Missouri Public Policy

Governor Nixon’s Tax Credit Commission Criticized

From the Coalition for Historic Preservation and Economic Development:

Governor Nixon’s tax credit commission criticized as lacking enough representation of people who know economic benefits of Historic Tax Credits

For Immediate Release

Contact: Deb Sheals, 573-874-3379
Coalition for Historic Preservation and Economic Development

Columbia, MO – July 22, 2010 – Governor Jay Nixon released his plans for creating a commission to perform a review of the state tax credit programs yesterday. The Missouri Coalition for Historic Preservation and Economic Development (MCHPED) spokesperson Deb Sheals, stated, “We are concerned that the Governor’s commission does not appear to have enough representation from people and organizations that are familiar with the dramatic impact the Historic Tax Credit has had in the production of jobs and economic development across Missouri. There are, for example, no representatives from small main street organizations, community development organizations, or historic preservation organizations, all of whom have firsthand experience in how well the program works for the average citizen. Missouri leads the nation in economic development from the historic tax credit, and any commission that is looking at this issue should include more members that are familiar with how it works.”

It also appears that the members chosen for the commission mirror a previous effort taken midway through the 2010 legislative session to pit education vs. development and redevelopment in communities throughout the state. This is not an either-or situation; economic development through historic preservation creates a stronger tax base and is therefore a benefit to education.

The State Historic Tax Program is a proven economic engine. Historic Tax Credits create jobs, encourage environmentally sensitive redevelopment, and long term revenue sustainability for the state of Missouri. Since 2000, historic tax credits have generated more than $669 million dollars in revenue for the state and local governments while creating 43,150 new and retained jobs with an average salary of $42,732. (See the attached executive summary of a recent study of the impact of this program.) The Governor’s attacks are creating industry-wide uncertainty and have crippled the effectiveness of the program as an economic stimulus.

MCHPED looks forward to once again demonstrating the tremendous state and community benefits generated by the Historic Tax Credit Program.

Missouri Missouri Legislature Public Policy

Nixon Announces Tax Credit Commission

Contact: Scott Holste, (573) 751-0290

Sam Murphey, (573) 751-0290

July 21, 2010

Gov. Nixon creates new commission to perform comprehensive review of state tax credit programs
Panel of business and community leaders, legislators will make recommendations to enhance job creation, boost return on investment for state

JEFFERSON CITY, Mo. – Gov. Jay Nixon today announced the creation of a Tax Credit Review Commission that will review the state’s 61 tax credit programs and make recommendations for greater efficacy and enhanced return on investment. Gov. Nixon named 25 business, community and legislative leaders to serve on the commission.

“Missouri must have sharp, effective development tools that will promote growth, create jobs, strengthen our communities and continue to drive our economic recovery forward,” Gov. Nixon said. “This commission will perform a critical analysis to ensure taxpayers receive the greatest possible return on investment from tax credit programs and that those programs are used efficiently and effectively. The work of the commission will play a vital role in reshaping the way the state uses financial incentives to achieve those important goals.”

The commission will analyze the efficacy and return on investment for each of the state’s 61 tax credit programs and make recommendations for modifications as appropriate.

Gov. Nixon appointed Steve Stogel and Chuck Gross to co-chair the Tax Credit Review Commission. Stogel is the President of DFC Group in St. Louis; Gross is the director of administration for St. Charles County. They are joined on the commission by leaders from the development, education, finance and labor communities, as well as members of the Missouri General Assembly.

From the Missouri Senate, Gov. Nixon named Sen. Matt Bartle (R-Lee’s Summit), Sen. Jolie Justus (D-Kansas City) and Sen. Robin Wright-Jones (D-St. Louis). Gov. Nixon’s appointees from the Missouri House are Rep. Tim Flook (R-Liberty) and Rep. Sam Komo (D-House Springs).

