Tax credit reform is once again a subject of much debate in Missouri’s capital with the historic preservation tax credit garnering much attention. Proponents of tax reform proposals that eliminate the state HTC program cite a report stating that only 26 cents of every tax credit dollar is returned to the state treasury; opponents of reform call this report “amateurish” and not representative of the reality of the program or its positive effects on the state.
A special committee formed by Governor Eric Greitens released a report in early July calling for sweeping changes to the historic preservation tax credit program, much to the dismay of developers, bankers, and local leaders. The current tax credit covers 25 percent of the cost of rehabbing historic buildings and any changes could impact projects in large cities, particularly St. Louis, where 900 projects over the past 15 years have utilized the tax credit for a combined $3.15 billion eligible for reimbursement.
Developers argue the state tax credit makes rehabbing historic buildings possible, and without it, downtown St. Louis will have continuing blight due to abandoned historic structures. Supporters of keeping the tax credit program believe the present uncertainty will cause stagnation in the local development environment and drive investment out of the state.
Conversely, Michigan’s former state historic preservation tax credit may be receiving new life thanks to recent proposed legislation. In early July, a bill was introduced in Michigan’s State Senate to reinstate the historic preservation tax credits that went away in 2011 under Governor Rick Snyder’s sweeping tax reform. The bill would allow individuals and companies to “credit up to 25 percent of qualified expenditures when paired with federal tax credits,” according to the legislation.
Over the 11-year period when the credits were available, tax credits leveraged almost $1.5 billion in private investment and created 36,000 jobs, according to data from the Michigan Historic Preservation Network.
Elsewhere in the Midwest, the Illinois’ River Edge Redevelopment Zone (RERZ) Historic Tax Credit was extended with the signing of legislation by Governor Bruce Rauner on August 18th, 2017. The legislation benefits special historic zones in five cities – Aurora, East St. Louis, Elgin, Peoria, and Rockford – that were identified as in need of special incentives for economic development. This program allows for a tax credit of 25 percent of qualified rehabilitation expenses for historic projects, and since 2009 the program has mobilized $82.1 million in private investment in these communities.
A similar 25 percent HTC was proposed earlier in the year for the cities that were the sites of the Lincoln-Douglas Debates of 1858 (H.B. 3096). Municipalities that would benefit include Ottawa, Freeport, Jonesboro, Charleston, Galesburg, Quincy, and Alton. The outcome of that proposal is yet to be determined. No state historic tax credit program has yet been proposed for the Greater Chicago area.
Governor Scott Walker’s 2017-2019 biennial budget is creating uncertainty for historic rehabilitation projects in Wisconsin. Included in the proposal is a $10 million annual aggregate cap for the state HTC along with added stipulations requiring applicants demonstrate that their projects create jobs and improve local economies. This type of forced competition is leading developers in smaller communities to shy away from advancing projects, anticipating fierce competition with larger projects in urban centers which routinely claim the majority of annual tax credit allocations. In 2015, Milwaukee projects alone were awarded more than $48 million in tax credits, representing over 42 percent of the state’s annual allocations. However in 2016, $58 million in credits were awarded with 70 percent of projects in communities with a population less than 100,000, proof that the economic benefits of the HTC program are helping smaller communities under the uncapped program.
This is not the first time HTC defenders fought legislation of this type. Governor Walker’s 2015-2017 budget proposed similar changes to the program but the Legislature did not agree. This year, Senate Republicans support a cap, but their proposal would increase the cap to $20 million with a project cap of $5 million and no stipulation for job creation.
If you are concerned about the future of your state’s historic tax credit, please make plans to engage your state legislators on behalf of your state’s HTC. The Historic Tax Credit Coalition and the National Trust for Historic Preservation are excellent resources for information on advocacy.