The Missouri General Assembly has several proposals that would reduce the effectiveness of the Missouri Historic Tax Credit Program or, worse, eliminate it in future years. As a Realtor serving the historic neighborhoods of the City of St. Louis, Missouri, the Missouri Historic Tax Credit has been an extremely important tool for financing the construction and rehabilitation of historic buildings throughout the State of Missouri. With changes in the credit markets, the importance of the Missouri Historic Tax Credit Program as a financing tool for construction projects has increased (not increased).
CURRENT LEGISLATIVE PROPOSALS
Here are some of the current legislative proposals:
SB45 (substitute bill from Senate's Economic Development Committee): Bill places cap on the Missouri Historic Tax Credit program at $150 million per year. Note: The substitute bill does not appear on the Missouri General Assembly's bill tracking website.)
SB121: Institutes a 2-year moratorium on all tax credit programs.
SB142: Sets sunset provisions for all tax credit programs in 2015.
REVIEW OF CURRENT HISTORIC TAX CREDIT PROGRAM AND ITS ECONOMIC IMPACT
Given the current economic crisis, it simply doesn't make any financial sense to make changes to a successful tax credit program that has increased the local tax roils, has generated jobs and has a proven track record of preserving historic buildings and creating high paying construction jobs. Here are some of the facts:
The Historic Tax Credit program serves as a model for the country. Missouri has become a leader in generating jobs with historic preservation as a direct result of the Missouri Historic Tax Credit Program. The Wall Street Journal described the Missouri Historic Tax Credit as the "best in the nation." (Wall Street Journal) Because of the availability of the Missouri Historic Tax Credits, Missouri ranks:
- First in the nation with 189 federal historic rehab tax credit projects successfully completed in FY 2007.
- First in the nation with almost $535 million in up-front investment in labor and materials for the federal historic rehab tax credit projects completed in FY 2007.
- First in the nation with 174 preliminary applications approved in FY 2007.
The Historic Tax Credit generates more tax revenue than it costs. For every $4 spent on direct construction costs for approved projects, a $1 credit is issued by the State of Missouri. For each $1 tax credit issued, over $1.50 is generated in new state and local tax revenue. (Rutgers University Study) According to the Rutgers study, the state's average investment in historic preservation tax credits helps stimulate:
- $346 million in annual expenditures for the rehabilitation of historic buildings
- $660 million in annual expenditures by tourists exploring the state's cultural resources
- $5 million in annual investments related to the state's Main Street Program
The same study calculated the indirect impacts of those expenditures on Missouri's economy including:
- $582 million in income generated
- $917 in gross state product
- $111 million in state and local taxes
Missouri needs jobs. The Missouri Historic Tax Credit Program has created over over 40,000 jobs since its inception in 1998. (Rypkema Report 2008) These jobs are high paying construction jobs.
Capping the Historic Tax Credit will damage our communities. Missouri has made great progress in revitalizing its downtowns and main streets. However, the proposal if capped will damage the progress made in recent years and make it extremely difficult to both start and complete projects associated with historic buildings where the construction costs exceed the likely return on post-construction sales. The Rypkema Report described the impact on Downtown St. Louis as follows:
Downtown St. Louis had experienced decades of decline and departure. But over the last ten years there has been a dramatic change. Over $4 billion has been invested, 90 new retail businesses have opened, 2500 new hotel rooms have been created and 5000 new residents now call downtown St. Louis home. There has certainly been sizeable investment in new construction, including the $387 million stadium and a $220 million Federal courthouse. But the vast majority of the projects and nearly half of the total investment dollars have gone into the rehabilitation of historic buildings. In fact, nearly 100 vacant or abandoned historic buildings have been rehabilitated into hotels, offices, apartment buildings, retail facilities and condominiums. Just the 15 largest historic preservation projects represent private investment of over $1 billion. As someone whose primary professional focus is downtowns, I've reached the conclusion that St. Louis is the biggest turnaround story of American downtowns. And it has done so by utilizing its historic assets. (Rypkema Report 2008)
Program Has Broad Impact. Although the St. Louis area has benefited from this program as described above, St. Louis isn't the only beneficiary of the Missouri Historic Tax Credit Program. The following communities have had buildings rehabilitated and preserved as a part of the program: Arcadia, Boonville, Butler, California, Carthage, Chesterfield, Chillicothe, Clarksville, Columbia, Danville, Excelsior, Farmington, Florissant, Fulton, Hannibal, Hartsburg, Hermann, Independence, Jefferson City, Joplin, Kansas City, King City, Kirkwood, Lexington, Manchester, Maplewood, Neosho, Nevada, New Haven, New Melle, North Kansas City, Osceola, Pilot Grove, Rocheport, St. Charles, St. Joseph, St. Louis, Ste. Genevieve, Sedalia, Springfield, Trenton, University City, Wellston, West Plains and Wildwood. This program has had a broad impact on and has served as a catalyst for revitalization in urban, suburban and rural areas. Similarly, it isn't just a corporate welfare program. 11% of the tax credits issued went to projects with construction expenditures over $5 million which are projects that anchor neighborhoods. However, 66% of the tax credits issued went to project under $500,000, which means that these projects involved small projects including single family homes. The program has had a balanced approach in terms of number of urban, suburban and rural projects and is available to families renovating single family homes as well as developers of large anchor projects.
Although I rarely write blog posts that address legislative matters, this issue is simply too important not to be addressed by Realtors who are on the front lines and see first hand the impact that the Missouri Historic Tax Credit Program has had on the revitalization and stabilization of the neighborhoods in which we live and work.
For more information on purchasing a home in the historic neighborhoods of the City of St. Louis or using the Missouri Historic Tax Credit Program to finance the rehabilitation of your new home, please contact Ryan Shaughnessy at PREA Signature Realty at 314-971-4381 or via e-mail to Ryan@PREASignatureRealty.com.
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PREA SIGNATURE REALTY
PREA Signature Realty is a full service brokerage located at 1709 Park Avenue in the Lafayette Square neighborhood of the City of St. Louis. PREA Signature proudly serves the following city neighborhoods: Lafayette Square, Soulard, Benton Park, Benton Park West, Downtown Loft District, Forest Park Southwest, Central West End, Tower Grove East, Tower Grove South, Compton Heights, Shaw, The Hill, Dogtown, Carondelet, Holly Hills, St. Louis Hills, Dutchtown, and the Other Historic Neighborhoods of the City of Saint Louis, Missouri.
The opinions expressed herein represent the opinions of the author only and do not reflect the opinions of PREA Signature Realty. All photos and written content were produced by PREA Signature Realty. All Rights Reserved - PREA Signature Realty (2009). This content may not be reproduced or reprinted, except for Active Rain re-blogging, without express written permission of PREA Signature Realty.
For more information, visit our website at www.PREASignatureRealty.com or contact Ryan Shaughnessy at 314-971-4381 or send an email to Ryan@PREASignatureRealty.com.
