Tax credit overhaul would slice historic preservation, housing subsidies

In the biggest change, the bill would lower by more than two-thirds the amount of historic preservation tax credits and low-income housing tax credits that the state could issue each year. Together, the programs would be capped at $105 million annually, down from $335 million.

Sen. Rob Schaaf, R-St. Joseph, compared the development outlays to “this huge wound that’s just gushing blood. We’re bleeding out dollars that we could be using to infuse other programs, like education and health care.”

Opponents called the cuts drastic and unacceptable. They said the subsidies have revived older downtown areas and urban neighborhoods, providing construction jobs and affordable rental housing for low-income families and seniors.

With the proposed cuts, developers won’t be able to count on the money, and the historic preservation program “won’t function,” said Andrew Weil, executive director of the Landmarks Association of St. Louis.

The bill’s foes are counting on the House to reject the cuts, and indeed, that is likely. Earlier Thursday, House leaders floated an alternative that would take only modest bites out of the development subsidies.

That the two chambers are far apart is nothing new. For four years, economic development legislation has died because the House and Senate — which are both controlled overwhelmingly by Republicans — could not forge an agreement.

But personality conflicts inflamed the dispute in the past, and with new leaders who get along better this year, both chambers are holding out hope for a deal.

One key: The Senate is no longer demanding that the development programs have “sunsets,” or expiration dates, as most tax credit programs do. That was a sticking point with the House.

Senators also signaled a willingness to bargain by characterizing their tax credit caps as a good “base” for negotiations.

“As we pursue the best package, let’s not let the perfect be the enemy of the good,” said Senate President Pro Tem Tom Dempsey, R-St. Charles.

House Speaker Tim Jones, R-Eureka, told reporters that “there’s a chance we can work something out, if the Senate as a whole wants to do that.”

Gov. Jay Nixon, a Democrat, also is eager to put the issue to rest. He said the Senate-passed bill “contains long-overdue reforms to our state’s largest tax credit expenditures, which would yield significant savings for taxpayers in years to come.”

Estimates show the bill, sponsored by Sen. Eric Schmitt, R-Glendale, could save the state $1.3 billion over the next 15 years.

The bill’s supporters noted that Missouri spends far more than most states spend on historic preservation and low-income housing tax credits. For example, Missouri is second to Georgia in low-income housing credits awarded, according to a 2008 audit.

In historic preservation credits, Sen. Brad Lager said that Missouri spends more than the total spent by the states that made up the original 13 colonies — “which you would think are the most historic places in our nation.”

“The time has come for a reprioritization,” said Lager, R-Savannah. “Right now, these two programs are cannibalizing all these other opportunities.”

The Senate passed the bill on a vote of 27-7.

Some opponents, such as Sen. Jamilah Nasheed, D-St. Louis, did not want to cut the development programs while others, such as Sen. John Lamping, R-Ladue, objected to creating new tax credit programs.

The new programs in the bill would provide $60 million over eight years to subsidize businesses that arrange international freight shipments at Lambert-St. Louis International Airport, and more than $36 million over six years to lure “angel investors” to finance startup businesses.

Also, data centers — buildings that house computer servers, telecommunications equipment and digital storage devices — could get new state and local tax breaks.

The bill does not contain an extension of the land assemblage credit, which has been used by developer Paul McKee to buy property for a massive redevelopment he plans in north St. Louis. That tax credit program will expire in August, but McKee has hired a team of lobbyists to push for its extension, and a House committee this week approved that idea as a separate bill.

In the end, a joint House-Senate conference committee is apt to write the final economic development bill, probably in the legislative session’s final days in early May.

“If you look at it as a basketball game, we’re still midway through the second quarter,” said House Majority Leader John Diehl, R-Town and Country. “I think there’s a lot to play out on this.”

The bill is SB120.