This week, the Senate and House will be preparing conference reports on the state budget. It is likely that legislators will spend a fair amount of time in conferences set for this week. However, there is the persistent possibility that legislation related to the historic preservation tax credit may be put into action. The following are bills that the Coalition for Historic Preservation and Economic Development will be watching carefully as the week continues.

Senate Substitute for Senate Committee Substitute for House Committee Substitute for House Bill 191

It is likely that a substitute for the House’s original economic development bill will be brought to the Senate floor at some point this week. An earlier version of this substitute is available on the Coalition’s legislative update page. It is anticipated that the legislation will include a $100 million cap on historic tax credit, with supplemental appropriations, and a per-project cap on residential rehabilitation.

House Committee Substitute for Senate Bill 377

This bill has been placed on the informal calendar, and may be brought to the House floor this week. It currently contains a $165 million cap, with exemptions for projects that receive less than $350,000 of historic credits. Language is available on our legislative update page.

House Committee Substitute for Senate Bill 280

Although HCS/SB 280 currently exists as a bill which calls for insurance companies’ exemption from state corporate income and franchise taxes, it is suspected that this bill could be used as a vehicle for economic development language. And, given that historic tax credit cuts have frequently been tacked on to such bills throughout this year’s session, HCS/SB 280 is a bill of interest.

House Committee Substitute for Senate Bill 215

After hitting a roadblock in the Senate on Thursday of last week, this bill now has the potential to come up at any time. Currently, HCS/SB 215 does not contain any tax credit language. However, it is possible that the bill could be sent to conference and allowed to include historic tax credit cutbacks if the Senate and House vote to exceed the differences.

(Legislative Update courtesy of Missouri Coalition for Historic Preservation & Economic Development)

Missouri’s Historic Tax Credit program is under fire by a group of senators who have sought to frame this debate in terms of “urban” versus “rural.” They cite examples such as the plans for the Ballpark Village in St. Louis to argue that the Historic Tax Credits only benefit big developers in urban centers.

The reality is, however, that HTCs have actually been used by communities across the state of Missouri. Cities and towns that have utilized HTCs include: Arcadia, Boonville, Butler, California, Cape Girardeau, Carthage, Chesterfield, Chillicothe, Clarksville, Columbia, Danville, Excelsior Springs, Farmington, Fayette, Ferguson, Florissant, Fulton, Glasgow, Hannibal, Hartsburg, Hermann, Independence, Jefferson City, Joplin, Kansas City, Kennett, King City, Kirkwood, Lee’s Summit, Lexington, Liberty, Louisiana, Manchester, Maplewood, Neosho, Nevada, New Haven, New Melle, North Kansas City, Osceola, Park Hills and Pilot Grove, through Rocheport, St. Charles, St. Joseph, St. Louis, Ste. Genevieve, Sedalia, Springfield, Trenton, University City, Webster Groves, Wellston, West Plains, Weston, Wildwood and Wright City.

According to the Missouri Coalition for Historic Preservation and Economic Development, between 1998 and 2006, more than 900 historic renovation projects were completed across the state of Missouri in 37 counties and 55 communities.

Another important fact is that the vast majority of HTCs in Missouri have not gone to large-scale redevelopment projects, but rather to small homeowners and developers. The break-down goes like this: Over the past decade, only 11% of all projects spent over $5 million in rehabilitation, while 2/3rds were less than $500,000. The people that really benefit from this tax credit are not the big developers, but rather, the independent “mom and pop” in communities across the state.

Not only is the HTC program is utilized by developers statewide, but also large historic preservation projects in places like Springfield, Jeff City, KC, and St. Louis employ many laborers from small communities across Missouri. These renovation projects typically require a high level of skill, and therefore are some of the highest paying blue-collar jobs available.

If the HTC program receives a cap and becomes subject to annual appropriations, obtaining this tax credit will become a political process. Leaving the HTC uncapped allows for it to function through efficient markets; whereas putting a limit on it subjects the HTC to lobbyists and those with political power. Based on the “reformers” arguments, it is ironic to realize that capping the HTC would end up benefiting big developers, while limiting the availability of tax credits in small communities across Missouri.

It is vital to continue the historic tax credit program without any changes so that the credits may continue to spread to smaller communities throughout the state.

A Who’s-Who of state legislators for and against Missouri’s Historic Tax Credit program:

The following state senators and representatives are in support of the Historic Tax Credit program:

Senator Jeff Smith (D-4)

Senator Jane Cunningham (R-7)

Senator Tom Dempsey (R-23)

Senator David Pearce (R-31)

Senator Eric Schmitt (R-15)

Senator Wright-Jones (D-5)

Senator Jolie Justus (D-10)

Senator Rita Heard Days (D-14)

Senator Yvonne Wilson (D-9)

Senator Wes Shoemyer (D-18)

Representative Ron Richard (R-129) (Speaker of the House)

The following 6 senators, lead by Senator Lager, constitute the group of legislators who would place limitations on the Historic Tax Credit:

Senator Brad Lager (R-12)

Senator Jim Lembke (R-1)

Senator Jason Crowell (R-27)

Senator Matt Bartle (R-8)

Senator Luann Ridgeway (R-17)

Senator Chuck Purgason (R-33)

The following legislators are on-the-fence regarding the proposed limitations on Historic Tax Credits:

Senator Griesheimer (R-26) (Chair of Senate Economic Development Committee)

Representative Timothy Flook (R-34) (Chair of House Economic Development Committee)

Note: At this time, the majority of the House remains on the fence in relation to this issue.

