In the early hours of May 15th, the Missouri Senate crafted a compromise bill that struck middle ground among Senators who had spent months gridlocked over the historic tax credit issue and economic development. Missouri’s historic rehab tax credit has had immense economic benefits. According to the Missouri Department of Economic Development, the credit generated nearly 5,000 jobs in fiscal year 2007 and, as stated by Donovan Rypkema, leading preservation economist, has produced over 40,000 jobs throughout the life of the program.
Senator Brad Lager , who pushed for a cap and other limitations on the historic tax credit, agrees that the compromise language achieves the necessary budget certainty which he sought throughout session. According to Senator Jeff Smith, a persistent tax credit advocate from St. Louis, “now that the critics have gotten the ‘budget certainty’ they sought, the program will have the stability to flourish in the years ahead.”
Provisions of the bill include:
- 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); and
- An effective date of January 1, 2010.
The small project exemption will allow smaller-scale projects to continue redevelopment without the cap. Based on historical data, it will allow around 75 percent of all deals to be unaffected by the cap, toward which their dollars will not count. Jacob Sanders, a Springfield, Missouri CPA, believes that “the small deal exemption is key. It’s those small developers right now that are having such a hard time. Plus, the large percentage of projects we have, especially outside of Saint Louis and Kansas City, will fall into that category.” And, the $140 million cap allows room for large projects while providing the restriction sought by some lawmakers.
See the Missouri Coalition for Historic Preservation & Economic Development for more.
The Assembly Environment Committee passed the proposed New Jersey historic rehabilitation tax incentive bill, the Historic Property Reinvestment Act (A791) this afternoon. The vote was unanimous; many thanks to prime sponsor and committee vice-chair Asm. Reed Gusciora.
Compelling testimony and/or support from PNJ president and preservation architect John Hatch, Trenton developer and Trenton Downtown Association president David Henderson, Joe Simonetta representing NJ-AIA and City Scape Capital Group CEO Bill Hoffman outlined the importance of the tax credit to the stimulation of NJ’s nearly dormant development market.
Philip Fierro, Executive Vice President of Manhattan developer Metrovest Equities, the firm currently developing the nation’s largest federal tax credit-driven paroject, The Beacon (former Jersey City Medical Center), also provided persuasive testimony about the value of the proposed historic preservation stimulus bill. We thank him for his remarks, herewith in full:
“The benefits to commercial redevelopment in this current economic climate are in line with the stated governmental role to stimulate the economy, with the desired effect of creating job opportunities, both permanent and construction. One of the key benefits to this legislation would be to create revenue streams to the state and local bodies through employment and future tax revenues.
The current turmoil in the capital markets, specifically the Bank Credit and Mezzanine tranches, make the capitalization of large commercial developments very challenging, if possibleat all. The scarcity of money in the subordinate tranches is causing market participants to charge higher rates of interest in order to fund. This has the effect of making the underwriting of these projects marginal at best.
New Jersey’s enactment of a tax credit, which could be syndicated for purposes of raising additional equity to replace the mezzanine tranche, would enable projects that are currently not moving ahead to come online quicker and generate much needed construction jobs, permanent jobs and local recurring property tax revenue. Numerous projects that are not being done would become viable.
By the restoration of historic structures that would be kick started by a 25% state historic tax credit the state would recapture the credit cost in numerous ways:
1) Construction Jobs – Approximately 60% of all construction hard costs are labor related (more…)
The Assembly Environment Committee has just published their hearing schedule for Mon., May 11, 2 p.m. in Cttee Room #9 of the Statehouse Annex and the long-sought historic preservation tax credit (HPRA – A791) is on the agenda!
Spread the word, and meantime PLEASE contact Assembly members Barnes (18), MIlam (1), Rooney (39), Huttle (37) and Van Pelt (9), members of the committee, especially if they are your representatives. Get contact info from the legislature website.
You can get plenty of information from this blog and the NJ Heritage Development Coalition website, including statistics on how the credits in other states actually generate positive tax revenue for their treasuries, create jobs and economic stimulus.
Most importantly tell legislators how valuable the tax credit would be to your community, economic development, job creation, quality of life, etc. Would you please let us know the results of any conversation you have before Monday afternoon at 2?