Missouri House Committee to Consider Tax Credit-Busting Bill Tomorrow

What's Happening

Tomorrow (April 6th) the Job Creation and Economic Development Committee of the Missouri House of Representatives will consider HB 2399, the bill that would gut Missouri's successful historic preservation tax credit program. The committee will meet at 1:00 p.m. in Hearing Room 6 of the capitol.

Why It's Bad

The bill, introduced by Representatives Steve Hobbs (D) and Sam Komo (R), would rescind most of the state's current tax credit authorizations and institute a new set of provisions. The bill would implement the policy proposed by Governor Jay Nixon (D) and would turn over much discretionary power to the Department of Economic Development, whose director is always a political appointment.

HB 2399's worst aspects:

Eliminates tax credit provisions of all programs except the circuit breaker and homestead preservation credits, and would create six new programs;

Place a global credit cap of $314 million on all modified credits with annual fluctuation.

Cap "redevelopment" credit issuance at $78.5 million, which is 35% of FY 2009's level. The historic rehabilitation, low income and land assemblage programs would compete for issuance.

Potential eliminate standards and review for the historic rehabilitation credit. There is no provision to continue the current review by the State Historic Preservation Office and no mention of the Secretary of the Interior's Standards for Rehabilitation.

Give the DED director full discretion on whether to issue credits: "The decision of whether to authorize a tax credit under this section and the amount of any credit to be authorized is committed to the discretion of the director of the department of economic development…" (135.841.1)

Give DED full discretion to award 20% of all state tax credits to which ever program they choose. (135.840.7)

The net result will be a highly politicized tax credit environment where one person -- the DED director -- will have broad discretionary power. The potential for special interest domination of Missouri's tax credits -- now simply a legislative problem -- will be realized. Instead of rewarding incentivized economic activity, tax credits will reward personal political connections. Homeowners and small businesses will have hard time using the historic rehabilitation tax credit competing against large companies -- and large companies the get the credits won't be subject to the current level of oversight!

What You Can Do

Please contact members of the committee and let them know you oppose HB 2399.

Flook, Timothy, Chair-Liberty R, Tim.Flook@house.mo.gov -- 573-751-1218

Brandom, Ellen, Vice Chair-Sikeston R, Ellen.Brandom@house.mo.gov -- 573-751-5471

Brown, Michael R. Kansas City D, Michael.Brown@house.mo.gov -- 573-751-7639

Corcoran, Michael George St. Louis County (St. Ann) D, Michael.Corcoran@house.mo.gov -- 573-751-0855

Diehl, John St Louis County (Town and Country) R, John.Diehl@house.mo.gov -- 573-751-1544

Jones, Tishaura St. Louis City D, Tishaura.Jones@house.mo.gov -- 573-751-6800

Komo, Sam Jefferson County (House Springs) D, Sam.Komo@house.mo.gov -- 573-751-6625

Kratky, Michele St. Louis City D, Michele.Kratky@house.mo.gov --573-751-4220

Kraus, Will Lee's Summit R, Will.Kraus@house.mo.gov -- 573-751-1459

McGhee, Michael Odessa R, Mike.McGhee@house.mo.gov -- 573-751-1462

Riddle, Jeanie Fulton R, Jeanie.Riddle@house.mo.gov -- 573-751-5226

Scharnhorst, Dwight St. Louis County (Fenton) R, Dwight.Scharnhorst@house.mo.gov -- 573-751-4392

Schoeller, Shane Springfield R, Shane.Schoeller@house.mo.gov -- 573-751-2948

Spreng, Michael St. Louis County (Florissant) R, Michael.Spreng@house.mo.gov --573-751-9628

Webber, Stephen Columbia D, Stephen.Webber@house.mo.gov -- 573-751-9753

Zerr, Anne St. Charles R, Anne.Zerr@house.mo.gov --573-751-3717

To find your Representative go to http://www.house.mo.gov/ and enter your nine digit zip code

Missouri House Bill Would Cap Tax Credits

Today Missouri State Representative Steve Hobbs (D) and Sam Komo (R) introduced HR 2399, a bill which would implement Democratic Governor Jay Nixon's proposal to limit issuance of all economic development tax credits to not exceed seventy percent of the total dollar amount of all state tax credits redeemed during the fiscal year ending on June 30, 2009 and hand over discretionary allocation power to the Department of Economic Development. The bill would implement the policy effective July 1, 2010 and would greatly limit usage of the state historic rehabilitation tax credit as well as the low income and brownfields credits.

The bill is referred to the Job Creation and Economic Development Committee chaired by Representative Tim Flook (R).

