Missouri Missouri Legislature Public Policy

Missouri Senate Votes to Slash Historic Rehab Tax Credit

From Deb Sheals of the Alliance for Investment, Jobs and Preservation

The Missouri Senate just passed a bill that will cap the historic tax credit program at $75 million per year, with no small deal exemption. This is a drastic cut from the current cap of $140 million. The bill is the Senate Substitute for HB1865, sponsored by Sen. Lembke.

Even though the House has already passed HB1285 to extend sunsets for many social service tax credits due to expire this year, several senators refused to allow those programs to continue unless the historic program was slashed, and the bill was passed out of the Senate with the new cap.

Sens. Keaveny, Schaffer, and Curls were stalwart supporters of the Historic program.

The bill will now go to the House for consideration. We still have strong support in the House and are hopeful that they will not take this up, but this is a hot issue and it’s the end of the session, so about anything goes.

It’s really unfortunate that a few senators feel the need to hold good social programs hostage for this. At a time when unemployment in the construction industry is well above 14%, we need programs that stimulate construction activity, and we all know the historic credit does that quite well. (Stats from the U.S. Bureau of Labor Statistics)

We will be watching this very closely, obviously, and will keep you in the loop.

As always, let your legislators know how you feel about this, especially those in the House of Representatives. Good things come to squeaky wheels.

Historic Preservation Missouri Public Policy

A Tax Credit That Works

Deb Sheals, Chair of the Public Policy Committee of Missouri Preservation, sent out the following statistics on Missouri’s state historic rehabilitation tax credit program.
Between creation of the program in 1998 and September 2011, the Department of Economic Development measure the following activity directly created by the program:

  • More than $6 billion in redevelopment
  • 20,833 jobs (not counting construction jobs on $6 billion worth of redevelopment)
  • 21,646 new or rehabilitated housing units
Missouri Missouri Legislature Public Policy

Communities First

by Michael R. Allen

Today the Missouri Senate will convene to consider the “economic development” bill (HCS SS SCS SB 8 ) passed by the House last week that would cut neighborhood and Main Street development across the state. The bill’s most damaging provisions are those that cap the issuance of historic tax credits for “small” projects at $10 million a year and one that would prohibit stacking the 9% low income and historic rehab tax credits. Anyone who has observed the renewal of urban neighborhoods and small towns across the state knows that small projects have led the way, and that stacking historic and low income tax credits have made transformative projects like Dick Gregory Place in St. Louis’ Ville possible. The use of these credits has created economic growth that has outpaced the US GDP, strengthened real property values and created wealth for thousands of Missourians.

At right, a long-abandoned building rehabbed using low income and historic tax credits. At left, a neighborhood coffee shop owned by neighborhood residents. This is 14th Street in Old North.

These tools are not being curtailed to save the state money, or to cut back on tax credits. The Republicans in the legislature are not conservatives in any fiscal sense, because their leadership wants only to remove some credits to create new ones for cargo warehouses in suburban St. Louis, to lower the state corporate income tax and to increase the amount of money available each year — and the categories of eligible spending — for the Distressed Areas Land Assemblage Tax Credit (DALATC). While the leadership in the houses fortunately has failed to find consensus on how to shift available tax breaks from middle-class property owners to wealthy investors, there seems to be a possibility that the bill might be reconciled in conference if the Senate passes it.

Passage of the bill, and Governor Nixon’s signature, would be mistakes. Missouri’s strength comes from people who care about their communities enough to invest in their homes and buildings housing small businesses. These are people fighting similar patterns of disinvestment across the state, found on large scales in parts of St. Louis and Kansas City but also in small towns robbed of vitality and local wealth by corporate chains like Wal-Mart. The historic tax credit has enabled average people to reclaim their communities, and create skilled construction and professional jobs in the process. Not only have vacant or aging buildings been revitalized, but wealth has been created in local economies. Developers with larger capacity have joined these efforts by tackling big buildings.

