Tax policies can have a significant impact on redevelopment patterns in a city.  In the case of vacant land in Providence’s most disadvantaged neighborhoods, tax policies have been incongruous with the goals of redevelopment and neighborhood revitalization. Vacant lots blight neighborhoods and deprive the City of potential tax revenue.  In fact, the presence of poorly maintained vacant land could actually bring down the value of surrounding properties and impact an entire community.

Tax abatements are one way that the Providence Redevelopment Agency and non-profit organizations can deal with the accumulated taxes that encumber vacant lot redevelopment. There is no clear policy to deal with tax abatement in the city. State law, RIGL 44-7-23, limits the city's ability to grant tax abatements purposefully to discourage municipal corruption and local politics to interfere with taxation. The city has some legislation regarding tax abatement for "rehabilitated properties", City Ordinance Section 21 - 129 through 136. Tax abatement for the Providence Redevelopment Agency is currently conducted by petitioning the City Council for the abatement of back taxes on properties that they plan to transfer for redevelopment projects (usually for non-profits or residents via the $1/ Lot Program).

Recently, the City Council considered Resolution 52 that requires any resolution authorizing abatement of taxes to include information background on the property before it is approved. The Council did not pass this Resolution. The Resolution calls for information that may be difficult or impossible to provide and that will further slow the process of tax abatement. For example, Item 6 of the Resolution requests; "attached copies of any and all present or future owners tax bills for any and all property they may own in the City of Providence and have the City Tax Collector certify that all of their taxes are up to date on these properties". This item would be difficult to comply with for several reasons:

1. The PRA does not always have a purchaser or redevelopment project lined up for vacant lots it acquires.
2. Previous owners are often neglectful which is a primary reason for the PRA to redevelop the property. The PRA owns title to these properties and therefore the relevance of the previous owner's tax history is questionable.
3.  The sheer paperwork and staff time required to pull together all the previous tax records and check with the City's Tax collector will hinder the redevelopment of lots that may be most derelict and in need of tax abatement for reuse.

This new resolution begs the question of why the City Council is hesitant about granting the PRA lots tax abatements. This stance by the City Council may be due to a lack of understanding or realization of the low value of tax delinquent properties. The hesitancy could also be lack of confidence in the PRA to transfer property responsibly although the there is no evidence to support this. The PRA is a city agency that owns (forecloses the right of redeemer) vacant lots for the purpose of turning them over to someone who will redevelop them. In turn, this redevelopment may benefit the Wards of certain City Council members. It seems that the tax abatement process is politically charged and can present obstacles to redevelopment projects that are not favorable to particular Council members. In a Providence Journal article about the City Council’s resolution to request more information before granting tax abatements the journalist commented, "The request [from the City Council] for more information comes at a time when the public has been especially sensitized to tax matters." The recent indictment of four Providence tax officials for tax bribes may be another explanation for the City Council’s reluctance for granting tax abatements.

In an interview I conducted with City Councilwoman Patricia Nolan (Ward 9, Elmwood) she shared with me one of her concerns regarding tax abatements. Councilwoman Nolan states that tax abatements have almost always been granted in cases where properties are being transferred to non-profits or residents (i.e. via Special Vacant Lot Program) for redevelopment. She expresses concern over two points: (1) tax abatement in cases when the future owner is not identified could go to individuals or organizations that are tax delinquent absentee land owners (2) tax abatement represents lost revenue for the city. These concerns again highlight the unrealistic goals associated with delinquent taxes on vacant lots. While the city waits for delinquent taxes to be paid, the property sits derelict and opportunities to redevelop the land and return it to the tax rolls becomes increasingly difficult. On the other hand, Councilwoman Nolan does bring up a valid concern regarding the PRA’s accountability to turn lots over to a responsible redeveloper. This accountability may be accomplished in a more practical manner by making the PRA present an annual report detailing the status of lots they transferred.

Another explanation for the reluctance to abate large amounts of back taxes may be the system of balancing the City's budget. Back taxes that are owed on vacant lots can be presented as positive revenue (future income) in the final budget report. This may be an underlying motivation for allowing back taxes to accumulate without tax abatement. This practice of showing unpaid taxes as revenue should be limited by the State auditors only to taxes that have been delinquent for less than 6 months to a year. The average amount of time it takes before a property’s taxes can be effectively considered unrealized income for the City may only come about from studying the tax delinquent records. These records can show the average time it takes for most property taxes to be paid. I was unable to obtain this information from the Tax Collector’s Office.

