Rhode Island Supreme Court Supports Town Council’s Right to Offer Tax Exemptions to Encourage Development

Rhode Island has enjoyed a growing economy over the last several years. As cities and towns grow and development fill in the spaces of our small state, municipalities sometimes must compete with one another to encourage companies to choose their town for construction and development. Rhode Island law allows municipalities to offer tax exemptions to certain approved development projects in order to make their location more desirable. The procedures for issuing such tax exemptions can be the subject of conflict between developers and municipalities, as evidenced by a recent case decided by the Rhode Island Supreme Court.

According to the facts discussed in a recently published appellate opinion, the plaintiff owns a large parcel of property within the boundaries of the town of Lincoln, which is the defendant named in the case. The plaintiff obtained preliminary approval for a development plan on the property to build over 200 homes, some of which would be classified as “affordable housing.” To make the plaintiff’s plan financially feasible, the plaintiff would need a tax stabilization agreement from the town of Lincoln.

Based on a 2003 law that gave the town council the right to approve such a tax stabilization agreement for affordable housing projects, the plaintiff submitted a proposal from the council for a tax agreement. The town council refused to consider the plaintiff’s request, claiming that such a request would require approval from the Financial Town Meeting, which is a group of citizens that meets once per year to make economic decisions for the town. The plaintiff disputed the defendant’s claim that the tax agreement needed to be approved by an FTM, pointing to the 2003 law that expressly gave the town council the right to enter into such agreements.

The plaintiff sought relief directly from the Rhode Island Supreme Court, petitioning the court for a declaratory judgment that would force the town council of Lincoln to address the plaintiff’s proposal without waiting for the one day that the FTM was in session. The high court evaluated each parties’ claims and ruled in favor of the plaintiff, finding that historically towns have given the power to enter into such agreements to their own councils and that the 2003 law referenced by the plaintiff did just that. As a result of the high court’s decision, the town council will be forced to evaluate the plaintiff’s request.

Seeking Tax Agreements from Municipalities to Encourage Development

If you or a business associate is seeking to start a Rhode Island development project, the tax agreements that you may be offered by municipalities in the state can make the difference between a profitable project and a failure. Consulting with a qualified Rhode Island real estate attorney with Bilodeau Capalbo can help you make the best decision as to where to propose your development. With our skilled advocacy, you can be confident that you’re being offered the most favorable tax agreement. If you have questions about development or tax agreements, give us a call to discuss your situation today by contacting our offices at 401-300-4055.