FYI:

Map: Missouri Senatorial Districts

Map: Missouri House of Representatives Districts

***Find out who your Legislators are!

What are Historic Tax Credits?
Missouri is recognized nationally for its Historic Tax Credit program, which, since its inception in 1998, has spurred $4 billion in private investment (Missouri Preservation) and created 40,000 jobs, according to a 2008 analysis by top economic, Donovan Rypkema. The Historic Tax Credit program allows a tax credit equal to 25% of qualified expenditures associate with a historic redevelopment project. The Historic Tax Credits are available to a project of any size, and can be used for both commercial and residential purposes.

In St. Louis alone, Historic Tax Credits have been responsible for the dramatic redevelopment of the downtown center, as well as the restoration of significant historic properties such as the Chase Park Plaza, the Moolah, and the old Post Office Building. These Tax Credits have also contributed to the revitalization of historic neighborhoods across the city. The Historic Tax Credit program has had similar effects in other Missouri cities, including Springfield, Columbia, and Cape Girardeau, as well as smaller communities statewide.

The Fight over Historic Tax Credits
Missouri’s Historic Tax Credit is currently under fire in the State senate. Headed by  Senator Brad Lager, a group of Republican senators is seeking to set a 2 year sunset and a cap (between $50-100 million) on the state’s Historic Tax Credit program. To put this figure in perspective, two years ago the state awarded more than $171 million in Historic Tax Credits, while last year the amount was $162 million (sbj.net). Several of these so-called “reformers” would also like to subject the Historic Tax Credit to annual appropriations.

With only four weeks remaining in the current legislative session, the debate over Historic Tax Credits is expected to resurface on the Senate floor. St. Louis senator, Jeff Smith, for one, is committed to fighting against the proposed cap. It is his belief that no bill at all would be better than seeing one pass which includes the current proposed “reforms” to the Historic Tax Credit program.

Some Initial Talking Points

Historic Tax Credits create jobs and result in additional income for Missourians. In fiscal year 2007 alone, the historic preservation credit put over 4,900 Missourians to work. And, according to the foremost preservation economist in the United States, Historic Tax Credits have resulted in a total of 40,000 jobs since 1998. With a return to the state of over one dollar for each credit dollar issued, the Historic Tax Credit has resulted in $673 million direct and $700 million indirect additional income for Missouri taxpayers (Rypkema 2008).

Historic Tax Credits result in increased investment. More than $4 billion of investment has been leveraged throughout the state by the historic preservation tax credit. In FY2007 alone, amount leveraged totaled $729,637,669.

Historic tax credits affect the entire state of Missouri. According to the Missouri Coalition for Historic Preservation and Economic Development, between 1998 and 2006, more than 900 historic renovation projects were completed across the state of Missouri in 37 counties and 55 communities.

The vast majority of historic tax credits benefit small homeowners and developers. Since 2000, over 85% of projects have used under $1 million of tax credits, and 92.5% have been issued less than $2 million.

In addition, redevelopment projects that receive Historic Tax Credits employ many laborers from small communities across Missouri.

Historic preservation preserves the historic character of both residential and commercial communities. The biggest beneficiaries of historic preservation are local citizens, who work and live in distinctive, attractive places imbued with a sense of place.

Historic preservation is about stewardship and sustainability. Without the Historic Tax Credit program, buildings in many communities lie in a state disuse, which renders them economically obsolete without an available incentive. Historic preservation utilizes existing structures, and prevents the waste and expenditure that comes with demolition and new construction.

As a result of the Historic Tax Credit, Missouri leads the nation in historic preservation. The Historic Tax Credit has been so successful that several states, including Iowa, Massachusetts, Tennessee, North Carolina, Wisconsin and Maryland have made efforts to imitate the credit.

Capping the Historic Tax Credit will halt redevelopment and destroy the program. Renovated buildings must be completed and certified prior to the tax credit being issued. If developers/owners are not certain that a credit will be available, they will not make the initial investment. The credit is essential to making the project work.

Capping the Historic Tax Credit will benefit big developers and limit the availability of tax credits in small communities across Missouri. “If the credit is capped, and the credit run through an appropriations process, issuance of the credit will become a political process… A cap and appropriation will benefit the big developers who can afford to gain influence and work at getting credits full time (ecoabsence.blogspot.com).”

There is legislation being debated today in the Missouri State Legislature that would put a cap on a program, that more than any other state program, has contributed to the revitalization of the City of St. Louis over the past decade. The attacks on the state’s Historic Tax Credit program are short-sighted and threaten to put the brakes on development activities in neighborhoods and downtowns all over the state.