Accumulated back taxes can pose significant hurdles to redevelopment efforts especially by organizations or agencies that have very limited funding, such as the PRA or community based non-profits. A vacant property can go tax delinquent for several years before it even goes to tax sale (Tax Sale Law - City Ordinance Sections 2-73 through 76 and Section 21-39.1). The amount of back taxes that can accumulate on a vacant lot can sometimes be greater than the actual value of the property, making resale and redevelopment unrealistic if these taxes must be paid. This idea that back taxes on vacant lots are usually not paid is difficult to prove without access to data on tax delinquent properties from the City. If one could study the Tax Collector’s records it would be useful to calculate the following ratio:

# Vacant lots that remain tax delinquent / # vacant lots that are paid in full & redeveloped.

Although the number and extent of tax delinquent properties is unknown, officials in the city government point to anecdotal evidence of properties whose back taxes have posed significant financial and logistical hurdles to redevelopment.

Currently the process by which the City forecloses on the right of redemption for abandoned vacant properties is not clearly stated and there are a series of state and municipal laws that complicate the process:

State law – RIGL 44-9-25, Petition for Foreclosure of Redemption and RIGL 44-9-25.2, Foreclosure of the rights of redemption on account of constructive abandonment by a city.

City Ordinances – Section 2-75 Foreclosure Rights of redemption, Section 21-39.1 Acquisition of titles of tax delinquent properties for resale as dwellings, PRA Special Vacant Lot Program

Legislation needs to be passed to allow the City to immediately petition to foreclose on the rights of redemption on properties that are effectively abandoned. The City’s Building Inspector must find that the property meets certain outlined requirements (outlined in RIGL 44-9-25.2 Foreclosure of the rights of redemption on account of constructive abandonment by a city or town.) before the PRA can ask the courts to deem a property abandoned. A local tax title attorney has outlined the procedure on how to legally "take" property for redevelopment purposes. This type of step-by-step process can be useful to distribute to local and State officials dealing with any aspect of vacant lot redevelopment.

While there is some level of vacant lot redevelopment currently underway in areas of South Providence, there remains a surplus of vacant lots that will not be developed until a stronger demand for real estate is created in these neighborhoods. The City currently holds tax title to hundreds of tax-delinquent vacant lots that could potentially be redeveloped via the PRA but the PRA does not have the funding to foreclose and repay all the back and future taxes on the properties. Vacant lots that are purchased by the PRA continue to accumulate back taxes because the PRA is not yet a tax-exempt agency. PRA land can become tax-exempt under RIGL 45-32-40 but has not yet done so. If the PRA does acquire tax-exempt status it could effectively serve as a land bank for vacant lots by holding onto these properties until the market is more favorable to redevelopment projects. The motivation for not moving on the tax-exempt status may be due to a shortage of staff, funding and general support from the Mayor’s Office to be more aggressive in redeveloping vacant lots.

Accessing tax information about vacant properties can be extremely challenging. One reason for this access problem is the lack of a clear, unified system of record keeping across all the city agencies/departments. For example, the Tax Assessor's Office and the Tax Collector's Office do not keep each other updated on which properties are sold at tax sale or which lots were deemed tax-delinquent. The Tax Collector's Office keeps its records of tax sale on hard copy, not on a computer database so that figuring the amount of delinquent taxes due on a property can be difficult to track.

Information for large numbers of tax delinquent properties is difficult for the public (and students) to obtain. I attempted over the course of several months to obtain records of tax sales (for vacant lots) and any information on the results of these public tax sales. Attempts at accessing these data via written and personal requests were unsuccessful. The Tax Collector’s Office personnel informed me that the shortage of staff and time would make my request impossible. The recent PlunderDome investigation into the activities of the Tax Collector's and Tax Assessor's Offices highlights the importance of keeping accurate, accountable and accessible records. The indictment of four Providence tax officials, including the former Tax Collector and the Deputy Tax Assessor may also have reduced the staff available to handle information requests. The Acting Tax Collector was only on the job a few weeks when my request for information came through.

