Providence Mayor David N. Cicilline, left, and Richard Kerbel, his director of administration, listen to testimony.

The Providence Journal / Connie Grosch

PROVIDENCE — Municipal leaders testifying before two General Assembly committees on Tuesday said that two proposed taxes on private colleges and hospitals would provide much-needed revenue to communities while still honoring the special tax status of nonprofit institutions.

College, hospital and business officials and students, however, told the panels the taxes would be an unfair burden on institutions that already contribute greatly to their communities.

“Nonprofits are a public good. It’s a slippery slope when nonprofits become looked at as revenue sources,” the Rev. Brian Shanley, president of Providence College, told the House Finance Committee. “This is a short-sighted approach to a real systemic problem in the state, which is encouraging economic development.”

Providence Mayor David N. Cicilline, whose administration developed the legislation, said: “There is a universal agreement, even among the institutions, that they owe something … The only question is what is the proper level of contribution.”

One bill, sponsored by House Majority Leader Gordon D. Fox, a Providence Democrat, would require private colleges pay their host community a “student impact fee” equivalent to $150 per student per semester. The fee would not be assessed for students who are Rhode Island residents.

The other bill, sponsored by Rep. Thomas C. Slater, D-Providence, would authorize municipalities to collect a fee in lieu of taxes from nonprofit — and thus nontaxable — entities that own properties assessed at $20 million or more. The fee would equal 25 percent of what the commercial tax bill would have been on the properties.

During the three-hour-long House Finance Committee hearing in the afternoon, committee members bore down on university and hospital representatives, criticizing them for failing to develop a much-discussed “knowledge-based” economy centered around Providence’s world-class hospitals and universities.

“There was a lot of grandstanding from the Providence representatives. They clearly supported the mayor,” Father Shanley said later. A Senate Finance Committee hearing later in the day was about half as long and “more civil,” according to the PC president, who testified at both hearings. No action was taken by either panel.

Proponents of the bills, including Providence City Council members and the Rhode Island League of Cities and Towns, argued that they are crucial at a time when municipal revenues are declining sharply and the state is slashing local aid.

They argued that residents are paying higher property taxes to cover municipal services while large nonprofit institutions use the same services but do not pay their fair share.

“Subsidies should be reserved for the needy, not for enormous nonprofits and non-resident students,” said Cathy Lund, a Providence resident.

“It’s a level of unfairness that has been going on for so long that we’ve become numb to it,” agreed Providence Councilman Terrence Hassett.

Opponents said it is “counterintuitive” to tax institutions that, they asserted, are vital to the recovery of the state’s economy. “Taxing one of the few sectors that is seeing growth is the wrong approach,” said John E. Donahue, director of Brown University’s Brain Science Program.

But House Finance Committee Chairman Steven Costantino was not impressed. Universities and hospitals “talk a big game about the knowledge economy, but I just don’t see it,” the Providence Democrat said.

“You talk about job growth and I’m not seeing it. You talk about partnerships, but I’m not seeing it,” he said.

For Providence, home to four private universities and six major hospitals, the two bills represent a potential $27 million in annual revenue, with $20.7 million coming from the assessments on big property owners and $6.2 million from the student impact fee, Cicilline said.

In North Providence, which is home to Our Lady of Fatima Hospital, it would mean $350,000 in revenue. “That’s a very, very significant amount for the city,” said Mayor Charles A. Lombardi.

East Greenwich Town Council President Michael B. Isaacs said his community, which will be the future home of the New England Institute of Technology (it’s now in Warwick) would get up to $77,000 in new revenue.

“We’re asking for a very modest amount of money,” said Cicilline. “It will not solve the problems of cities or towns, but will be a part of an answer.”

pmarcelo@projo.com