Category: Public Policy

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Chicago Illinois Public Policy

Illinois Historic Tax Credit Bill Not Down or Out

by Michael R. Allen

Illinois may yet pass a state historic rehabilitation tax credit this year. On March 18, the Illinois Senate passed SB 2559, which is now heading through the House committee process in the final days of this year’s legislative session.

Apparently Governor Pat Quinn (D) is favorable to the bill. Supporters wisely have crafted a substitute that lowers the per-county cap from $25 million to $5 million, requires each project pass a “but for” test and subjects projects to a per-project issuance cap. These are provisions that make the bill — and the dream that downstate communities like East St. Louis and Alton gain a powerful tool for neighborhood development — alive. There may be one particular county that generated the per-county cap, and the per-project cap as well, but those are excellent ideas to ensure that the credit gets used where it is most needed — where development actually needs a stimulus.

Update: The Illinois House never took up the bill before adjourning in May 2010.

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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.

Categories
Missouri Public Policy

What Is Governor Nixon Thinking?

by Michael R. Allen

One has to wonder what is the point of Missouri Governor Jay Nixon (Democrat)’s tax credit reform proposal and why he is going to such great lengths to push it. The House Republican leadership is stonewalling any changes to tax credits this year, so even if Nixon could get reform passed in the Senate it will never make it to his desk. That fact did not stop Nixon from showboating at a press conference yesterday, where he pitched his tax credit proposal flanked by 75 educators whose presence underscored his point that a dollar toward tax credits is a dollar taken from education.

This is a talking point now being used in debate in the General Assembly by Senator Brad Lager (R-Savannah) and his conservative allies, whose commitment to public education has never been so strongly stated. Strange that Lager, Nixon and company have aimed their strongest attack at the historic tax credit, one of the few tax credits in Missouri that does not require expensive consultants and lawyers to understand and use. The low income housing tax credit is second on the list, although its appropriation system is continually politicized along the lines that Nixon is proposing for all tax credits in the state.

I keep wondering if this Jay Nixon is the same man that I met at a fundraiser hosted by Steven Fitzpatrick Smith back in 2008. That Nixon talked a lot about the importance of education, too, but he also emphasized his commitment to the historic rehabilitation tax credit and urban development. Nixon proclaimed to understand that the historic rehab credit creates jobs. That night nearly two years ago, Nixon told a room of us that he was proud of his days living around Tower Grove Park and being a city resident.

Flash forward and now he’s aiming at the state’s only citizen’s tax credit, knowing he won’t hit, because taking aim wins alliances with people who wish that Missouri had no cities larger than Chillicothe. He’s doing this at the same time that Lt. Governor Peter Kinder (R) is building up his urban support to unseat Nixon. He’s doing this at the same time that House Speaker Ron Richard (R) is calling for independent evaluation of all tax credit programs before making cuts — a sensible and needed study that could help Missouri get rid of the bad programs. What could Jay Nixon possibly be thinking? Why let Republicans who know very well how to use the opportunity sound urban-minded and reasonable to St. Louis voters?

I’d like Governor Nixon to embrace real tax credit reform, not a gubernatorial power grab that makes tax credits the sole province of the politically connected who can wheedle part of the annual appropriation. All Nixon needs to do is look at the programs and propose getting rid of the ones that aren’t creating jobs and spurring revenue returns. He needs to drop his current reform proposal fast. After all, every dollar spent in campaign contributions is a dollar not spent on creating jobs or improving neighborhoods. You don’t have to be a teacher to do that math.

Categories
Historic Preservation Missouri Public Policy

Historic Tax Credits at Work Near the Missouri Capitol

by Michael R. Allen

This is how the building at 105-7 East High Street in downtown Jefferson City looked in 2006.


Here’s what it looked like on a recent visit. While mid-century slipcovers should not always be removed, here the half-covering was ugly and covered operable windows. Windows allow for light and ventilation and significantly reduce the energy usage of a building — not to mention the spirits of the people who work or live inside. Underneath, the ornate cast iron lintels are intact. The facade will be restored gracing a block very near our state Capitol.

This project is utilizing Missouri’s state historic rehabilitation tax credit, a national model that returns up to 25% of qualified rehabilitation costs back to an owner in transferable credits. This building was in sound condition before, but its street face was not becoming a location right by the seat of state government. Without the tax credit, the owner might have left well enough alone — and visitors to our capital might have found this block a bit unbecoming.

