Bryant's mandatory payment another black eye for state

Bryant's mandatory payment another black eye for state

When few were watching, "mandatory volunteerism" became the official state policy of Rhode Island, as declared by the governor and General Assembly last month. The oxymoronic policy, embedded in a new law, is attracting nationwide, disapproving attention for what it says about the unfavorable climate for doing business in the Ocean State.

At issue is a law mandating that a tax-exempt nonprofit, Bryant University, must "voluntarily" agree to pay the town of Smithfield hundreds of thousands of additional dollars in lieu of taxes, or else the town will be empowered to tax the university the same amount in the form of new "fees." This approach to law-making is abhorrent: a state that is willing to pass one law ... to empower one town ... to tax one particular entity ... unless that entity caves to the town's demands.

Innovative nonprofits, as well as local businesses, chambers of commerce, real estate agents, economic development councils, and others ought to be quite nervous about flight from and avoidance of Rhode Island once others see the new law and what it says about the climate for doing business in Rhode Island. If politicians are willing to empower individual municipalities to ignore longstanding law by taxing a nonprofit that is tax-exempt, then where will it stop?

The facts are not in dispute; Smithfield already reaps huge rewards by having Bryant University located within its borders. Bryant employs more than 1,000 people, plus brings in more than 3,300 students, who consume products and services that contribute more than $17 million to the Smithfield economy.

Indeed, many cities and states give away huge tax incentives to lure in new businesses that yield far less in economic benefit. 38 Studios is only one notorious example of such failed policy endeavors.

The nonprofit university also contributes more than $800,000 every year in cash and other direct and indirect services to the town. Further, like many larger nonprofit institutions, Bryant employs its own police force, which helps to relieve the burden on local law-enforcement officials, and opens its grounds and facilities to municipal events. These and other contributions by the nonprofit help make Smithfield a healthier, more engaged community.

On top of all that, the state makes payments to Smithfield and other local communities of 25 percent of the value of property tax revenues foregone due to the tax-exempt status of governments, nonprofits, and others. The state's payment of approximately $500,000 annually to Smithfield clearly covers costs for such items as fire protection allegedly at issue in the Smithfield-Bryant University "negotiations."

Unsatisfied with this windfall of millions of dollars in benefits from having a nonprofit university as a steady and reliable citizen, the town is demanding that Bryant pay an additional $300,000 or more every year. In essence, the town is saying: Even though Smithfield's budget hole is smaller because of Bryant, we think the nonprofit has money, so we demand some of it.

Bryant reportedly is considering litigation to block the new law on the grounds that it is unconstitutional. Its success before the courts may correct a shameful legislative aberration, but the damage to the state's reputation already has been done by lawmakers.

Charitable nonprofits and other businesses in the rest of the country are asking, why would we want to do business in Rhode Island where lawmakers opt for confrontation and arbitrary legislative action rather than collaboration? Elsewhere, nonprofits sit down with their public officials to address local problems, together.

Nonprofits recognize that governments at all levels are running short of resources; that is why, like Bryant University, they work to earn their tax exemptions every day by giving back to their hometowns in multiple ways. Likewise, government officials elsewhere acknowledge the many contributions of their nonprofit partners and understand that charitable resources are dedicated to the missions of the organizations of serving their communities. Those private resources are not "pots of gold" for the taking by politicians.

For the sake of the town's and state's reputation, representatives from the Smithfield would be well-served to return to the negotiating table, not with a demand for payment, but with expressions of thanks for what the university does for the community. Nonprofits are proven problem-solvers and natural partners with governments across the country. Truly working together, without outside threats and legislative overreaching, will work wonders for the town and make it an attractive destination for others to do business.

David L. Thompson

Thompson is Vice President of Public Policy for the National Council of Nonprofits in Washington, D.C., whose state association and national nonprofit members are active on tax and other nonprofit policy issues in the states.

Editor's Note: While Bryant has its own police force, the force does not have arrest powers, so Smithfield town police must make arrests and devote time and resources to following through with the prosecution of an individual.