Historic Tax Credit Program at Risk

[jencoleslaw]

ProJo Business article about historic tax credit.

Historical tax credits under fire. Developers who renovate old mills and historic buildings are worried about Governor Carcieri's proposal to reduce the preservation tax break. [ProJo.com]

what was unfortunate about the article yesterday was the picture they ran with it--of a beautiful rooftop pool on one of the renovated buildings. It certainly helped make the case for it not being all that necessary. I would have much preferred to see some of the great affordable housing projects, like Rau Fastener, that the tax credit has helped rather than a rich person's swimming pool...

although, truth be told, it was a really nice pool and i was jealous that i don't have one on the roof of the queen anne victorian i live in.

[gregw]

http://www.pbn.com/contentmgr/showdetails.php/id/119716

[millboy]

Keep the tax credits, but allay the state-

Reduce the tax credit by a modest amount, say 5%, and disburse it over a period of years, instead of in one lump sum. This will initially appear to put a big dent in the deficit, as the payout by the state for any given tax credit dollar amount would now be stretched out over several fiscal years. In addition (and this is the one effect I like most), if the legislation dictates that a property for which a credit is applied is sold, any pending disbursements will be forfeit. What does this do? Well, say you make the payout period 7 years. The developer has to hold on to that property for that period of time (read- no flipping). Everybody in construction knows about the 5-year rule of thumb. Finance the project enough to make a return on investment in 5 years. Why not make people stick around for a few more years? Also, maybe another tag on the credit states that a certain percentage has to go towards 20-year maintenance. Could the maintenance money be held in trust by the Revolving Fund?

Just trying to think long term, here.

[gregw]

As Millboy says, compromise on the Tax credit program is probably going to be necessary.

I would say that it should continue to exist at 30% but be limited to revitalization and/or affordable housing (which the vast majority of current projects are anyway).

The mill rehab projects, the downtown lofts, the various housing programs in Elmwood and elsewhere would all qualify.

As it stands now, there are a number of projects on the list that I am sure would get done without the credit--renovations to the Hope Club, Atheneum Row, and the Newport Country Club.

Using the credit to finance these projects in established areas where parties involved have plenty of access to capital is unnecessary and--worse--gives opponents of the program the ammunition they need to brand the program as a "give-away."

I remember Costantino griping about the Hope Club as a justification to impose a moratorium. Of course the income that the state gives up because of these projects is a drop compared to the Masonic Temple and Royal Mills, but this being politics, sometimes you need to throw the other side a bone.

[Garris]

Very reasonable suggestions I guess... Perhaps organizational and/or private homes can qualify in certain zones...

I again remind everyone to e-mail the elected representatives! The GrowSmartRI page linked above makes it as simple as possible!

- Garris

[Frankie811]

http://www.pbn.com/contentmgr/showdetails.php/id/119716

[gregw]

Does anyone know what the status of the tax credit is? I'm assuming that since I haven't read anything about it being changed as part of the budget that the powers that be decided not to mess with it.

[Cotuit]

Does anyone know what the status of the tax credit is? I'm assuming that since I haven't read anything about it being changed as part of the budget that the powers that be decided not to mess with it.

Here's the text from the GrowSmartRI e-newsletter which came out today:

Three key victories for Smart Growth in 2006 General Assembly

Historic Tax Credit program, Open Space Protection and Housing Production initiatives all earned the support of lawmakers this legislative session. More complete legislative wrap-up coming next month.

Historic Tax Credit Program spared from budget cuts

The 55 member Coalition for Neighborhood and Economic Renewal, under the leadership of Grow Smart Rhode Island, waged a successful campaign to safeguard a program that has been enormously successful in stimulating new jobs, new tax revenue, and new economic vitality in historic neighborhoods from Woonsocket to Westerly and from Burrillville to Block Island. While no changes were made to the State Historic Tax Credit program this legislative session, Grow Smart recognizes the need to continue promoting greater awareness of the program's substantial return on investment as a means of addressing some legislators' lingering concerns about the program's perceived cost.