Study on Missouri Historic Tax Credit: 43,150 Jobs, Most Tax Credit Projects Small

The Missouri Growth Association has released An Evaluation of the Missouri Historic Preservation Tax Credit's Program's Impact on Job Creation and Economic Activity Across the State, a 34-page report by Dr. Sarah Coffin, Rob Ryan and Ben McCall of St. Louis University.

According to the report, the tax credit is responsible for 43,150 new or retained jobs with an average salary of $42,732 as well as $669.8 million in new sales/use and income tax revenues to state and local government.

The report confirms advocates' assertions that the credit enjoys wide usage and largely benefits small developers. Coffin and company found that, as of 2009, the range of historic rehab tax credits issued goes from $399 to $20.1 million.

About 33% of the projects that have received Missouri historic rehab tax credits have used less than $50,000 in credits. Taking the number up to usage of $100,000 or less, there is a majority of 57% of projects. Less than 13% of projects used more than $1 million in credits.

Video Tour of St. Louis Equity Fund Projects

In January, the Federal Reserve Bank of St. Louis posted this video of a bus tour of affordable housing developed by the St. Louis Equity Fund (SLEFI). SLEFI President John Wuest led a tour that included south city, the Loop, Hillsdale, north St. Louis and downtown. The majority of the projects included are rehabilitation of historic buildings that leveraged state and federal low income housing tax credits with state historic rehabilitation tax credits.



At one point during the tour, Wuest said that after several projects in one area there can start to be serious impact. That's a realistic approach that differs from the large-scale urban renewal projects that have failed again and again. Yet the project-by-project effort to create a community impact is difficult to finance, especially if the end product is affordable housing. The recession has made the work even harder, but changes to the tax credit programs that make this work possible would be disastrous.

St. Louis Post-Dispatch: "Dubious Policy Based on False Urgency"

Today the Post-Dispatch has an excellently-titled editorial on Governor Jay Nixon's tax credit proposal: "Tax credit plan advances dubious policy based on false urgency".

The editorial writer makes many good points, but a key observation is the timing of the proposal:

The tax credit debate hardly is new; the Legislature has been debating it for at least two years. Mr. Nixon has had ample time for an orderly, informed public debate on how best to proceed. But he chose to drop this complicated proposal out of the blue, with just six weeks remaining in an otherwise busy and contentious legislative session.

The timing of the proposal has led some observers to view it as a red herring designed to get the legislature to act. However, the resonance of Nixon's views with those of Republican Senators like Jason Crowell and Matt Bartle cannot be underestimated. In past years -- including last year -- the governor stood on the side lines of the tax credit debates in the legislature, frustrating many urban Democrats who has enthusiastically supported his election.

This year, Nixon has aligned with those who view tax credits as "welfare" and who view welfare -- and most government spending -- as stealing. Some tax credits are dubious, but a true overhaul would evaluate the net economic benefit of each program before making cuts. The Rutgers study of state historic rehabilitation tax credits is a model of careful analysis that should guide decision-makers. This writer doubts that every program would show a net benefit if analyzed carefully. In the absence of such study, we are left with the prospect of continued contest of interests. Nixon's proposal would amp up that contest, and create a wholly political tax credit system. Nixon is playing politics, not making policy. And Missouri's legislators should reject his proposal.

Governor Nixon can be reached at:

Office of Governor Jay Nixon
P.O. Box 720
Jefferson City, MO 65102
(573) 751-3222

Bartle's Tax Credit Bill Didn't Get Out of Committee

From Anna Ginsburg, Staff Coordinator of the Missouri Coalition for Historic Preservation and Economic Development:

Senator Matt Bartle’s bill (SB 584) to sunset Missouri tax credits was heard Friday 2/19/10 before the Senate Government Accountability and Fiscal Oversight Committee. The language from Senator Crowell’s bill SB 728 was attached to SB 584 as an amendment. Crowell’s bill would put 40 Missouri tax credits including Historic’s under the annual budget appropriations process. The committee voted to not send the bill to the Senate Floor by a vote of 4 -3. Senators Days, Schmitt, Schoemyer and Schaffer voted to kill the bill. Senators Purgason, Lembke and Lager voted to pass the bill out.

A second bill introduced by Senator Crowell (SB 890) was heard the Senate Jobs, Economic Development and Local Government Committee. SB 890 places a one year moratorium on low income housing tax credits and Missouri Development Finance Board tax credits. Several other economic development bills have been introduced into this committee and they could be used as vehicles for attaching Crowell’s bill SB 728 or some varation.

