2014 -- H 8068

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LC005451

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT

     

     Introduced By: Representatives Carnevale, Marshall, Hull, Palangio, and Almeida

     Date Introduced: April 17, 2014

     Referred To: House Finance

     It is enacted by the General Assembly as follows:

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     SECTION 1. Title 42 of the General Laws entitled "STATE AFFAIRS AND

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GOVERNMENT" is hereby amended by adding thereto the following chapter:

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CHAPTER 64.20

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THE 111 WESTMINSTER STREET HISTORIC REDEVELOPMENT AND ECONOMIC

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DEVELOPMENT PROGRAM

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     42-64.20-1. Declaration of purpose. – (a) the general assembly finds and declares the

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building located at 111 Westminster Street, city of Providence, county of Providence, state of

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Rhode Island (hereinafter referred to as "111 Westminster") is an iconic historic structure that has

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and will continue to play a crucial role in the vitality of downtown Providence and the historic

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fabric of the state. 111 Westminster is among the most visible and prominent buildings in the

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capital city's skyline. 111 Westminster is a certified historic structure as defined under Rhode

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Island general laws § 44-33.6-2 and its preservation shall foster civic beauty, promote public

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education, pleasure and welfare and otherwise generally improve and enhance the economic

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wellbeing of the citizens of the state of Rhode Island. The general assembly recognizes that, like

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most historic structures in central business districts across the state of Rhode Island, without

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providing economic incentives or assistance, 111 Westminster is not viable for redevelopment

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and reuse by modem commercial, residential or manufacturing enterprises. The high cost of

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redeveloping 111 Westminster is prohibitive to placing the building back into service at its

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highest and best use for the overall city and state economies and, as such, is at serious risk of

 

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further deterioration and continued vacancy, which shall serve to detract from neighboring

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properties and the capital city's downtown as a whole. The purpose of this chapter is to create an

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economic investment package by way of a public-private partnership to stimulate the

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redevelopment of 111 Westminster, stabilize the commercial office market in downtown

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Providence, preserve and potentially enhance property values in the capital city's downtown, as

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well as generate positive economic and employment activities that will result from the

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redevelopment and reuse of the building.

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     (b) The general assembly recognizes that the commercial office space market in

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downtown Providence has over one million square feet (1,000,000 sq. ft.) of vacant office space.

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This overwhelming vacancy rate would only be further exacerbated if 111 Westminster flooded

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the market with more than three hundred fifty thousand square feet (350,000 sq. ft.) of additional

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vacant space. Conversely, the downtown Providence has one of the highest residential rental

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apartment occupancy rates in the county of Providence. There is a clear shortage of apartment

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units that needs to be addressed for the overall economic vitality of the city of Providence and

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state of Rhode Island.

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     (c) The highest and best use of 111 Westminster is to redevelop the building into a

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modern mixed use building with commercial, retail and public space on the ground floor and

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approximately two hundred fifty (250) apartment units on the remaining floors of the building.

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This will enhance the tax base of the city of Providence, stabilize the property values of the

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surrounding properties, particularly commercial office buildings, and attract hundreds of new

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residents to live in downtown Providence. This conversion will create approximately one

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thousand (1,000) jobs related to redevelopment activities, and generate millions of dollars in

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economic activity in the struggling construction industry. The establishment of a public-private

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partnership with the owner of the building will attract over eighty million dollars ($80,000,000) in

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private and federal investment in downtown Providence. The redevelopment of 111 Westminster

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will generate over forty million dollars ($40,000,000) in wages paid to people working in Rhode

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Island. The redevelopment of 111 Westminster will generate approximately one hundred million

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five hundred thousand dollars ($100,500,000) in qualified rehabilitative expenditures as defined

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by Rhode Island general law § 44-33.6-2. The presence of hundreds of new residents living in

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downtown Providence will also benefit the restaurants, stores and other small businesses

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currently located in downtown Providence, further strengthening commerce in the re-emerging

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downtown.

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     (d) Furthermore, the general assembly recognizes the need for a public-private

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partnership with the owner of 111 Westminster. The state has experienced great success in

 

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investing in the rehabilitation of historic structures in various forms. In the past, investing in the

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rehabilitation of historic structures has created thousand of jobs and generated hundreds of

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millions of dollars in economic activity in the state, as well as preserved and enhanced property

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values in many communities throughout the state. Due to the universally high costs of such

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historic rehabilitation projects and the large scale of this particular project, the state of Rhode

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Island's presently available economic incentive programs for redeveloping historic structures are

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inadequate in scope. Given the high cost of the redevelopment of 111 Westminster and the

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current market rental rates, this project cannot be financed without public support. The owner of

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111 Westminster anticipates being able to secure approximately eighty million five hundred

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thousand dollars ($80,500,000) in new equity, debt and the monetization of federal historic tax

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credits for the anticipated redevelopment project. This leaves a need for state investment in the

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project of thirty-nine million dollars ($39,000,000) to make the redevelopment of 111

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Westminster financially viable. This chapter shall create an economic investment package by way

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of a public-private partnership to stimulate the redevelopment of 111 Westminster and thereby

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preserving and enhancing the capital city's downtown, creating needed employment

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opportunities, and generating substantial direct and indirect positive economic activities/impact

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that will result from the subject redevelopment project and the resulting use of same as a vibrant

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mixed use building that preserves its iconic stature.