Odd Fellows Hall in Ironton, Missouri sits vacant. Historic tax credits could help make reuse feasible.

Every year, the legislature seems to increase the flow of incentives toward activities that create wealth at the expense of communities. Cuts across the board would be one thing, and a philosophically consistent tax policy another. That is not what is on the table right now. Government policies that threaten local economies are far from conservative in any traditional sense. The legislature is looking at curbing proven, sustainable community development in order to enable large-scale economic activity that may not create wealth for struggling communities. Our state will suffer if these changes move forward.

Missouri Public Policy

What The House Is Voting On

Today the House Committee on Economic Development passed economic development bill HCS SB 8 by 21-4 vote. Included in the bill, to be considered by the full House as soon as tomorrow, would be major and devastating changes to the state’s historic rehabilitation tax credit as well as changes to the low income housing and distressed areas land assemblage tax credits.

Here are excerpts from the official substitute summary.

Historic Rehabilitation Tax Credits

For each fiscal year beginning on or after July 1, 2011, the substitute limits to $80 million the total amount of credits that the Department of Economic Development can approve.

For all applications for credits approved on or after July 1, 2011, no more than $125,000 may be issued for eligible costs and expenses incurred in the rehabilitation of certain eligible owner-occupied residential property.

For each fiscal year beginning on or after July 1, 2011, the substitute limits to $10 million the total amount of credits for projects receiving less than $275,000 that the Department of Economic Development can approve.

For all credits authorized on or after July 1, 2011, the substitute reduces from three years to one year the time period that the credit can be carried back and from 10 years to five years the time period that the credit can be carried forward.

A taxpayer who receives a low-income housing tax credit for a project not financed through tax-exempt bond issuance cannot be eligible for a historic preservation tax credit for the same project.

An application for final approval and issuance of a tax credit must include a cost and expense certification by an independent licensed certified public accountant with any accrued developer fees stated separately. The department will have 120 days from receipt of the application for final approval to determine whether the completed project meets required standards and to issue tax credit certificates equal to 75% of the eligible costs and expenses verified to that date. If a taxpayer receives tax credits that include an amount attributable to accrued developer fees, he or she must submit within six years of completion of the rehabilitation an additional cost and expense certification verifying the total amount of developer fees actually accrued and paid. If the amount of the tax credits issued and attributable to developer fees exceeds the amount of developer fees actually accrued and paid, the taxpayer is liable to repay 25% of the excess. A taxpayer or his or her authorized representative may appeal any official decision on a preliminary or final approval to an independent third party appeals officer designated by the department.

Low Income Housing Tax Credit

For each fiscal year beginning on or after July 1, 2011, the substitute limits the total amount of low income housing tax credits that can be authorized for projects not financed through tax exempt bond issuance to $110 million, authorizes the tax credit to be carried forward for five years, and reduces from three years to two years the time period that a low income housing tax credit can be carried back.

Beginning July 1, 2011, the substitute limits the total amount of low income housing tax credits that can be authorized annually for projects financed through tax exempt bond issuance to $20 million.

Distressed Areas Land Assemblage Tax Credit

This substitute expands the definition of “eligible project area” for purposes of the distressed land assemblage tax credit program to include a “redevelopment area” as defined in the real property tax increment allocation development act that contains at least 300 acres in 80 or more parcels, includes or previously included in excess of 10 million square feet of commercial building space, and is located within a “low income community” as defined in 26 U.S.C. Section 45D.

The five year restriction during which an applicant can receive a tax credit for all interest costs under the act is removed. Engineering costs, attorney=s fees, and architectural and planning costs are now authorized “acquisition costs”, and the allowable tax credit for demolition costs is increased from 50% to 100%. An applicant can file for the tax credit quarterly rather than annually.

