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SB 3254

AN ACT RELATING TO TOWNS AND CITIES -- STATE AID

2026 Regular Session Introduced by Lou DiPalma

Expands in-lieu-of-taxes payments to 27% of taxes that would be due on exempt real property, now including Department of Defense facilities like Naval Station Newport.

05/07/2026 Committee recommended measure be held for further study
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WeVote Research Nonpartisan
Bill Summary · SB 3254

Rhode Island SB 3254 (2026) – State Aid (Towns and Cities)

A concise, nonpartisan summary of the bill introduced in the Rhode Island General Assembly in the 2026 session.

Purpose and Intent

  • Amend the state aid program that in lieu of local property taxes pays cities and towns a portion of taxes that would have been collected on certain exempt properties.
  • Specifically: add eligibility for in-lieu-of-tax payments to facilities operated by the federal Department of Defense (DoD), in addition to existing eligible facilities (private nonprofit higher education institutions, nonprofit hospitals, Pokanoket Tribe Land Trust properties, and certain state facilities).

Key Provisions

  1. In-Lieu-of-Taxes Payments Expanded (Section 45-13-5.1(a))

    • The state shall annually appropriate to eligible municipalities an amount equal to 27% of the property taxes that would have been collected on exempt real property, for:
      • Private nonprofit higher education institutions
      • Pokanoket Management Group properties
      • Nonprofit hospital facilities
      • State-owned and operated hospitals, veterans' residential facilities, or correctional facilities (occupied by more than 100 residents)
      • New addition: facilities operated by the federal Department of Defense (e.g., Naval Station Newport)
    • This payment is in lieu of real property taxes, with adjustments as provided by the statute.

  2. DoD Facilities Eligibility (New Text)

    • DoD facilities, including Naval Station Newport, shall be eligible for these in-lieu-of-tax payments due to their economic impact and municipal service demands.

  3. Limitations and Protections (Sections 1(a)(2), 1(b), 1(g)-(h))

    • No municipality shall both collect taxes/payments under a for-profit stabilization agreement and receive in-lieu payments for the same property.
    • If a facility’s nonprofit status changes to for-profit, or similar adjustments occur, prior distributions must be handled accordingly.
    • Municipal duty to provide essential services (police, fire, etc.) remains even if the state does not pay under this act; state action cannot absolve towns of these responsibilities.
    • Payments may be reduced pro rata if a municipality suspends or reduces essential services to eligible facilities.

  4. Definitions and Data (Sections 1(c)-(d))

    • Clarifies definitions of “private nonprofit institution of higher education” and “nonprofit hospital facility” for purposes of eligibility.
    • The grant to each municipality is calculated as 27% of eligible property taxes that would have been due on exempt properties as of the December 31, 1986 assessment list (with a transitional reference to December 31, 2004 for fiscal year ending June 30, 2008).

  5. Distribution Timing and Budget (Sections 1(e)-(f))

    • The state budget office must include the annual appropriation amount for this program.
    • Distributions to municipalities are to be made on or before July 31 of each year (or after receipt of assessment data for the following year, whichever is later). Benefits can be counted as receivables for the prior fiscal year.

  6. Effective Date (Section 2)

    • Takes effect upon passage.

Who Would Be Affected

  • Municipalities in Rhode Island that host exempt properties (private nonprofit higher education institutions, nonprofit hospitals, Pokanoket Tribe lands, certain state facilities, and now DoD facilities like Naval Station Newport).
  • The state budget office and the Department of Revenue’s assessment data processes (for determining 27% of tax that would have been collected).
  • DoD facilities and the localities that host them, due to eligibility for in-lieu-of-tax payments and the economic/municipal demand considerations.

Procedural and Timeline Aspects

  • Introduced May 5, 2026; referred to Senate Finance.
  • If enacted, payments would be included in annual state budgets and distributed each July 31 (subject to data timing and fiscal constraints).
  • The act is designed to be effective upon passage.

Practical Implications

  • Enhanced revenue stream for municipalities hosting DoD facilities and other exempt properties, reducing reliance on property tax and state aid for general municipal needs.
  • Treatment remains subject to overall state budget availability; reductions can occur pro rata if total appropriations are insufficient.
  • The change recognizes the significant municipal services and economic impact associated with large federal facilities.

If you’d like, I can provide a quick comparison with current law (pre-SB 3254) or draft a one-page briefing for policymakers or community stakeholders.

Compiled from official sources — confirm details with the bill’s official record.

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