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     42-64.20-2. Definitions. -- As used in this chapter:

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     (1) "Certified rehabilitation" means any rehabilitation of a certified historic structure

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consistent with the historic character of such property or the district in which the property is

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located as determined by the guidelines of the Rhode Island historical preservation and heritage

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commission created pursuant to § 42-45-2.

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     (2) "Commission" means the Rhode Island historical preservation and heritage

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commission created pursuant to § 42-45-2.

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     (3) "Owner" means the individual, corporation, partnership or LLC that is the owner of

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record of 111 Westminster.

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     (4) "Placed in service" means that substantial rehabilitation work has been completed

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which would allow for occupancy of a substantial portion of the structure, or the owner has

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commenced depreciation of the qualified rehabilitation expenditures, whichever occurs first.

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     (5) "Qualified Rehabilitative Expenditures" or "QREs" means any amounts expended in

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the rehabilitation of a certified historic structure properly capitalized to the building and either:

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     (i) Depreciable under the Internal Revenue Code, 26 U.S.C. l et seq.; or

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     (ii) Made with respect to property held for sale by the owner.

 

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     (6) "Remain idle" means that work crews have been reduced by more than twenty-five

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percent (25%) for reasons unrelated to scheduled completion of work in accordance with the

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project schedule, reasonably unanticipated physical conditions, shortage or issues related to

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scheduling of work force, or force majeure; or the project schedule that was originally submitted

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by the owner to the commission has been extended by more than twelve (12) months for reasons

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other than reasonably unanticipated physical conditions or an event of force majeure (by way of

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example, and not in limitation, any delays, work stoppage or work force reduction caused by

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issues with project funding, finances, disputes or violations of laws shall be deemed to cause the

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project to remain idle).

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     42-64.20-3. Historic redevelopment program and revolving fund. -- This chapter shall

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establish the 111 Westminster historic redevelopment program and revolving fund. The program

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shall be for an amount not to exceed thirty-nine million dollars ($39,000,000), provided that the

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projects total QRE's equal or exceed one hundred million five hundred thousand dollars

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($100,500,000). The amount of the direct allocation to the owner shall be allocated over four (4)

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consecutive fiscal years in equal amounts of nine million seven hundred fifty dollars

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($9,750,000), commencing with fiscal year 2015, and administered by the Rhode Island

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department of administration. No funds from the program shall be released until the project is

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placed in service. As the project's construction phase is expected to take approximately two (2)

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years, the first fiscal year's payment of the allocated funds shall be held by the state in escrow and

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not paid until the completion of the project. Thus, the payment of the funds in the second fiscal

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year shall be nineteen million five hundred thousand dollars ($19,500,000) and then payments of

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nine million seven hundred fifty thousand dollars ($9,750,000) in each of the following fiscal

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years. Following the funding of the fourth and final payment, upon a capital event resulting from

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the sale or refinancing of the project, any amount paid to the owner under this program above

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thirty percent (30%) of QREs shall be repaid to the state of Rhode Island prior to the owner

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realizing any return over the actual amounts invested in the project (the "refundable investment

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component"). By way of example, upon such a capital event, the proceeds shall go first to

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repaying third-party debt, then to repayment of equity invested (without any interest or profit

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thereon), and then to repay the refundable grant component (with any balance after such

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repayment going to owner). Capital events involving 111 Westminster shall be subject to the

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foregoing repayment until such time as the state of Rhode Island has recovered, in the aggregate,

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the entire refundable grant component. The refundable investment component of the project shall

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be placed into a revolving fund created and administered by the state of Rhode Island to

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rehabilitate historic structures in need of assistance across the state. The revolving fund shall be

 

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established and administered in accordance with Rhode Island law. The specific payment

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schedule and funding of the program shall be established by the Rhode Island department of

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administration. The owner intends to obtain financing in anticipation of the aforementioned

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funding of the program.

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     42-64.20-4. Procedure and oversight. -- The owner shall, within nine (9) months from

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passage of this chapter, submit a redevelopment proposal to the commission and the department

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of administration for review. The owner shall be allowed two (2) ninety (90) day extensions if the

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delay in providing the report is caused by forced outside of the reasonable control of the owner.