More about the tax credit program

Open Space gains new level of protection

The General Assembly approved S-2497 giving state-owned open space lands a new level of protection. The new law establishes a system of checks and balances governing any proposal to sell or change the use of properties such as state parks and management areas. Readers may recall Grow Smart's campaign last summer against an a proposal to locate the State Police Headquarters in the Big River Management Area. Grow Smart was pleased and proud to be of assistance in the advocacy effort. Kudos to the Rhode Island Land Trust Council for spearheading advocacy for this new law. Read more about the new law, including which legislators to thank for its passage, by clicking HERE.

Housing bond, other elements of HousingWorks RI platform in budget

The HousingWorks RI coalition, a group of 120 organizations, won a major victory in its quest to alleviate one crisis: a severe shortage of quality, affordable housing in all regions of the state. The final adopted state budget places a $50 million bond for sorely needed affordable housing production on the November ballot, continues the state's investment in the Neighborhood Opportunities Program, Supportive Services Pilot Program and supports the State Historic Tax Credit Program, which is helping to boost housing production at the same time that it spurs neighborhood revitalization. As an active member of the HousingWorks RI Steering Committee, Grow Smart is very pleased with these legislative victories. Yet, we recognize that more important work lies ahead�both to pass the bond issue in November and to push for serious consideration in 2007 of the proposal we�ve helped to craft for a dedicated funding stream to activate and sustain Rhode Island�s Housing and Conservation Trust Fund.

[Frankie811]

Governor may change historic tax credit program. Rhode Island

[Frankie811]

Successful state tax credit program may be trimmed. http://www.projo.com/news/content/historic...L2.35ea1e2.html

[Frankie811]

Supporters make case for historic tax credits.

Supporters of Rhode Island

[Cotuit]

I received a communiqu

[eltron]

The legislation is here [pdf] if anyone cares to read it. The Historic Tax Credit is Article 20 starting on page 102.

[foxpointer]

It's simply a cap. $20 Million in 2008 and $40 Million in 2009-2017, at which time the program dies. Problem is similar cap plans have pretty much killed programs in other states and will do so here. The cap creates a competitive environment for capturing the limited amount of tax credit dollars which can lead to severe administrative burdens and, dare I say, the potential for corruption of the system. Not that that happens in RI.

The simple truth the Gov is missing is that this is an investment and many of these large-scale projects take multiple years to complete. If a project cannot be guaranteed tax credits through the life of the project, the project won't happen, or will be heavily scaled back. Some of the largest individual historic projects, past and present, have relied on more than $20 million in State HTCs. As a state, then, do we do one project a year?

With all this talk about 'stimulus' one would hope that the leaders of this State (and, heaven forbid, the Unions) would understand by now that this program has provided the most effective economic stimulus to the State of any program in memory. Without it, there would be far fewer construction jobs, and many many more Union guys on the bench.

I understand that alternative proposals are being developed, so this is not necessarily the way this is going to go.

[foxpointer]

From Grow Smart RI's e-mail communication today:

Proposed cap on RI Historic Tax Credits would undermine economic stimulus when it's most needed, say supporters

The retroactive proposal would thwart projects already underway, trigger costly litigation and send a chilling message that businesses should be wary of investing in Rhode Island

The Carcieri Administration has introduced a supplemental budget proposal capping the redemption of historic tax credits at $20 million in FY '08, $40 million beginning in FY '09 and proposing a full program sunset by 2017. The Supplemental Budget proposal is detailed in House Bill 7204 (Article 20) beginning on page 102.

The proposal comes at a time when it appears that natural market forces are causing a slowdown in historic tax credit activity. "The preliminary indication is that without doing anything, the slowing of projects may reduce the state's projected budget deficit in FY '09 by as much as $40 million", said Scott Wolf, Executive Director of Grow Smart Rhode Island. "An update on the status of all active tax credit projects is currently underway and that's how it appears to be shaking out", he said.

Still, Grow Smart and other key allies from such varied sectors as business, housing, local government and historic preservation are opposed to the Governor's proposal for the following reasons:

• It would be counterproductive to fight the state's structural deficit by crippling a proven economic stimulus program when it's most needed.

• We need a state budget that promotes prosperity as well as austerity. Without that balance, we won't have a "balanced budget" that is in the best interest of all Rhode Islanders.