The annual program cap is increased from $20 million to $30 million, although the aggregate program cap remains at $95 million. A process is established for allocating the annual $30 million in tax credits, depending upon the number of eligible applicants, provided however that if there are more than two applicants, no single applicant can receive more than 50% of the available tax credits. The sunset date is extended from August 28, 2013, to August 28, 2016.

Hyde Park Missouri North St. Louis O'Fallon Penrose Public Policy St. Louis Place The Ville

Capping Neighborhood Revitalization

by Michael R. Allen

In the past few weeks, proponents of the possibly impending economic development deal crafted between leaders in the Missouri House and Senate have made excuses for proposed cuts to the historic rehabilitation tax credit: “it was going to be cut anyway.” This rationale has led many St. Louis political leaders, developers and even usually-opinionated bloggers to concede that the state’s proven revitalization tool will have to be lopped to make way for a brave new future of subsidies for new cargo warehouses.

The corner building at 1530 Salisbury Avenue in the Hyde Park Historic District is now vacant.

We’ve heard that the “big buildings are done,” a statement that one could not safely make at the corner of 8th and Olive streets in downtown St. Louis, or in the railyard industrial areas of Kansas City. We have hard that it’s time for “new money” and new economics, a line that fails to mention that the cargo warehouse credits as written would only go to new construction, and that warehouses are not know for either welcoming pedestrian flanks or for innovative architecture. Worst, we have heard that a $10 million limit on historic tax credit awards of $275,000 or less is somehow protection of neighborhood microdevelopment.

The LRA-owned building at 2037 Adelaide Avenue is within the proposed O'Fallon Historic District.

To be sure, having some nod toward small projects is better than none, but what we have on the table is an annual $90 million issuance of historic tax credits in which small projects will only get $10 million – not a penny more. The $80 million majority of credits will go to the big projects – the ones that some proponents have claimed are “mostly done.” This skewed ratio prevents small developers and property owners from direct competition with large development operations, but it represents a move to cut small projects to over half of activity we saw in Fiscal Year 2011.

The vacant house at 2609 Rauschenbach Avenue in the newly-designated St. Louis Place Historic District.

According to data from the Missouri department of Economic Development (DED), in Fiscal Year 2011, the state issued around $21.5 million in historic rehabilitation tax credits to projects that received $275,000 or less in tax credits. This activity represents 165 of the 385 projects to which DED issued historic tax credits. Of course, the total issuance was $116.2 million, so the small projects were far from the majority. Yet they account for around 43% of all projects that used the historic tax credit.

A formula based on caps of $10 million for small projects and $80 million for large projects will end up slowing the pace at which neighborhood revitalization can take place, in small towns and big cities. In St. Louis, the effects could be most harmful in distressed neighborhoods across north St. Louis where new historic districts are being created or have been created in St. Louis Place, the Ville, Penrose, O’Fallon and the Wellston Loop. Literally thousands of north St. Louis buildings will be eligible for the Missouri historic rehabilitation tax credit by the end of the next year, in addition to buildings in the rest of the city. Will these buildings have fair access to an incentive designed to bring them back to productive use?

The answer to that questions rests with the General Assembly, as well as to backers of the tax credits for the cargo warehouses. Those who advocate for neighborhood revitalization can fight for a mechanism that may bring us more jobs, which the region does need, but they should not let their guard down when it comes to the mechanism that often is what stands between a rehabilitated, human-scaled building and a vacant lot or gas station.

The building at 4210 W. Cote Brilliante Avenue is in the Cote Brilliante Avenue in The Ville Historic District, which goes for state approval in November.

This is no either-or proposition – St. Louis will not be an attractive place for new investment if it neighborhoods aren’t improving. Missouri can’t give us unlimited money, but we can make sure that what we get doesn’t rob resources from neighborhoods that can’t afford lobbyists in the Capitol this week. A $10 million cap is too low. At least the cap should be based on last year’s activity of $21 million, so we don’t lose the momentum that is transforming tough blocks into great places to live.