Crowell Bill Fails to Pass Committee

Today the Missouri Senate's Government Accountability Committee deadlocked in a 3-3 vote on SB728, the bill introduced by Senator Jason Crowell (R-Cape Girardeau) that would subject all tax credits to appropriation by the legislature. Among the credits included would be the state historic rehabilitation tax credit, already reduced by a cap on large projects placed by the legislature last year. Crowell will now attempt to attach his proposal through amendment to other bills.

State Senator Crowell Bills Threatens Historic Tax Credits

Senate Bill 728 Wipes Out the Historic Tax Credit Legislation Passed Last Year

For Immediate Release
Contact:Eric Friedman
Coalition for Historic Preservation And Economic Development
Office: 314.367.2800 ext. 23, Cell 314.369.4702
Erics@FriedmanGroup.com

ST. LOUIS (January 14, 2010) – Senator Jason Crowell (R-Cape Girardeau) introduced S.B. 728 which places nearly all state tax credits under the budget appropriation process which eliminates all legislative language on historic tax credits approved last year by the Missouri General Assembly. The ability for smaller historic restoration projects to not be counted against the cap has been eliminated. In addition, the application procedures for projects that ensure equity for small and large projects submitted to the Department of Economic Development will be eliminated. All tax credit programs will expire on June 30 2011 unless an allocation is made by the legislature, both chambers , for that specific year, through the appropriations process. This would not impact projects authorized or tax credits issued.
This bill pits all tax credit programs against one another to compete for a specific allocation.

Food pantry, neighborhood assistance, shelters for domestic violence victims, quality jobs, low income housing, brownfields, family farm livestock, pregnancy resource centers, youth opportunities and historic renovation tax credits are just a few of the programs that will be forced to fight for their existence each year and to fight for how much money they get each year. The financial uncertainty that would result from the passage of this bill will end historic preservation projects in cities and towns throughout Missouri, including the 30 Dream communities.

In an article in yesterday’s Southeast Missourian newspaper, Senator Crowell tried to portray these tax credits as a corporate bail-out for big business although, it is the small contractors, their employee, their suppliers and projects that will be hardest hit if the tax credit process is changed. These changes would devastate the construction industry and their suppliers in Missouri as it struggles to recover from the greatest economic challenge since the Great Depression. The Department of Economic Development shows that this program generated 4,000 jobs in one year. We know of no other program that has done that.

At the time of most serious financial and housing crisis since the Great Depression we need stability for investment in our communities and for the Historic tax credit program to continue to be the best Jobs, Housing, Green, Sustainable and Smart Development program in the country. Without that stability and predictability we will not get investments, and jobs we so desperately need in our communities across our state.

# # #

Kansas City Seeks Change to Distressed Areas Land Assemblage Tax Credit

Once again, state Senator Yvonne Wilson (D-Kansas City) has offered a bill to reduce the acreage ownership requirement of the Distressed Areas Land Assemblage Tax Credit Act from 50 to 30 acres. This bill is SB 682 and was first read on January 6. Wilson's past attempts to pass this bill have gone nowhere.

However, the bill certainly has merit. If the courts uphold the Distressed Areas Land Assemblage Tax Credit, and the legislature lacks the will to kill it, the credit should be reformed. Wilson and Kansas City lawmakers would like to use the credit to aid in a Kansas City redevelopment project. Why shouldn't they be able to get the credit changed, if it is truly a public benefit law under the Missouri Constitution?

Of course, the premise of the tax credit remains as dangerous as it was when first proposed in 2007, and the effect of the type of real estate activity it encourages is terrible for struggling neighborhoods. The tax credit's main beneficiary has spawned copycat buying across north St. Louis. All we have to show are lost buildings, vacant buildings and neighborhoods caught up in a broadly-drawn development project that may not ultimately include them. It's bad public policy, plain and simple. It could be a little better, though.

Energy Efficiency Act Snubs Missouri Historic Tax Credit

Missouri State Senator Brad Lager (R-Savannah) won a legislative victory this year when his Energy Efficient Investment Act passed the General Assembly and was signed into law by Democratic Governor Jay Nixon.

The bill's chief purpose is to allow utilities to recover costs of energy efficiency measures to deter construction of new power plants. Lager wisely has opposed public subsidy to power plant construction. The state's Public Service Commission's rule is that Missouri's electric companies only raise rates if the rates are equal to or less than the rates that the companies would have charged if the company had built a new power plant. That rule encourages more energy output without addressing efficiency.

The bill allows utilities to count toward output energy not being consumed and enables utilities to establish programs where customers receive benefits for demand-side efficiency upgrades.

However, Lager could not resist riding his favorite hobby horse into the bill -- opposition to the state's historic rehabilitation tax credit, which was modified for the first time ever this year in response to Lager's efforts to kill it.