Gov. Nixon also named: Zack Boyers of U.S. Bancorp Community Development Corporation in St. Louis; Mark Gardner of Gardner Capital in Springfield; Luana Gifford of the American Federation of Teachers in Jefferson City; Bill Hall of Hallmark in Kansas City; Dee Joyner of Commerce Bank in St. Louis; David Kendrick of the Kansas City Building and Construction Trades Council; Alan Marble, President of Crowder College in Neosho; Troy Nash of Zimmer Real Estate Services in Kansas City; Melissa Randol of the Missouri School Boards Association in Jefferson City; Tom Reeves of Pulaski Bank in St. Louis; Penney Rector of the Missouri Association of School Administrators in Jefferson City; Russ Still, a member of the State Board of Education from Columbia; Craig Van Matre, a member of the Coordinating Board for Higher Education from Columbia; Ray Wagner of Enterprise Rent-A-Car in St. Louis; Todd Weaver of Legacy Building Group in St. Louis; Shannon Weber of the Carpenters’ District Council of Greater St. Louis and Vicinity; Mike Wood of the Missouri State Teachers Association in Jefferson City; and David Zimmerman of the Sheet Metal Workers International Association, Local 36 in St. Louis.

Missouri Missouri Legislature Public Policy

DED Sort of Explains the New Rule on Historic Tax Credits

by Michael R. Allen

Tim Logan has a good article this morning about the state of Missouri’s historic tax credit program. Recently, the Department of Economic Development (DED) sent letters to already-approved historic tax credit project applicants stating that the projects were going back for further review. This applied to projects approved since July 1. The letters did not cite the substance of any DED rules that will govern further review.

In the article, DED spokesman John Fougere stated that the new rules were created to ensure compliance with the large project cap passed by the legislature in 2009. That cap went into effect January 1, 2010. Did DED miss the chance to ensure that half of this year’s projects are in compliance? And since estimated project cost is a requirement of even having an application reviewed, why are new rules needed to ensure that DED does not award too many tax credits? A calculator would suffice.

DED has not yet shared the language of the new rules with prospective applicants. If the new reviews are taking place, the rules must exist. If the rules exist, they should be shared. The historic rehab tax credit has been orderly, predictable and free from politics since day one. Some want to cut it or change it for budgetary reasons, and their arguments are respectable. What Governor Nixon is doing is something else entirely.

DALATC Missouri Missouri Legislature Public Policy

Tax Credit Accountability

by Michael R. Allen

The Show-Me Institute’s research on the Missouri Distressed Areas Land Assemblage Tax Credit raises questions about the Department of Economic Development (DED) rules for usage of that credit. One immediate contrast is the state Historic Rehabilitation Tax Credit, which has increased reporting requirements in recent years to maximize accountability and state regulation. DED ensures that users of the historic rehab tax credit have to account for every dollar claimed.

For one thing, projects using the historic rehab tax credit have to receive preliminary approval from DED before work can commence. This requires listing of buildings in the National Register of Historic Places before an application can be made. Then it requires submission of a detailed scope of work that is reviewed by DED as well as State Historic Preservation Office (SHPO) staff. This review must include itemized estimated costs of all aspects of work.

After preliminary approval, work can start. During work, SHPO review staff will usually be involved in making final decisions that impact the historic character of a building. When work is completed, an applicant has to submit a fully itemized account of all project expenses, with receipts proving money was spent as claimed. Homeowners that use the credit can learn the hard way that they needed to save every receipt. Without proof that they bought that $2.39 tube of caulk, it cannot be claimed as an eligible expense. DED’s rules will not allow any wiggle room — not even on a $50,000 project.

There is a lot of concern about the impact of tax credit programs on Missouri’s revenue. One can argue whether the historic rehab tax credit should exist, but one cannot claim that the program’s rules allow for unverified claims. The state gets exactly what it pays for, and gets to decide up front whether to pay at all. All other tax credit programs — especially programs that allow single applicants to claim $20 million in one application — should play by the same rules.

Historic Preservation Missouri St. Louis County

Fairfax House, Rock Hill Presbyterian Church, Route 66 Bridge Make Statewide Endangered List

This week, Missouri Preservation announced its 2010 Most Endangered Properties list. St. Louis area listings are the Route 66 Bridge over the Meramec River as well as the adjacent Fairfax House and Rock Hill Presbyterian Church in Rock Hill.

