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City of Rhode Island council approves tax abatement for Island Living, sets 6.5% ceiling for bond sale
Summary
At a special public hearing the City of Rhode Island City Council approved a tax abatement resolution to facilitate tax-abatement bonds for the Island Living 501(c)(3) project, approved a promissory note contingent on attorney and Island Living approval, and adopted a parameters resolution authorizing a bond sale with a 6.5% maximum true interest cost.
The City of Rhode Island City Council adopted a tax abatement resolution and a parameters resolution authorizing the sale of tax-abatement bonds to support the Island Living nonprofit project, and approved a promissory note for the project contingent on attorney review and Island Living's agreement.
City staff told the council the resolution would allow issuance of tax-abatement bonds whose proceeds would support the Island Living project and explained that, under Minnesota law, the city must hold a public hearing and demonstrate a nexus by identifying parcels whose city-share taxes equal at least the principal due in any given year. Staff emphasized that the abatement calculation uses selected commercial parcels only for the statutory capacity test and that the abatement levy is spread across all taxable parcels like the city's operating and debt-service levies.
Staff said Island Living is registered as a 501(c)(3) and can apply to the county for property-tax-exempt status; whether it obtains exemption affects the city's tax base and future rates. Staff estimated the bonds' true interest cost at about 6.18% and recommended the council set a ceiling with some cushion because markets have been volatile. Council members discussed recent rate movements (staff cited a roughly 25 to 50 basis-point decline in munis) and the taxable, small-issue risk premium for this sale.
To avoid reconvening for a special meeting if market rates moved, the council approved a parameters/trigger resolution that authorizes the mayor and city administrator to sign the bond purchase contract provided the final terms remain below a council-approved ceiling. The council set that ceiling at 6.5% true interest cost.
Separately, the council approved the promissory note as drafted with a change tying monthly repayments to a commencement date of Sept. 15 (the transcript records the year as 2025) and with the approval conditioned on city attorney review; the promissory note approval was further noted to be contingent on Island Living's approval on its side. Staff stated anticipated proceeds delivery around Sept. 5 and noted the city's repayment claim may be subordinate to USDA financing in some respects, underscoring the importance of establishing the abatement or debt-service levy to receive any repayments.
Procedurally, staff said the city had provided required legal notice and conducted the public hearing; the council called for public comment twice, closed the hearing, and then voted. The motions for the promissory note and resolutions 12-24 (tax abatement) and 13-24 (parameters/ceiling) carried on voice votes.
What happens next: staff said bond counsel (Taft) will finalize documents and that, if the sale terms are within the 6.5% ceiling, the mayor and city administrator may execute the bond purchase contract ahead of the council's next regular meeting for ratification then. The promissory note remains contingent on city attorney approval and on Island Living's reciprocal approval.
