Blue Cross to Build New Headquarters in R.I.

$114-million project slated for providence, will consolidate offices

Blue Cross & Blue Shield was created in 1939 as a nonprofit company to serve the "public convenience and advantage."

Carcieri and the General Assembly have fought with the insurer in recent years over its rates and executive compensation levels, eventually leading to the resignation of Blue Cross president Ronald A. Battista in 2004.

Blue Cross officials said that this building will "have no additional impact on premiums and reserves," and despite the expensive real estate, going to the Capital Center site will actually save money for the insurer over the long term, Keough said.

The six buildings the insurer currently uses are not all equipped with modern technology, and the spread-out operation has led to some inefficiency. Many would have needed serious renovation over the next few years.

"Over the long haul, it was less expensive to build a new building than it was to renovate the ones we're currently in," Keough said.

But the tax breaks were especially important in making the deal a money-saver for Blue Cross, Keough said.

Blue Cross will receive the tax breaks through the deal that Intercontinental negotiated with the city in 2004, according to Nicholas Iselin, director of development and construction for Intercontinental.

That deal set up the terms for future tax breaks at the Capital Center site without knowing what kind of development was planned there. Normally, tax breaks are given to a specific project.

This tax plan established one set of tax numbers for future residential development at the site and one for office development.

Under the deal, Blue Cross' office development at the site would be assessed at $140 per square foot and taxed at a rate of $37 per $1,000 of assessed valuation.

On top of that, the tax plan is graduated: for the first few years, Blue Cross will pay only a small percentage of the total taxable value of the building, which would slowly increase over the life of the lease, until the company is making the full payment by 2024.

"Without that tax stabilization Blue Cross would never have been able to do this," Keough said.

The deal between Blue Cross and Intercontinental is not yet finalized, but Blue Cross has signed a letter of intent to take over the 20-year lease from Intercontinental, and the two companies plan to be 50-50 owners of the two-acre site.

The purchase price from Intercontinental was not disclosed.

The plan will put three large high-rise buildings on a two-acre lot, but Iselin said, "In terms of urban high-rise proximity, they're not very close."

Iselin said that constructing the new Blue Cross building should be relatively easy, because the foundation work has all been completed as part of the parking garage construction. The underground, 484-space parking garage should be complete sometime next year. Blue Cross can then start erecting its own building directly on top of the garage.

The garage will cover parking for all three buildings, with the Blue Cross building using 180 parking spaces and the residen8ces using the rest. Outside of those 180 spaces, the Blue Cross building would have no additional parking.