Rock Hill Presbyterian Church is in urgent need of a preservation plan. From Missouri Preservation’s announcement:

After being moved several times because of increasing commercial and residential development, the Fairfax House has ended up on another former Marshall property. In February 2010, it was discovered that the Giddings-Lovejoy Presbytery was seeking to sell the Rock Hill Presbyterian Church, presenting a threat to the historic church building and an additional threat to Fairfax House. This property is now situated at the intersection of two busy St. Louis county roads. It is a target for commercial development as the City of Rock Hill, which does its own zoning and has no current historic preservation ordinance, has zoned this property “commercial.”

Missouri Public Policy

Tax Credit Battle Almost Over — For Now

The Missouri General Assembly’s session ends on Friday. So far, no proposals to change tax credit programs have been taken up this week in the Senate or House. There may be a last-minute push in the Senate to pass a bill that would include the following changes:

Capping historic tax credits at $75 million per year but retaining the exemption for projects with under $1.1 million in qualified rehabilitation expenditures (the “small deal” exemption);

Create legislative appropriation of funding in future years.

Observers do not expect this measure to make it out of the Senate. If it does, the House Republican leadership has pledged to kill it.

There is no doubt, however, that the reprieve is momentary. Next session Governor Jay Nixon and his allies will get an earlier start on pushing reform, in the sense that they started next session’s fight in this session.

Adaptive Reuse Missouri

House-Turned-Bank in Daisy, Missouri to be Auctioned on Memorial Day

by Michael R. Allen

The so-called Daisy Bank House in Daisy, Missouri (located not far south of Perryville) will be auctioned on Memorial Day. From the website advertising the site:

This historic structure in the tiny town of Daisy, Missouri was built in 1918 as the new home of the Farmers’ Bank of Daisy (1913-1924). After the bank closed, the building was vacant until 1939 when Delos Sebaugh purchased it and converted it into Sebaugh’s Store selling groceries and other supplies. In 1947 an addition was built on the north side of the building. The original portion of the building was remodeled (modified to allow second floor and dormers added) and converted into a living space for the Sebaugh family. The store closed in 1956, but the commercial space remained open as home of the Delos Sebaugh Insurance Agency for Citizens Mutual Insurance through the late 1970s. Since then the building has functioned as home to the Sebaugh family.

Check out the website for more information and photographs.

Missouri Public Policy

House Committee Does Not Take Up Tax Credit Bill; Action in the Senate?

by Michael R. Allen

Yesterday evening the Missouri House Jobs and Economic Development Committee did not take up the substitute to the “economic development” bill HR 2399. Chairman Tim Flook (R) mentioned the bill at the committee meeting but did not call it. Apparently Flook is still working with members of the Senate on getting the Senate to pass a bill that changes the tax credit policies.

One version of reform said to be favored by Flook is capping the historic tax credit program at $100 million and lowering its reimbursement percentage from 25% to 20%. This proposal would be combined with a provision forbidding use of both historic tax credits and low income housing tax credits on the same project.

Expect a version of this proposal to be debated in the Senate before the end of the session.

Missouri Public Policy

Peter Kinder and Historic Tax Credits

by Michael R. Allen

Yesterday, Missouri Lieutenant Governor Peter Kinder convened a press conference on tax credits on Old Post Office Plaza in downtown St. Louis. (Coverage: St. Louis Business Journal, KWMU, St. Louis Globe-Democrat and St. Louis Beacon.) The location was ironic given that Old Post Office developer Steve Stogel has close ties to Governor Jay Nixon.

The scene was set as if this were an official response to Governor Nixon’s tax credit proposal, with Kinder citing statistics between statements of strong support for the state’s redevelopment incentives, especially the historic rehabilitation tax credit. Of course, the spate of press conferences by Nixon and Kinder are more prelude to the 2012 governor’s race than official actions. Both are shoring up bases, with a twist: Democrat Nixon is pandering to the perceived “Missourah” base that abhors the state’s urban areas, and Kinder is aiming to gain support in the urban areas that helped propel Nixon into the governor’s mansion.