Categories
Historic Preservation Public Policy

Minnesota Passes Historic Tax Credit as Stimulus

by Michael R. Allen

From Preservation Action

Last week, on April 1, Governor Tim Pawlenty signed into law the Minnesota Jobs Stimulus Bill which, of note to preservationists, includes a State Historic Rehabilitation Tax Credit designed to stimulate green job growth, increase local tax bases, and revitalize urban and main street communities through reinvestment in historic properties. Approximately 1,500 to 3,000 construction jobs are projected to be added annually because of the measure.

The new state historic preservation tax credit, like the federal rehabilitation tax credit, will make available a state income tax credit equal to 20 percent of the cost of rehabilitating a qualifying income-producing historic property. Projects are eligible to claim the state credit if they qualify for the federal credit, which requires properties to be listed in the National Register of Historic Places. Minnesota currently has 1,600 listings in the National Register representing almost 7,000 individual properties.

An innovative component of the tax credit allows developers to choose either a certificated, refundable credit or a grant, which will stimulate nonprofit use of the incentive, and also can be used against the insurance premium tax widening the investor pool. There is no cap for the program.

Minnesota joins thirty other states that have similar tax credit programs.

Categories
Historic Preservation Missouri Legislature Public Policy

Missouri House Committee to Consider Tax Credit-Busting Bill Tomorrow

by Michael R. Allen

What’s Happening

Tomorrow (April 6th) the Job Creation and Economic Development Committee of the Missouri House of Representatives will consider HB 2399, the bill that would gut Missouri’s successful historic preservation tax credit program. The committee will meet at 1:00 p.m. in Hearing Room 6 of the capitol.

Why It’s Bad

The bill, introduced by Representatives Steve Hobbs (D) and Sam Komo (R), would rescind most of the state’s current tax credit authorizations and institute a new set of provisions. The bill would implement the policy proposed by Governor Jay Nixon (D) and would turn over much discretionary power to the Department of Economic Development, whose director is always a political appointment.

HB 2399’s worst aspects:

  • Eliminates tax credit provisions of all programs except the circuit breaker and homestead preservation credits, and would create six new programs;
  • Place a global credit cap of $314 million on all modified credits with annual fluctuation.
  • Cap “redevelopment” credit issuance at $78.5 million, which is 35% of FY 2009’s level. The historic rehabilitation, low income and land assemblage programs would compete for issuance.
  • Potential eliminate standards and review for the historic rehabilitation credit. There is no provision to continue the current review by the State Historic Preservation Office and no mention of the Secretary of the Interior’s Standards for Rehabilitation.
  • Give the DED director full discretion on whether to issue credits: “The decision of whether to authorize a tax credit under this section and the amount of any credit to be authorized is committed to the discretion of the director of the department of economic development…” (135.841.1)
  • Give DED full discretion to award 20% of all state tax credits to which ever program they choose. (135.840.7)

    The net result will be a highly politicized tax credit environment where one person — the DED director — will have broad discretionary power. The potential for special interest domination of Missouri’s tax credits — now simply a legislative problem — will be realized. Instead of rewarding incentivized economic activity, tax credits will reward personal political connections. Homeowners and small businesses will have hard time using the historic rehabilitation tax credit competing against large companies — and large companies the get the credits won’t be subject to the current level of oversight!

    What You Can Do

    Please contact members of the committee and let them know you oppose HB 2399.

    Flook, Timothy, Chair-Liberty R, Tim.Flook@house.mo.gov — 573-751-1218

    Brandom, Ellen, Vice Chair-Sikeston R, Ellen.Brandom@house.mo.gov — 573-751-5471

    Brown, Michael R. Kansas City D, Michael.Brown@house.mo.gov — 573-751-7639

    Corcoran, Michael George St. Louis County (St. Ann) D, Michael.Corcoran@house.mo.gov — 573-751-0855

    Diehl, John St Louis County (Town and Country) R, John.Diehl@house.mo.gov — 573-751-1544

    Jones, Tishaura St. Louis City D, Tishaura.Jones@house.mo.gov — 573-751-6800

    Komo, Sam Jefferson County (House Springs) D, Sam.Komo@house.mo.gov — 573-751-6625

