ST. LOUIS • Local developers are girding for another round in the perennial fight over Missouri’s Historic Tax Credit. And they’re hoping that maybe this round will be the last.
Nearly a dozen development experts and bankers met Thursday in St. Louis to weigh in on the popular program before it once again goes under review by a blue-ribbon state panel.
While technically a meeting of the Historic Preservation Committee of the Missouri Tax Credit Review Commission, Thursday’s gathering at times felt like a strategy session for how preservationists might defend the program against a Jefferson City budget ax.
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Nearly everyone in the room at the Wainwright State Office Building — and on speakerphone from across the state — was either a developer, banker or consultant who works with the tax credits. They were there to plead their by-now-familiar case to the panel that’s again reviewing each of Missouri’s 61 tax credit programs.
“This program has resulted in $6 billion in private investment,” said Jim Farrell, a lobbyist for the Alliance for Investment, Jobs and Preservation, a group of historic tax credit supporters.
Despite that huge sum, perhaps no credit has generated as much drama as the historic program, which repays builders one-fourth the cost of upgrading older buildings.
It has fueled the rehab of hundreds of buildings in St. Louis, from downtown hotels to south city four-families, but has also cost the state treasury $348 million in the last three years. That has placed the program squarely in the sights of budget hawks in the state Senate, who have blocked all new incentives until historic credits are pared back.
This debate came to a head two years ago, when Gov. Jay Nixon first formed his Tax Credit Review Commission. After a historic credits subcommittee made up largely of St. Louis-area rehabbers and bankers split over whether to suggest capping the program at $90 million or $100 million — roughly the level it has used in recent years — the full tax credit panel voted to recommend $75 million.
“When you don’t send in something meaningful, other people will do it for you,” said Pete Noonan, who manages tax credit programs at Commerce Bank. “I think that’s what happened.”
Regardless, $75 million became the starting point for bills filed in the Legislature in 2011 to revamp tax credit programs. Despite months of debate, they never passed.
Now lawmakers are examining this coming spring’s legislative session as a chance to break the gridlock. Nixon has relaunched the Tax Credit Review Commission. And the people who rely on historic credits want to make sure they’re on the same page.
They agreed to fight changes that could make it harder to use the credits on residential properties, and to support tweaks that will make the program more efficient. They agreed that the so-called “stacking” of historic and low-income housing tax credits should probably be pared back, but that it should still be possible for some projects. Chairman Tom Reeves said the panel would probably need another meeting to hammer out details, and a satisfactory cap.
Similar subcommittees are reviewing the other 60 programs and will update their recommendations at statewide meetings starting today. Then the full 27-member commission — which includes former lawmakers and leaders of business and education groups — will issue its full report to Nixon by Dec. 5. The real debates will begin when the Legislature launches its session in January.
Leaders in both houses have said tax credit reform is high on their agenda, and business groups will be pushing for other incentives they would like to see. If past years are any indication, any broad economic development deal will require some horse-trading, with the historic credits likely a prime item on the block.
Farrell said he feels like the years of talks have moved the various sides closer to each other, and that a deal might be within reach this time. Most members of the preservation community say they would be open to a lower cap on the program — something in the range of $90 million to $100 million. But there’s one thing they won’t put on the table: a sunset.
“The basic answer on that,” he said. “No.”
“Sunsets” are Jefferson City-speak for putting a program up for a vote on renewal every few years. While much state spending is approved this way in the annual budget, many tax credits, including the historic, renew automatically. Critics say that’s one reason the program has grown so big, but Farrell and others say requiring periodic votes — and the surrounding uncertainty — would kill the program.
“A sunset means, if the Legislature does nothing, the program dies,” said Deb Sheals, a historic consultant in Columbia. “Sometimes we’ve seen the Legislature choose to do nothing. It’s really dangerous.”
Also dangerous, said Eric McMahon, a financial analyst at ND Consulting in St. Louis, is this constant uncertainty around both historic and low-income housing tax credits. It’s driving tax credit investors out of Missouri, and making it harder to finance deals.
“You have numerous federal investors who don’t want to mess with Missouri right now because the programs might change,” he said.
Noonan agreed. He has been engaged in the tax credit debates for years now, and, while he wants a deal that leaves the historic program strong, what he wants most is a deal that ends all the debate.
“We want surety for the program,” he said. “We want to put this to bed for the next 10 or 20 years.”
