PROVIDENCE — Blue Cross & Blue Shield of Rhode Island has already had a tough week, announcing 39 layoffs to trim costs. Now, the City of Providence is breathing down its neck and threatening to pull the $25-million tax treaty for its proposed headquarters building downtown.

Even though the building is well along in the planning process and construction could begin in a few months, several City Council members have objected to the tax treaty already approved for the building, and are poking around the legal language to see if nonprofit Blue Cross should be replaced with a large, for-profit corporate client.

Blue Cross plans to build a $114-million, 13-story, 325,000-square-foot building on the corner of Finance Way and Exchange Street, atop a parking garage under construction to serve two residential towers being built by Boston-based Intercontinental Real Estate Corp.

Under a one-of-a-kind tax plan that came with the site, Blue Cross will receive more than $25 million in tax breaks for choosing the location.

The tax plan was negotiated in 2004 between the city and Intercontinental when the Boston developer signed its long-term lease on the 2-acre Capital Center parcel.

That deal set up the terms for future tax breaks at the Capital Center site without specifying what kind of development was planned. Normally, tax breaks are given only to projects that have highly specific plans, timetables and economic impact projections.

Tomorrow, the council will formally begin the review process on the tax break, but only on the tax stabilization plan to ensure that Intercontinental is in compliance with the terms of the tax treaty.

But Finance Committee Chairman John J. Igliozzi said that if the council finds that Intercontinental’s awarding the tax treaty to Blue Cross violates city statutes, the council will push to have the health-care company taken off the agreement, and the tax treaty instead given to a for-profit, corporate developer from outside the city.

“We want a new business to be located in that site, from outside,” Igliozzi said, adding that there are no immediate options in mind.

Blue Cross spokeswoman Kim Keough said if the city pulls the tax treaty, Blue Cross will not build the headquarters building on the site, even though the tower has already been approved by the Capital Center Commission and construction is set to begin in January.

Igliozzi said that’s not his concern — the tax treaty is a valuable asset, and it should have been used to lure an outside company here, not to move a state-chartered, nonprofit health-care provider to a better building in the same city, he said.

“They’re not my primary interest. My concern is the best interest of the taxpayers, not Intercontinental or Blue Cross, but the residents of Providence. I would love to see more and more big Fortune 500 companies locate here,” Igliozzi said. “We need companies to come into the city and the state. Something where it would really put the city and the state on a more innovative track.”

Igliozzi’s concerns are similar to those voiced by Governor Carcieri when the building was announced in April. “I would prefer to see that tax advantage used to recruit companies to come here from out of state,” Carcieri said at the time.

Igliozzi said he has asked the city’s Law Department to examine the tax treaty and determine whether there are sections that would make Blue Cross ineligible to receive the treaty. In particular, he wants them to look at a section that he says may bar a nonprofit organization like Blue Cross from receiving city tax breaks.

Igliozzi said if Intercontinental is found to be out of compliance by giving the tax break to Blue Cross, Intercontinental will be given a chance to remedy that situation — by finding another tenant. If it doesn’t, the treaty could be pulled from Intercontinental.

“The tax treaty is a contract between the two parties, and if a party on either side breaches that contract in any material way, there’s an opportunity to remedy that breach; or if it can’t be, then it can be revoked,” Igliozzi said.

Majority Leader Terrence M. Hassett said the Blue Cross move isn’t what the council wanted at the site “because it transfers a company from one location to another in the city with no net increase in job growth.” Because Blue Cross was never mentioned when the council approved the tax treaty, Hassett said, the “merits of the benefits” have never been reviewed.

Blue Cross’s Keough said this is a matter between Intercontinental and the city.

“The contract’s between the City of Providence and Intercontinental,” she said. But she pointed out that the city was the one that came to Blue Cross and pitched the location in an effort to keep the health-care insurer from moving to another part of Rhode Island.

“This is something the city brought to our attention,” she said.

The Capital Center Commission recently approved the design, with some stylistic changes. It now must go through the city permitting process.

Providence is also in negotiations with Blue Cross and its competitor, UnitedHealthcare of New England, over which will serve as third-party administrator of the city’s health-care plan. The city built its budget for the current fiscal year around the UnitedHealth figures, and it was assumed at budget time that the city was either going to use UnitedHealth or that Blue Cross would come down to UnitedHealth’s price levels.

Last week, John Simmons, Providence’s chief of administration, said the city is still trying to get the best price out of each of the vendors.

“We are going through the process right now of analysis, pricing each network, how each bid stacks up.”

Simmons said the city’s unions, which predominantly use Blue Cross now, want to stay with Blue Cross. “I think any bargaining unit wants to keep what they have,” he said.

dbarbari@projo.com