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Said proposal shall include detailed redevelopment plans, a detailed project budget and all

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relevant financial information and documentation, including, but not limited to, the project's

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equity sources, anticipated debt sources, expected federal tax credits, and anticipated QREs. The

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owner shall also include a construction timeline demonstrating a time frame during which work

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shall begin and be completed. Upon receipt of the proposal, the commission shall review the

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proposed redevelopment of the building for the purpose of certifying the rehabilitation as

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compliant with the historic character of the building and the surrounding district pursuant to the

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commission's current guidelines for rehabilitation of historic structures. The commission shall

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complete its review and issue its certification (or a detailed report setting forth the elements of

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non-compliance) within thirty (30) days of its receipt of such proposal or any resubmission

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thereof. Upon substantial completion of the rehabilitation and the project being placed in service,

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the commission shall, within thirty (30) days of the owner notifying the commission of

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substantial completion, certify that the rehabilitation has been completed in accordance with its

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guidelines (or issue a detailed report setting forth the elements of non-compliance). Upon

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substantial completion of the rehabilitation, the owner shall provide the department of

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administration a schedule of the actual QREs, a list of contractors and subcontractors that worked

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on the project, the number of tradespersons employed on the project, the name, state of residence,

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occupation, number of hours worked, and actual wages and fringe benefits paid to each worker

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employed by the owner and/or any of its contractors or subcontractors and verification of

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apprenticeship programs and the number of hours of work completed by apprentices on the

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QREs. The department of administration shall work with the department of labor and training to

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certify the accuracy of the information provided by the owner. Provided that owner has

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substantially complied with the commission guidelines and the terms and conditions of this

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chapter, the applicable portion of the grant shall be funded within sixty (60) days of the project

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being placed in service.

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     During the construction phase of the rehabilitation of 111 Westminster, the owner shall

 

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provide quarterly updates on the progress and financial status of the project to the department of

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administration. These reports shall include an approximate schedule of the QREs, a list of

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contractors and subcontractors that worked on the project, the number of tradespersons employed

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on the project, the name, state of residence, occupation, number of hours worked, and actual

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wages and fringe benefits paid to each worker employed by the owner and/or any of its

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contractors or subcontractors and verification of apprenticeship programs and the number of

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hours of work completed by apprentices on the QREs. Furthermore, the department of

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administration, for the purpose of ascertaining the correctness of any claim made by the owner

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under the provisions of this chapter, may examine any books, papers, records or memoranda

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bearing upon the matters required to be included in the reports or any other statement.

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     42-64.20-5. Completion and economic benefit bond guaranty. -- The owner shall

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contract for and or purchase a private bond from an institution mutually agreed upon by the

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owner and the department of administration. This bond shall be for an amount sufficient to

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guaranty the completion of the project thus ensuring that all the economic and employment

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benefits to the state of Rhode Island are realized in the event that the owner is financially unable

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to complete the project or the project should remain idle as defined in this chapter. The bond

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company shall have no recourse against the state of Rhode Island and the cost of said completion

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bond shall be borne entirely by the owner. The terms of the bond must ensure that the work of

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rehabilitating 111 Westminster in accordance with the terms of this chapter and the proposal

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approved by the commission is completed and all of the wages owed and materials costs are paid

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as anticipated.

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     42-64.20-6. Workforce development. -- All contractors and subcontractors who perform

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work on the 111 Westminster rehabilitation shall have an apprenticeship program for all

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apprenticeable crafts that will be employed on the project at the time of bid, and that no less than

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ten percent (10%) of the labor hours worked on the project shall be performed by apprentices in

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these programs unless there is a demonstration of a lack of availability of apprentices or a written

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determination by the department of administration that compliance with the apprenticeship

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requirements are unduly cost prohibitive. The provisions of this section shall apply only to

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contractors and subcontractors with five (5) or more employees. To the extent that any of the

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provisions contained herein conflict with the requirements for federal historic tax credits, federal

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law and regulations shall govern.

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     42-64.20-7. Payment of wages. -- The owner and/or all contractors and subcontractors

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working on the 111 Westminster project pursuant to this chapter shall comply with the

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requirements of § 37-13-7.

 

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     42-64.20-8. Kennedy Plaza revitalization fund. -- In recognition of the critical relation

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between the success of a clean, safe and active Kennedy Plaza and the success of 111

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Westminster, the owner shall establish an endowment fund for the maintenance, enhancement and

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programming of Kennedy Plaza, or otherwise fund an organization charged with maintaining,

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enhancing and programming Kennedy Plaza, and shall contribute fifty thousand dollars ($50,000)

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annually to said fund or organization, as applicable. The owner shall make said contributions for

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a period of ten (10) years or until the owner has paid back the refundable grant component.

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     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO STATE AFFAIRS AND GOVERNMENT

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     This act would provide economic incentives and assistance for the redevelopment of 111

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Westminster Street using a public-private partnership.

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     This act would take effect upon passage.

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