Missouri Public Policy

Smart Changes for the Historic Tax Credit Program

From Deb Sheals, Public Policy Committee Chair, Missouri Preservation

As most of you probably know by now, the Governor has called a special session of the legislature, to begin on September 6th. The centerpiece of the special session is a massive Economic Development bill that will impact almost all existing tax credit programs, including Historic.

The proposed legislation will make many changes to the HTC program, including a seven year sunset, elimination of the ability to combine historic and other tax credits, and a first ever cap on annual allocations for small projects. (Up to this point, projects requesting less than $275,000 in tax credits have not been counted against the overall cap, which allowed owners to plan without uncertainty about when development incentives may become available.) The new law would create a separate $10 million cap for small projects.

Capping the small deal exemption would have an arguably minor impact upon redemption totals, but affect many program users. In spite of large numbers of projects, the overall cost for this category is low. In FY2010, small projects made up 72% (159 of 172) of the total number of approved projects, but all of those only accounted for 28% of the dollar amount of credits issued (just over $11 million). This would cut one of the most effective state incentives available for modest redevelopment projects. Smaller developers cannot afford to deal with the funding uncertainty that would come with a new cap.

The bill calls for a complete end (sunset) to the program in seven years. This uncertainty will shut down development many years ahead of that time, since it often take many years to get a redevelopment project underway. Alternate language calling for a regular review of the program offers a much more reasonable way to handle this issue.

Other troubling proposals include eliminating the ability to use Historic and Low Income credits in the same project (stacking). This change would be especially damaging to efforts to reuse important resources such as vacated historic schools, which can be very hard to redevelop, but adapt well to new low-income senior and workforce housing.

The proposal also cuts the overall cap to $80 million per year. Although this is a drastic reduction, it is being paired with administrative changes that are expected to make the program much easier to use, which will soften the blow a bit. It seems prudent to accept a slightly lower cap ($100 million is much more reasonable) as long as that is tied to administrative changes.

Ask your legislator to support the small deal exemption and oppose a sunset.

It will make a difference if they hear from us.

Don’t know your legislator’s name or contact information? Look here.

Historic Preservation Public Policy

Aldermanic Candidates on Citywide Preservation Review

NextSTL sent questionnaires to aldermanic candidates in the St. Louis general election on Tuesday, April 7. Among the questions posed is one of interest to readers of this blog: Do you support city-wide historic preservation review?

Preservation review map from the Cultural Resources Office.

Since the adoption of a new historic preservation ordinance in 1999, the city’s Cultural Resources Office has not had the power to review and deny demolition permits across the city, but only in wards whose aldermen choose to participate. Currently 20 of the city’s 28 aldermen participate — a number boosted by Alderman Antonio French’s placement of the 21st Ward in review upon his election in 2009.

Here are the answers from candidates who chose to respond.

Jesse Irwin, Republican, 10th Ward: “I don’t know enough about this to make a worthwhile comment. I’m for keeping everything worth keeping and building green everywhere else.”

Craig Schmid, Democrat, 20th Ward:”Yes, but individual communities must have a say in this. I sought to include my ward in preservation review and to obtain historic district designations.”

Scott Ogilvie, Independent, 24th Ward: “I believe there is strong support for keeping the 24th Ward in the Preservation District. The historic quality of our neighborhoods is one of our greatest strengths as a City, and we need to ensure that when demolition takes place, a new project of equal or greater value is replacing what is being removed. The fact that much of North St. Louis is not in the Preservation District has led to some senseless demolition of historic buildings of a type that are unlikely to be replaced. I would like to see stronger protection of existing structures and fewer demolitions — but we need to make sure there is support for expanding the Preservation District into new Wards.”

If any other candidates want to answer the question, send a note to us at and we will post the response.

Events Public Policy

Open/Closed Conference Highlights Common Ground, Need for More Action

by Michael R. Allen

My view from the "Regeneration" panel.