The information I was trying to obtain included the addresses of properties that were tax delinquent and that went to tax sale for several years. Specifically, I wanted to sift through this information to find the following:

With this information I would be able to study the following:

This data could be used to inform City agencies and City Council members of the potential value that vacant lots have at tax sale versus in the hands of the PRA or some other responsible developer. This type of tax information could also highlight the types of policies and strategies that would be most effective in redeveloping vacant lots quickly and responsibly. Unfortunately, tax sale and tax delinquency records are difficult if not impossible to access. Furthermore, tax data are poorly managed and communication between agencies regarding tax information is lacking. Because data that are supposed to be public were not made available to me, I cannot prove that vacant lots represent unrealized tax revenue, but Grow Smart Rhode Island has studied the effects of vacant land on municipal tax revenues.

Providence is currently a year and a half late on the state's deadline for property reassessment. This reassessment is important to calculate the current value and the amount of taxes due on vacant lots. The reassessment will be incorporated into the Planning and Development's database (GIS). If these reassessed valuations of vacant properties could be compared with the amount of accumulated back taxes, it might be a good way to identify vacant lots that are in need of acquisition by the PRA for redevelopment before their delinquent taxes worsen. These properties may be declared effectively abandoned by the courts and taken by the PRA for redevelopment.

* Changes in the current tax policies can have a tremendous impact on the redevelopment of vacant lots in the future.

1. First, the Mayor should declare a unifying policy to be adopted by all the City’s agencies (Tax Collector, Tax Assessor, Recorder of Deeds, Department of Planning, PRA, etc.) regarding the goal of redevelopment of vacant properties. Back taxes should be considered a blight not an asset to the City. 
2. One way to encourage this new goal would be to disallow delinquent taxes that are more then 6 months – 1 year in arrears to show up on the budget as a source of revenue. 
3. The City should also work towards making property tax information easily accessible and understandable to the public. This would serve the dual purpose of holding Tax officials accountable while informing new legislation/policies that encourage redevelopment of tax-delinquent vacant land. 
4. One method of convincing the City officials that back taxes are not realistic sources of revenue is by tracking the number of years and the amount of back taxes vacant properties accumulate each year when they go up for tax sale. If very few lots are paid off or purchased at tax sale then it can make a compelling argument for streamlining the redevelopment process for vacant lots.

* Once properties go to tax sale it is difficult to keep properties from getting into the hands of speculators. 

1. In response to this problem, the Tax Sale Realty Law was passed in 1997 (RIGL 44-9-18.2. Assignment to redevelopment agency). The Tax Sale Realty Law allows the Providence Redevelopment Agency (PRA) to target tax delinquent properties that may be vulnerable to speculation, remove them from tax sale and use them for neighborhood development. Lots are considered vulnerable if they have a high chance of being purchased by a land speculator at tax sale. In the fall of 1997, after the legislation passed, about 20 properties were held off the tax sale list at the request of housing non-profit agencies. The City can pull a property at any time, not just before the tax sale, for redevelopment purposes. 
2. This Tax Sale Realty Law could be used more often in conjunction with community groups and local representatives to decide which lots are desirable for redevelop in the neighborhoods. Which community groups and residents get a say in this process? Community organizations or CDC’s could cooperate with the PRA if they show an interest in helping to redevelop lots and as long as they have a good track record for redeveloping vacant lots.

* City and state legislation should make the process of foreclosure for abandoned vacant lots clear and speedy. When there is evidence that a vacant lot has been effectively abandoned (tax delinquent, not maintained, etc), the city/PRA should be able to petition for immediate foreclosure of the property.

* In order to encourage the future redevelopment of vacant lots it is important that either the PRA or another designated tax-exempt organization hold vacant lots without accumulating taxes. Currently the PRA is required to pay property taxes on the land that it holds, therefore discouraging the land banking of vacant lots. 

1. The Rhode Island Housing and Mortgage Finance Corporation (RIHMFC) is already a tax-exempt agency that could also be considered by the PRA for the purpose of foreclosing and land-banking vacant lots until a redevelopment project can redevelop the lots. RIHMFC could then recover the foreclosure costs. This may only be feasible if the PRA does not become tax-exempt and the RIHMFC sets up a program to provide this type of service. 
2. Another mechanism to land bank vacant lots that go to tax sale is by pulling vacant lots off the tax auction if there are no successful bids after two or three tax sales. City properties that are not purchased at the tax auction within this time frame could be automatically pulled off the tax sale and sent to a land bank.

* An informational booklet summarizing tax related procedures, legislation, and policies that affect the redevelopment of vacant, blighted land in the city would be useful for distribution to all City agencies, the City Council, community organizations and any other parties interested in vacant lot redevelopment.

by Ana Baptista

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