• The proposed tax credit cap is a false savings because it fails to account for the lost income and sale tax revenue that the program generates - revenue that is essential for a healthy state budget.

• Drastically changing the rules in the middle of the game sends a bad message to the business community and would likely lead to severe financial problems for Rhode Island companies and expensive litigation for the state.

• A cap would make participation in the program unpredictable and therefore discourage worthwhile neighborhood revitalization projects from going forward.

• A cap would make the program particularly susceptible to political favoritism because it would be difficult to establish a fair and transparent method for allocating limited credits.

• Caps have proven to undermine other previously successful historic tax credit programs such as that in Maryland.

House Majority Leader Gordon Fox voiced his continued support for the Historic Tax Credit program during his televised response to the Governor Carcieri's State of the State address on January 22nd.

The House Finance Committee has scheduled a hearing on the proposed tax credit changes. It will be held on Thursday, January 31st at 12:00 p.m. in Room 35 at the State House.

[jencoleslaw]

it is a shame that i missed all the messages from GrowSmart regarding the demolition of buildings that could have/should have been redeveloped.

[foxpointer]

it is a shame that i missed all the messages from GrowSmart regarding the demolition of buildings that could have/should have been redeveloped.

[jencoleslaw]

oh there's plenty of blame to go around, but honestly, rehabbing old buildings to make them useful again rather than building on "greenfields" and tearing down old buildings in order to build crap that will only last 10 years is most certainly a Smart Growth issue.

it is too bad it only is applied in the wealthy suburbs because we sure could use a dose of it here in the city.

[Frankie811]

Proposal threatens building projects

The plan announced by the governor last month would jeopardize the financing of more than 130 projects, ranging from private homes to $80-million developments.

[JimmyGreaves]

Here's a link to the study that GrowSmartRI released in September.

http://www.growsmartri.com/tax%20credit/ta...it-general.html

Here are three links to articles reporting on the study which were written in September.

Tax credit program paying off say its supporters

PBN Editorial:Successful? Yes, but not beyond question

Supporters make case for Historic Tax Credits

[eltron]

OK, here is the deal:

The governor is throwing up a perfect political smokescreen with his current budget cut proposals - he has successfully kept the discussion away from the fact that several years ago, he cut taxes for the wealthiest 2% of Rhode Islanders, a tax cut that if rescinded would conveniently make up the budget shortfall. EXACTLY.

So instead of historic tax credits that bring HUGE amounts of social benefit to our state, not to mention massive economic development, and many other worthy programs, he is busy putting more money in a select fews pockets.

Its rubbish, and I can only hope our legislature can see through the ruse. It absolutely sickens me.

[JimmyGreaves]

OK, here is the deal:

The governor is throwing up a perfect political smokescreen with his current budget cut proposals - he has successfully kept the discussion away from the fact that several years ago, he cut taxes for the wealthiest 2% of Rhode Islanders, a tax cut that if rescinded would conveniently make up the budget shortfall. EXACTLY.

So instead of historic tax credits that bring HUGE amounts of social benefit to our state, not to mention massive economic development, and many other worthy programs, he is busy putting more money in a select fews pockets.

Its rubbish, and I can only hope our legislature can see through the ruse. It absolutely sickens me.

[Jenkins]

OK, here is the deal:

The governor is throwing up a perfect political smokescreen with his current budget cut proposals - he has successfully kept the discussion away from the fact that several years ago, he cut taxes for the wealthiest 2% of Rhode Islanders, a tax cut that if rescinded would conveniently make up the budget shortfall. EXACTLY.

So instead of historic tax credits that bring HUGE amounts of social benefit to our state, not to mention massive economic development, and many other worthy programs, he is busy putting more money in a select fews pockets.

Its rubbish, and I can only hope our legislature can see through the ruse. It absolutely sickens me.

[eltron]

Actually, it was the General Assembly that proposed the tax cut in 2006, not Governor Carcieri.

Rhode Island Revelation

[eltron]

If only that were true. The amount lost in revenue in the short term is nowhere near the estimated budget shortfall. And in the long term the only way this state gets any traction economically is if we stop advertising ourselves as having even higher taxes than Taxachusetts and the rest of New England.

Now the historic tax credits I am right with you on. It generates money for the state and should not be touched.