Yesterday I had the pleasure of joining Paul J. McKee, Jr., Antonio French and Stephen Acree for the panel on “Regeneration” during Open/Closed, a groundbreaking conference on vacant property in St. Louis. Perhaps the majesty of Joseph Conradi’s design of the Most holy Trinity Church sanctuary prevented any expected rancor, but I credit both the deft moderation of Cynthia Jordan and the spirit of the conference itself for leading the discussion away from any predictable drama.

Moderator RJ Kocielniak asks questions of panelists Michelle Duffe, Otis Williams, Audrey Spalding and Yvonne Sparks during the panel.

Drama would have been a distraction. I confess to wanting deliberately to focus on specific goals and actions during what was often an abstract — but healthy — conversation. The reason for this was that Open/Closed showed how much common ground exists between people supposedly diametrically opposed in goals. What I heard was that most panelists want to dream big but work hard, and everyone wants to revitalize the economy of the city as well as cure its cultural defects. Vacant property is a huge problem, but we all know that it is a symptom of regional stasis and city disease that we must end.

Andrew Weil, Roderick Jones, Romona Taylor-Williams and Tom Moes on the "Vacancy and Schools" panel.

We have a lot of work ahead, and we need to develop the 21st century approach to renewing St. Louis. Every panelist and speaker at Open/Closed is working on a version of that approach, sometimes — as with Paul McKee, Jr. and I — in conflict. Differences in approach are not big problems so long as there are so few people searching for a new way forward. Our challenge is to use our common ground to grow the number of people and resources being deployed to transform the city and make the region a national magnet. We can debate the finer points of Land Reutilization Authority policy or Northside Regeneration’s development program, but until there is robust demand for vacant land held by the city, McKee or anyone else, we are chasing minor targets.

Sylvester Brown, Jr. delivering the keynote address.

The challenge ahead is transforming such wide agreement on the major problems facing St. Louis into workable actions. Otherwise we are just having lovely conversations about some very ugly problems that will continue to worsen. I hesitate to offer a string of abstract things we need to do to rebuild city government, cut through racism, rally behind entrepreneurs and other things that people talked about this weekend. The bottom line really is that anyone who recognizes that vacancy in St. Louis — especially the intensive abandonment of north St. Louis — is the symptom of a declining culture has to get to work rebuilding that culture. Some of us can afford to have our family foundations target grants or loans, others can start organizing block units, some can buy and rehab vacant buildings and others can use their official positions to create policies that direct scarce resources to  neighborhoods that actually need targeted public money. (Oh, and we all can vote.) The problem in enormous, but the cure is collective.

I commend Next STL, Frontier St. Louis, Rebuild Foundation and the other organizers of Open/Closed. Your work itself is an action step — the next step is ours.

DALATC Historic Preservation Missouri Public Policy

Changes to Missouri Historic Tax Credit Pass Senate Committee

by Michael R. Allen

Yesterday the Missouri Senate’s Ways and Means Committee passed by a 5-0 vote a committee substitute to Senate Bill 280 (now SCS SB 280), which would implement many of the Tax Credit Reform Commission’s recommendations. The new version of the bill takes the bill from 109 to 254 pages, and tacks the Compete Missouri legislation (SB 279) onto the bill.

Included among SCS SB 280’s numerous policy changes are several that would change the state historic tax credit for the worse. Here is a summary of the changes:

  • Caps all annual issuance of historic tax credits at $75 million;
  • Sunsets Missouri’s historic tax credit after August 28, 2015 unless the legislature re-authorizes the program;
  • Prohibits “stacking” of historic tax credits with Low Income Housing Tax Credits and Neighborhood Preservation Act tax credits;
  • Authorizes the Department of Economic Development to define an “applicant” for the credits;
  • Permits only qualified rehabilitation expenditures (QREs) incurred prior to issuance of the tax credits;
  • Establishes a limit of $50,000 in tax credit issuance for an owner-occupied property, and prohibits applications from owner-occupied properties purchased for $150,000 or more.
  • The most pernicious change is the new cap formula, which does not separate small and large projects as the 2009 cap did. The result will be a system that throws homeowners, small business people and neighborhood groups in the same mix as developers with stronger political connections. This new version of the Missouri historic rehabilitation tax credit would be highly politicized, and would allow the Department of Economic Development to pick winners and losers.

