A troubled condominium market and serious conditions in the local and national economies have prompted City officials to consider options involving a tax treaty granted to the Capitol Cove condominium development, located on Canal Street, according to City Council Majority Leader Terrence M. Hassett (Ward 12).

The developer, Robert Roth, is seeking permission from the City to lease some of the condo units to Johnson & Wales University for a limited period of time in order to accommodate a need for student housing.  Hassett explained that the university has plans to develop additional on-campus housing for students, and that the lease arrangement with Capitol Cove would provide temporary housing until the university completes its project. The request is under review by the City Solicitor.

Hassett stated that, “The City Solicitor is reviewing the tax treaty that the City entered into with Capitol Cove, LLC, so that the Council may consider its options, given the worsening economy and a looming City budget deficit for the upcoming fiscal year.”

Among the various options to consider, Hassett said, are the following:

1)       Deny the request to lease the property. Hassett said this would “cause the whole project to fail, thus producing no taxes.”

2)       Amend the treaty to allow temporary housing. Hassett noted that under this option, property taxes would continue to be paid.

3)       Enforce the current tax treaty, leaving Capitol Cove the option of selling the property to Johnson & Wales. Hassett emphasized that this option would “render the tax agreement null and void, and would leave the tax-exempt Johnson & Wales owning the property, but paying no taxes.”

Councilman Hassett observed that “there is an irony to the current dilemma, in that the City is seeking permission from the General Assembly to tax colleges, universities and hospitals.” Therefore, Hassett noted, “one other option is to wait until the General Assembly approves a bill to tax these large tax-exempts. If Capitol Cove were then sold to Johnson & Wales, the City could assess property taxes on the property.”

The councilman has long-advocated some form of taxation on tax exempt institutions, as Chairman of the commission that studied the issue in 2003. He noted that Mayor David N. Cicilline ultimately settled for a voluntary payment from some tax-exempt organizations.

Hassett said that he agrees with Councilman John Lombardi, who suggested that if the developer allowed student housing, he would be in violation of the tax stabilization agreement because the agreement prohibits the building’s use as a dormitory. “However,” said Hassett, “we are not there yet. There has been no formal approval given to the developer to use Capitol Cove as a temporary dormitory.

“I have asked the City Solicitor to review the City’s options, given the perilous future of the development during the current economic downtown. I am being fully informed about the matter, given the development’s location in my ward,” Hassett continued. “The assistance I have sought is that of Fred Stolle, Assistant City Solicitor. Given Councilman Lombardi’s concern, I have asked the solicitor’s office to update him on the status of the work already underway to address the future of Capitol Cove.”