Section 14 of the act states:

Any customer of an electrical corporation who has received a state tax credit under sections 135.350 to 135.362, RSMo, or received under sections 253.545 to 253.561, RSMo, shall not be eligible for participation in any demand-side program offered by an electrical corporation under this section if such program offers a monetary incentive to the customer.

Sections 135.350-362 deal with a range of tax credit programs that Lager also opposes, including the state's low income housing tax credit, but sections 253.545-561 enable the state historic rehabilitation tax credit. Vigilance on the rehabilitation tax credit remains crucial in this post-Jeff Smith era.

Historic Tax Credit Compromise Celebrated

Yesterday the Missouri Coalition for Historic Preservation and Economic Development sent a press release celebrating the legislative compromise reached in the Missouri Senate at the end of the session. The compromise language is included in an economic development omnibus bill awaiting signature by Governor Jay Nixon.

Here's a summary of the compromise:

* A per-project residential cap of $1,000,000 in qualified rehabilitation expenditures (QREs) for owner occupied single family homes.

* A small project exemption for projects with $1.1 million in qualified rehabilitation expenditures (QREs) (these do not count toward a cap).

* $140 million cap on historic tax credits (existing projects do not fall under the cap).

* An effective date of January 1, 2010.

Missouri Senate Passes Economic Development Bill That Includes Historic Tax Credit Cap

Last night, after a long impasse, the Missouri Senate passed a Senate substitute to economic development bill HB 191. The bill reflects a legislative compromise reached on historic tax credits: the state's first cap on the program.

HB 191 places a $140 million cap on the annual issuance of historic tax credits, but exempts projects with qualified rehabilitation costs of $1.1 million or less -- the majority of projects -- from counting toward the cap. The figures will not be indexed to rise with inflation. The new rules won't go into effect until January 1, 2010. Honestly, I don't think that these changes will make much of an impact on the program.

The compromise was made possible when Senator Jason Crowell (R-Cape Girardeau), a staunch opponent of the program in the past, switched his position and began speaking in favor of the program on the Senate floor. Crowell and Senator Jeff Smith (D-St. Louis) worked with leadership and erstwhile historic tax credit foe Senator Brad Lager (R-Savannah) to forge an acceptable compromise. Without Crowell's switch, a compromise may have been impossible.

The bill now heads to the House for final approval.

Tax Credit Action in the State Legislature

Yesterday the Missouri House of Representatives passed the House Committee Substitute (HCS) to Senate Bill 377. Now included in the bill is a $150 million cap on the historic tax credit with a $250,000 (in credits issued) exemption and a $250,000 (in credits issued) per-project cap on residential rehabs. The $150 million cap might not have much impact with healthy "micro" exemptions like these. The question: Is this a good enough micro exemption to keep present level of tax credit activity going?

Meanwhile, Representative Tim Flook (R-Liberty) offered an amendment to the HCS for SB 377 that, among other things, changed the language of the Distressed Areas Land Assemblage Tax Credit (DALATC) to allow issuance of up to $20 million per year instead of the current $10 million. On the House floor, Rep. Flook stated that a group of representatives had met with developer Paul J. McKee, Jr. to see his plans for north St. Louis, and that those plans needed an extra boost during this session. Of course, McKee still has to be designated redeveloper by the St. Louis Board of Aldermen in order to apply for the DALATC. Since the DALATC credits must be spent on development within the project area, the higher issuance could mean more immediate development activity after McKee receives the credits.

Flook's amendment passed.

Legislature Gives Metro $12 Million

The St. Louis Beacon reports that the legislature passed a stimulus bill that contains $12 million for Metro (actually still named the Bi-State Development Agency but doing business as Metro). This is a one-time payment, of course, and short of the $20 million that Metro estimates it needs to restore all service cuts made in March.

Governor Jay Nixon, often silent on state-funded programs that support St. Louis, actually has expressed support for Metro. However, the $12 million request came from Lt. Governor Peter Kinder, not Nixon. If the governor signs the bill, Metro will be able to restore Call-a-Ride and some bus routes -- for one year.

Realistically, the stimulus money is a small stop-gap. What is needed is a regional taxing district. Senator Robin Wright-Jones introduced a bill in this legislative session to allow such a district to be created, but the bill remains on the Senate's informal calender.

No matter what the fate of the stimulus funding or Wright-Jones' bill, Metro has a lot of work to do right now to build a strong case for its support. The longer the agency waits to start building public support, the longer people are stuck without transportation -- and the longer cities that have regional investment in transportation will surpass our ability to attract new residents and jobs. We can't have a hand-to-mouth transit system if St. Louis is going to be a competitive American city.