    Among other sections of SCS SB 280 is the bizarre recommendation that no applications be taken for the Distressed Areas Land Assemblage Tax Credit (DALATC) after August 28, 2011. Looks like the “tax credit for one man” — a charge that Department of Economic Development officials refuted at a public forum in St. Louis in September 2007 — will become exactly that. Why not simply end the program altogether? The DAATC has a sunset in August 2013. Under SCS SB 280, applications would end this year but the program would continue to exist for another two years. I cannot pretend to understand that logic.

    Readers, what do you think? Don’t tell me — tell your state senator and Governor Jay Nixon!

    Historic Preservation Public Policy

    Congress Looking at Cuts to Preservation Funding

    From Preservation Action

    Avoiding a government shutdown, earlier this week Congress passed a two-week Continuing Resolution extending federal funding until March 18th. Addressing many lawmakers’ calls for spending cuts, the CR eliminates $4 billion in funding. Historic preservation programs were spared the “axe.”

    Unfortunately lawmakers must still decide what to do about spending for the balance of FY 2011 and there is still widespread disagreement between legislators who want to see substantial cuts (such as the $61 billion proposed in House-passed H.R. 1), and those who want few or no additional cuts for the balance of the year — instead focusing on FY 2012.

    As we have been reporting, the House CR (which the Senate immediately rejected), would have eliminated funding for the Save America’s Treasures (SAT) and Preserve America programs but spared funding for National Heritage Areas. It would also have made sweeping cuts to the Community Development Block Grant program, the National Endowment for the Arts and the National Endowment for the Humanities. It would also have made cuts to the Land and Water Conservation Fund.

    At the same time lawmakers are trying to find a compromise to wrap-up FY 2011, hearings began this week on the President’s proposed FY 2012 budget — which recommends increasing funding for State and Tribal Historic Preservation Offices and eliminating funding for SAT and Preserve America and cutting funding for Heritage Areas in half. Yesterday, the House Committee on Natural Resources conducted a hearing on the President’s proposed budget with Interior Secretary Ken Salazar. In his testimony, Salazar mentioned the proposed cuts:

    Examples of the tough decisions made in 2012 include terminating the $7.0 million Rural Fire Assistance program which is duplicative of other fire assistance grant programs managed by the Department of Homeland Security and Department of Agriculture. The National Park Service’s Save America’s Treasures and Preserve America programs are eliminated in 2012 to focus NPS resources on the highest priority park requirements. The NPS Heritage Partnership Programs are reduced by half to encourage self-sufficiency among well-established National Heritage Areas while continuing support for newer areas.

    A central theme to his testimony was the America’s Great Outdoors initiative which he said “…can support a renewed and refreshed conservation vision by working in collaboration with [those] … who are working to protect the places that matter to them and by engaging people across the country in conservation and recreation.” The centerpiece of the AGO initiative is a call for full-funding ($900 million) for the Land and Water Conservation Fund. Several other hearings will be taking place next week.

    Preservation Action opposes the proposed cuts in the President’s Budget as submitted, but supports the modest increases to State and Tribal Historic Preservation Officers. Next week, at Lobby Day, Preservation Action and its partners will be advocating for: $50 million for State Historic Preservation Officers; $11 million for Tribal Historic Preservation Officers; and $9 million for Save America’s Treasures and Preserve America. Recognizing the current budget climate, collectively this $70 million budget request is actually ten percent less than total program funding for FY 2008.