the tenants some idea of what they can expect in the way of property taxes,” Searle explained. “A tax stabilization program in effect stabilizes your taxes over a 10 year period, so it gives you predictability.”

AS220 has requested to pay only the land tax—just under $12,000—during the two-year construction period. After the building is complete, the organization has asked to freeze the property taxes on the first and second floors at $34,248 a year for the next 10 years. If the stabilization plan passes, AS220 would pay the city slightly over $50,000 in taxes every year for 10 years.

The proposal first passed through a City Council finance committee hearing three weeks ago, on October 8, where it was unanimously approved. It was then sent to the full City Council for a reading on October 15, where 12 of 15 council members were present, all of whom voted in favor of the proposal. There will be one more reading of the proposal before the full Council in early November.

At the October 15 reading, residents and representatives from both Local 195 of the International Union of Painters and Allied Trades and Local 94 of the New England Regional Carpenters Union protested the proposal on two main bases. The proposal’s opponents do not think the city should reprieve AS220 of its full tax duties in an economically ill climate. The unions also have ethical reservations about the renovations; they claim that AS220 does not meet the three key provisions: local employment, use of apprenticeships, and payment of prevailing wages. These parties had the same concerns with a tax stabilization proposal for Capital Cove—a Johnson and Wales University dorm—though they supported a similar tax program for the Intercontinental apartment complex.

“Whatever the taxes are, they should pay it,” resident Keith Childress said at the hearing. “Residents pay their full taxes. They should pay theirs.”

“As much as the tax treaties do sometimes help, I’m not so sure now that we should be doing any more [of them] in light of what the average Providence taxpayer is going through,” Thomas Savoie, business representative for Local 94, said. “How much more on the back of the taxpayer?”

Searle noted that individual homeowners are not eligible for the kind of tax program AS220 is requesting. Moreover, the tax stabilization program may have a positive impact on the local economy; the renovation has created 150 construction jobs and will create a number of permanent jobs after its completion.
The union representatives also objected to AS220’s decision to use the contractor Pezzuco Construction, which does not hire union labor.

Both Savoie and Scott Duhamel of Local 195 argue that Pezzuco Construction—AS220’s contractor—frequently hires subcontractors that mistreat their employees.

“Providence residents need good jobs that provide locally prevailing wages, and they’re not providing that,” Savoie said.

Many of Duhamel’s concerns are grounded in the past; he claims that AS220’s 2007 renovation of the Dreyfus—a 19th century hotel—did not constitute ethical construction.

“I say all of this because of the practices that were utilized on AS220’s last project. If it’s similar to what occurred there, worker treatment will be ignored. There were 75-80 percent of the construction workers without healthcare,” he said.

Richard Pezzuco, president of Pezzuco Construction, told the Providence Journal that his company provides health care and offers apprenticeships for its workers. He also noted that the project is not subject to federal requirements for paying employees prevailing wages since it is privately financed.

But Duhamel objected: “Doesn’t public funding then make it a publicly financed project? When I see the city step in, whichever way you want to spell it, they’re being helped by a municipal entity.”

Searle said she reads the opposition from the unions as a politically charged message.
“I think the unions would like the see the renovations as an all-union job,” she said.
But Duhamel disagreed. “It’s not a union versus non-union issue,” he said. “It’s about checks and balances and having qualified contractors.”

Searle noted that AS220 does not make a union or non-union requirement when choosing its contractors. “We look for professionalism, competence, experience, and price. We have some union subcontractors and some non-union subcontractors.”

For construction projects, the city sets goals—in terms of minority and local employment—that it would like the contractors to meet. AS220 has exceeded all the projected ratios. The city’s goal for Minority Business Enterprise (MBE) and Woman Business Enterprise (WBE) workers—combined—is 25 percent, and AS220 is at 26 percent. AS220 has 20 percent local workers, while the city’s goal is set at 10 percent. Though there is no requirement for union or non-union workers, yet the project’s workforce consists of 30 percent union workers.

The city sets no standards for apprenticeships, which, along with local hires and prevailing wages, is the cornerstone of Savoie and Duhamel’s critique.

“There have been many attempts to legislate the language around these standards,” Duhamel said. “Most have failed, but there will continue to be efforts.”

But he is skeptical of success. “So far it’s been easy to attain [the suggested percentage] of local workers. That job has a long way to go,” he added, again using the Dreyfus renovation as a reference point.
According to Searle, AS220 has already hired the majority of workers for the project. Still, Savoie objects to the fact that Pezzuco is a Cranston-based company and that AS220 hired an electrical company from Massachusetts.

Despite the project’s arguably non-local contractors, Searle, who is also a member of the Providence Preservation Society, perceives Providence as integral to AS220’s construction—and AS220’s construction as integral to Providence.

“Providence has one of the most intact 19th century downtown districts. In the process of [the renovations], you restore a building that’s been tarnished and readapt it to something that makes sense today,” Searle said. “These projects preserve Providence’s uniqueness. We don’t look like other cities that have lost their downtown and their sense of history.”

Duhamel admires AS220’s architectural sensibilities. “I think [AS220 understands] the architecture of the city, I think they’re making those buildings viable,” he said. But he draws a firm line between the positive—AS220’s innovative urban renovation—and what he considers the negative. “I’m an AS220 supporter; I’m just not a fan of AS220’s building practices,” he said.

While both AS220 and the unions have the local community’s best interest in mind, the notion of what constitutes a local community—and the means necessary to construct it—may be too subjective for the two parties to reconcile.
KATIE LINDSTEDT B’11 is the People’s voice.