Lawmakers cap tax credits for preserving historic buildings
Saturday, May 16, 2009
When Missouri lawmakers passed a cap on tax credits for historic preservation Friday, they put the brakes on a program that has helped target investment at the core areas of many towns and cities, a Cape Girardeau preservation consultant said.
Terri Foley, who advises building owners on the steps they should take to reveal the historic aspects of their buildings, said she believes the new cap will cripple the program.
The Missouri Legislature revived a languishing bill for economic development as they entered their final day of work. The measure was tied up for weeks due to filibusters over which, if any, programs to cap and whether lawmakers should use budget bills to set yearly allotments to various credit programs.
In the end, the bill awaiting action from Gov. Jay Nixon will limit the total amount of historic preservation tax credits to $140 million annually. However, projects costing less than $1.1 million would be exempt from the cap. In another restriction added to the program, lawmakers set a limit of $25,000 in credits for restoring historic homes.
"When you cap something like tax credits, it is very hard for somebody who wants to buy that building, not knowing whether they will get the credits in one year, two years or five years," Foley said. "They cannot put together a guaranteed business plan not knowing whether they are going to get that funding."
Missouri's historic preservation tax credit is one of the state's largest tax credit programs and the most expensive one related directly to economic development. During the fiscal year that ended June 30, $140.7 million worth of historic preservation tax credits were claimed. During the first nine months of the current year, $157 million worth of the credits have been redeemed.
Cape Girardeau buildings renovated or undergoing renovation under the program include the Marquette Tower and the Southeast Missourian business offices, both in the 300 block of Broadway, and Breakaways Bar & Billiards on Main Street.
Under the program, owners of homes and commercial buildings listed on the National Register of Historic Places are eligible for a credit of up to 25 percent of qualified spending. The state credit complements a federal tax credit of 20 percent, but the federal credit is limited to commercial buildings.
The state credits may be sold to raise money for a reconstruction job, and that is where a cap will have the most bite, said Dr. Steven Hoffman, a history professor at Southeast Missouri State University. Hoffman conducts regular projects with his students to identify the historic aspects of buildings or districts in advance of a submission to the National Register.
"I like to look at it optimistically, that it may hurt the program but it won't kill it," Hoffman said.
Both Foley and Hoffman said the cap could make it more difficult to find investors willing to take on other Cape Girardeau projects such as the Esquire Theater or the Keys building at Spanish Street and Broadway.
The $1.1 million exemption will help keep investment flowing in smaller towns with smaller buildings, Hoffman said. But for bigger projects, the cap will likely make it more difficult to find conventional financing.
The newly capped program will need a mechanism that fairly distributes the credits throughout the state, Hoffman said. A first-come, first-served method would favor deep-pocket developers, he added.
"I am more drawn to some sort of regional allocation than first-come, first-served," he said. "But the doable projects are necessarily distributed equally."
301 Broadway, Cape Girardeau, Mo.
338 Broadway, Cape Girardeau, Mo.
15 N. Main St., Cape Girardeau, Mo.