Kinder was surrounded by St. Louis Democrats, including aldermanic President Lewis Reed, Aldermen Antonio French (D-21st) and Jeffrey Boyd (D-22nd), State Representative Tishaura Jones (D-63rd) and former Carnahan adminstration Director of Revenue Janette Lohman. Also on hand were Reverend Ken McKoy, developers Paul J. McKee, Jr. and Peter George, Landmarks Association of St. Louis Executive Director Jeff Mansell, RHCDA President Stephen Acree, Association of General Contractors of America President Leonard P. Toenjes and others. These people have different reasons for supporting the historic rehabilitation tax credit, but most talked about the importance of using the credits in distressed neighborhoods.

Kinder’s words resonated in St. Louis. The press has picked up on his jab about Blagojevich-style politics, but he mostly stuck to reasons why tax credit programs build the state economy. Kinder stated emphatically that Missouri should be proud of how much money it spends on historic preservation. Missouri leads all states in historic preservation-related development due to the tax credit. That’s not a bad thing, Kinder said.

Kinder questioned Nixon’s recent attempt to tie tax credit expenditures to loss of revenue for public education. According to Kinder, “he leaves out one simple part of the equation in that tax credits create jobs and without jobs there will be no place for our educated workforce to earn a living.” Missouri has indeed long suffered from lack of economic opportunity, and the historic rehabilitation tax credit has spurred job creation for skilled labor. Of course, public education should not be underfunded to spur job creation.

Kinder pointed out that leading the country in one type of development has created jobs that Missouri otherwise may not have had. “Nixon’s plan to cut tax credits is a boon to states like Kansas and Tennessee, which are courting our businesses away and taking their hundreds of millions of investment and jobs with them,” Kinder said.

Aldermen French and Boyd talked about the difference that the historic tax credit could make in north St. Louis, where use has not been as widespread as in other areas. Boyd talked about the upcoming renovation of Arlington School, which would not have happened without credits. French talked about plans to get most of his ward eligible for use of the credits. Each acknowledged that the credits alone are not the answer, but essential parts of larger strategies.

Surprisingly, Kinder was candid about his support for last year’s cap on the historic tax credit, which many who stood behind him opposed. Kinder stated that he might support a lower cap, but not “gutting” the program as proposed by the Nixon administration. While Kinder avoided any specific ideas for changes — not a good thing to do, I guess, with developers standing behind him — he did suggest that some changes have to happen. The end of the press conference was a sober reminder that, while there is wide recognition of the benefits of the Missouri rehabilitation tax credit, supporters have to face Missouri’s budget reality. After all, Governor Nixon is as right about that point as he is wrong about the solution.

DALATC Missouri Public Policy

Nixon’s Tax Credit Explanation

by Michael R. Allen

This morning in the St. Louis Post-Dispatch I read the worst-ever explanation of how the Missouri historic rehabilitation tax credit works:

“Right now, if a building is old and somebody in essence wants to develop that, they automatically get certain amounts of these credits,” [Governor Jay] Nixon said. “We want to have an ability to cap that.”

Does that sort of knowing oversimplification even play well out-state any more?

This is no the correct way to describe a program that:

1. Requires buildings to be listed in the National Register of Historic Places — either individually or in historic districts — before a tax credit application can be approved. The National Register has strict criteria for listing and many buildings do not make the cut;

2. Requires owners to submit up-front through preliminary application itemized expenditures and detailed work descriptions, and then subjects the developers to review by design professionals working for the State Historic Preservation Office;

3. Has rules that reimburse only for “qualified rehabilitation expenses”;

4. That last year was capped at $140 million for projects of $1.1 million or more in qualified rehabilitation expenditures (a cap that Nixon supported without stating that he wanted a more drastic cut);

5. Governor Nixon has supported in previous years, including the year he ran for governor.

Nixon also does not mention that last year he signed the economic development bill that increased Missouri’s annual obligation in Distressed Areas Land Assemblage tax credits from $10 to $20 million to allow developer Paul J. McKee, Jr. to receive over $19 million in those credits before the end of 2009. Nixon remains silent on the merits of that particular program while attacking a program used mostly for small-scale neighborhood redevelopment.

Nixon’s push to make tax credits available for the most politically connected is problematic, because that’s a continuation of the worst aspects of Missouri’s tax credit policy. There are other ideas for reform that have merit, such as placing caps on existing programs — including the special-interest programs — or independent study of the economic impact of all existing programs and the courage to eliminate the bad programs.