Governor Nixon Speaks on Historic Tax Credits

Today, Democratic Governor Jay Nixon visited the Missouri House of Representatives today where he voiced support for a "soft cap" on historic rehab tax credits that would apply to larger projects. We were wondering what Nixon thought about the future of the state's best tax credit program.

Anyone who wonders what Republican Lieutenant Governor Peter Kinder has to say about historic rehab tax credits can check out a new video on the reborn Pub Def posted this morning. The video features interview footage with Kinder, Senator Jeff Smith, Amy Gill and Eric Friedman on the struggle to retain the historic tax credits.

Capping the Missouri Historic Rehab Tax Credit Would Benefit Wealthy Developers

My latest commentary for KWMU is online here.

After Late Night, Missouri Senate Still Hasn't Passed Economic Development Bill

While debate went until well after 3:00 a.m. in the Missouri Senate this morning, the chamber did not pass an economic development bill that included a $75 million cap on the state's historic rehabilitation tax credit program. Senator Jeff Smith (D-4th) deserves a lot of credit for his strong advocacy for the credits. Smith is a master of using an inquiry to block negative changes to the program, and his spirited efforts are helping grow support for the credit in the Senate.

Illinois Legislation Would Enact Historic Tax Credit Modeled on Missouri's

Rick Bonasch at STL Rising wrote a post today asking for more information on a proposed state historic rehabilitation tax credit in Illinois.

Representative Jay Hoffman (D-Collinsville) filed HB 469 on February 4, Representative Greg Harris (D-Chicago) filed HB 586 on February 6 and Senator Dan Kotoski (D-Park Ridge) filed SB 1366 on February 10. The similar bills would enact a state historic rehabilitation tax credit modeled on Missouri's tax credit. All bills have had a first reading and remain in committee.

While Missouri inexplicably debates the future of its model tax credit, other states are looking at copying ours. What a strange reversal of regional dynamics if Illinois had an uncapped historic rehab tax credit and Missouri did not. The tax credit would be a boon to Alton, Belleville, Granite City and other east side communities that are interested in downtown revitalization.

Missouri House Speaker Won't Accept Historic Tax Credit Cap Under $150 Million

According to the Post-Dispatch, Missouri House Speaker Ron Richard (R) won't accept a cap on the historic rehabilitation tax credits less than $150 million. That's great news. As Democratic Governor Jay Nixon maintains his silence, we have a prominent Republican come forward with some support for one of the state's most effective and democratically available economic development tools. Former Governor Matt Blunt (R) was a strong supporter of the historic tax credit, as is Lieutenant Governor Peter Kinder (R). While the attack on the program is coming mainly from Republicans using typical conservative anti-city rhetoric, other prominent conservative Republicans support the program (and, admittedly, some others of dubious utility).


While a $150 million cap could still cause a competitive environment in which big developers will have an advantage over homeowners, it's a better stance than silence. State Senator Jeff Smith (D) has raised the stakes by calling for a cap no less than $170 million, the amount of credits issued in 2008, and Speaker Richard says that there is room to negotiate with his figure and Smith's. That is an encouraging dialogue, although the need for any cap has not been adequately justified by its proponents, whose arguments are more arguments against the historic tax credit itself.

Speaker Richard told reporters that "I will have the last word on tax credits." I wish that were true, but the last word comes at the desk of the governor when he decides whether to veto or approve an economic development bill sent to him by the legislature. What will the last word on historic tax credits be? Nixon has provided few clues.

Missouri Senate Now Considering $100 Million Cap on Historic Tax Credits

Yesterday, the Missouri State Senate took a few steps toward passage of the Quality Jobs bill favored by Governor Jay Nixon. The new version of the bill, which stalled but indicates the direction the Senate is heading, includes a $100 million cap on the state's historic rehabilitation tax credit, an amount $70 million less than the figure for credits issued in 2008.

Floor debate lasted until well after 11:00 p.m., with several amendments offered. Two good amendments adopted were one by Sen. John Griesheimer (R) to remove language that would subject tax credits to appropriation by the General Assembly and another offered by Sen. Brad Lager (R) to remove prohibitions on layering different tax credits. Lager had written that prohibition but offered the removal as a compromise.

Lager, one of the most ardent opponents of the historic rehabilitation tax credit, stated yesterday that $100 million was the highest cap on the historic tax credits that he would accept.

Keep calling and writing your senators, representatives and governor. Governor Nixon has yet to make any promise to support the historic tax credit. Nixon's influence could prevent a cap from being included in the final version of the bill.