    Kratky, Michele St. Louis City D, Michele.Kratky@house.mo.gov –573-751-4220

    Kraus, Will Lee’s Summit R, Will.Kraus@house.mo.gov — 573-751-1459

    McGhee, Michael Odessa R, Mike.McGhee@house.mo.gov — 573-751-1462

    Riddle, Jeanie Fulton R, Jeanie.Riddle@house.mo.gov — 573-751-5226

    Scharnhorst, Dwight St. Louis County (Fenton) R, Dwight.Scharnhorst@house.mo.gov — 573-751-4392

    Schoeller, Shane Springfield R, Shane.Schoeller@house.mo.gov — 573-751-2948

    Spreng, Michael St. Louis County (Florissant) R, Michael.Spreng@house.mo.gov –573-751-9628

    Webber, Stephen Columbia D, Stephen.Webber@house.mo.gov — 573-751-9753

    Zerr, Anne St. Charles R, Anne.Zerr@house.mo.gov –573-751-3717

    To find your Representative go to http://www.house.mo.gov/ and enter your nine digit zip code

    • Categories
    Missouri Legislature Public Policy

    Missouri House Bill Would Cap Tax Credits

    by Michael R. Allen

    Today Missouri State Representative Steve Hobbs (D) and Sam Komo (R) introduced HR 2399, a bill which would implement Democratic Governor Jay Nixon’s proposal to limit issuance of all economic development tax credits to not exceed seventy percent of the total dollar amount of all state tax credits redeemed during the fiscal year ending on June 30, 2009 and hand over discretionary allocation power to the Department of Economic Development. The bill would implement the policy effective July 1, 2010 and would greatly limit usage of the state historic rehabilitation tax credit as well as the low income and brownfields credits.

    The bill is referred to the Job Creation and Economic Development Committee chaired by Representative Tim Flook (R).

    Categories
    Historic Preservation Missouri Public Policy

    Support for Historic Tax Credits from North Side — Of Minneapolis

    by Michael R. Allen

    On March 28th, the blog The Adventures of Johnny Northside carried the post “Historic Rehab Tax Credit Means JOBS!”. Fine, but is another blog calling for saving the Missouri historic rehab tax credit worth mentioning?

    Well, the The Adventures of Johnny Northside blog is published by a resident of Minneapolis, and he is calling for Minnesota to enact a historic rehabilitation tax credit. And Missouri’s 25% credit is cited as a model.

    Categories
    Historic Preservation Missouri Missouri Legislature Public Policy

    Study on Missouri Historic Tax Credit: 43,150 Jobs, Most Tax Credit Projects Small

    by Michael R. Allen

    The Missouri Growth Association has released An Evaluation of the Missouri Historic Preservation Tax Credit’s Program’s Impact on Job Creation and Economic Activity Across the State, a 34-page report by Dr. Sarah Coffin, Rob Ryan and Ben McCall of St. Louis University.

    According to the report, the tax credit is responsible for 43,150 new or retained jobs with an average salary of $42,732 as well as $669.8 million in new sales/use and income tax revenues to state and local government.

    The report confirms advocates’ assertions that the credit enjoys wide usage and largely benefits small developers. Coffin and company found that, as of 2009, the range of historic rehab tax credits issued goes from $399 to $20.1 million.

    About 33% of the projects that have received Missouri historic rehab tax credits have used less than $50,000 in credits. Taking the number up to usage of $100,000 or less, there is a majority of 57% of projects. Less than 13% of projects used more than $1 million in credits.

    Categories
    Missouri Missouri Legislature Public Policy

    Video Tour of St. Louis Equity Fund Projects

    by Michael R. Allen

    In January, the Federal Reserve Bank of St. Louis posted this video of a bus tour of affordable housing developed by the St. Louis Equity Fund (SLEFI). SLEFI President John Wuest led a tour that included south city, the Loop, Hillsdale, north St. Louis and downtown. The majority of the projects included are rehabilitation of historic buildings that leveraged state and federal low income housing tax credits with state historic rehabilitation tax credits.

    At one point during the tour, Wuest said that after several projects in one area there can start to be serious impact. That’s a realistic approach that differs from the large-scale urban renewal projects that have failed again and again. Yet the project-by-project effort to create a community impact is difficult to finance, especially if the end product is affordable housing. The recession has made the work even harder, but changes to the tax credit programs that make this work possible would be disastrous.