Friday, May 19, 2023
Attorney Max Wistow. PHOTO: GoLocal
Max Wistow, the attorney who recovered more than $60 million for the state of Rhode Island in the 38 Studios collapse and nearly $50 million for the retirees of the failed St. Joseph pension fund, is now being tapped by the Providence City Council.
The firm, Wistow, Sheehan, and Loveley will review the merits of a 2021 consent judgment executed by the administration of former Mayor Jorge Elorza that allowed the owner of 10 downtown buildings to pay significantly lower property taxes to the city in the amount of approximately $42,500,000 over 30 years.
On Thursday, City Council President Rachel Miller announced the hiring of Wistow’s firm as outside legal counsel. Wistow told GoLocal, “Clearly this is a case that deserves very, very close scrutiny.”
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The big winner in the Elorza tax agreement was Arnold “Buff” Chace — the owner of the ten properties.
Instead of paying taxes under the tax stabilization agreements, the new agreement allowed Chace to shift to pay a flat 8% rate on his property.
This is not Chace’s only legal battle. His cousin Malcolm Chace and other members of his family has filed a massive lawsuit claiming he has misused tens of millions of dollars in family trust funds.
Developer Arnold “Buff” Chace PHOTO: promotional
Internal Auditor Finds Irregularities, Lack of Approval and Other Potential Violations
A December 2022 report from Providence’s Internal Auditor, Gina Costa, identified several legal issues regarding the settlement of a consent decree without approval before the city council. The auditor recommended hiring outside counsel to review the matter. Through a resolution in March, the city council authorized the council president to engage outside attorneys.
Specifically, she identified that “This consent order was approved and implemented without the approval of the City Council, the Committee on Claims and Pending Suits or the Board of Tax Assessment and Review. The City Solicitor claims that his authority to enter into the Consent Order rests in Code of Ordinances Sec 2-99 (b) (4). This section does allow the Solicitor to settle. However, that settlement authority requires the city Tax Assessor’s consent. My research has been unable to identify any such consent from the Tax Assessor at the time the Consent Order was signed, but a response from the Solicitor is pending.”
In addition Costa found the leases that are being used to justify restricted “low-income” units includes students with zero income level. Housing and Urban Development (HUD) does not include students as eligible for qualification in other HUD approved properties.
Further, Costa unveiled, “These properties are mixed-use and contain both commercial and residential space. Under this Consent Order the entire property, including commercial space such as restaurants and stores, is now being taxed the same as the residential – 8% of the previous year’s gross income. The Tax Assessor is empowered to separate the commercial from the residential, however, the Consent Order does not allow for that separation.”
And, “There is retroactivity to abate taxes to July 24, 2020, even though there was no restricted covenant in place at that time, as required. Approximately $626,000 has been abated for six of the ten properties. The Assessor did ask for the HUD forms that would confirm the qualification of “affordability” after the Consent Order was entered with the Court but was instead simply provided with the leases themselves.”
There are other questions about income qualifications and proper reporting, according to Costa.
The controversial agreement was approved by Elorza and Smiley City Solicitor Jeff Dana PHOTO: File
Chace’s Lawyer/Lobbyist Defends the Deal
Nick Hemond, the lobbyist and attorney for Chace, defends the agreement between the Elorza Administration and Chace.
“I don’t have the tenant makeup as I sit here now, as I’m the attorney, not the leasing manager. I have had discussions on this subject and it’s my understanding that if there was a unit occupied by a student, the income of the co-signer is used in the calculation. Again, I’m not entirely certain on that but I’ve had these discussions before,” said Hemond, a partner in DarrowEvertt.
“Regardless, the calculation of income eligibility for the deed-restricted unit is done pursuant to the applicable regulations and if the tenants are not compliant with the regulations, then the unit doesn’t qualify, and there would be a compliance issue with the law if it wasn’t remedied,” Hemond said.
And, Hemond stated that his client was not responsible as to how the city approved the agreement.
“I am not the solicitor, so whether something does or doesn’t need ratification by the council is governed by the city charter and is a question better directed at the solicitor’s office. My understanding is that the solicitor had the authority to enter into the consent judgment in order to resolve litigation. I’m not privy to the conversations between the solicitor and his clients as I was on the other side of the case representing my clients,” said Hemond.
“The 8 percent was applied to the entirety of the property as there is no carve out for units in the statute. This was a point we sought a declaratory judgment on these properties are overwhelmingly residential in nature and the only commercial space as the street level storefront units which are required under the zoning ordinance. The consent order covered the entire property and so that is what the city is obligated to apply when it sends out tax bills,” added Hemond.
The attorney who agreed to the consent decree was City Solicitor Jeff Dana — legal counsel under the Elorza administration and retained by sitting Mayor Brett Smiley.
EDITOR’S NOTE: Hemond’s firm represents GoLocal on a separate legal matter.
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