Some Missouri lawmakers are trying to gut the state’s Historic Preservation Tax Credit program, a blow that would cripple a vital economic engine around the state, but particularly in the city of St. Louis.
A group led by Sen. Brad Lager, R-Savannah, is holding Gov. Jay Nixon’s economic stimulus bill hostage, demanding as ransom the radical reordering of a long list of state tax credit subsidies.
The state has dozens of tax credit programs, offering incentives — in the form of coupons that offset tax liabilities — in exchange for investment in various economic or social programs. Each coupon that’s cashed in reduces the amount of state revenue, but the benefit is economic activity that otherwise would be lost.
Mr. Lager and key GOP members of the Senate say many of the programs don’t actually pay off. They want to get rid of programs that don’t work and add more legislative oversight to those that remain.
They say they only want to want to rein in the historic preservation tax program — cutting it by more than half, capping it at $50 million a year, allocating it by population and making renewal subject to reconsideration every year.
That would kill the program and cripple St. Louis. Mr. Lager and his supporters know it.
In the last 10 years, the historic tax credits have cost the state $646 million. But they have produced $1.8 billion in construction activity in the city of St. Louis alone. And the construction investment is just the start.
Residential projects have drawn homeowners into the city, including downtown, by the thousands, adding to the tax rolls and strengthening the fabric of neighborhoods. Commercial projects — office buildings, restaurants, hotels, entertainment districts — have become vibrant hubs and tourist destinations.
St. Louis Mayor Francis Slay says the program has been the single most important factor in reversing the city’s population decline and stabilizing its pool of jobs.
But the benefits are not limited to the city of St. Louis. The historic tax credit has supported more than 900 projects in 37 counties and 55 communities across the state.
Critics say the program hasn’t paid off in new tax revenue, but tax dollars alone can’t measure a program’s effectiveness. That requires considering a larger universe of costs and benefits, including new jobs and spin-off benefits.
Economist Donovan Rypkema says the historic tax credit program has been the direct source of 17,900 jobs in the state. Indirectly, he says, the program created another 22,500 jobs adding “$673 million to the pockets of Missouri citizens directly, and another $700 million indirectly.”
“Reformers” claim that capping tax credits would be a modest step about which only “tax credit hogs” would complain. But most historic preservation tax credit projects are small scale. Only 11 percent involve $5 million or more in expenditures. More than 45 percent weigh in at less than $250,000, with 15 percent below $100,000.
Developers risk the capital. They must complete the project before becoming eligible for the credit, which amounts at most to 25 percent of project costs.
St. Louis lawyer Jerry Schlichter, who authored the tax credit legislation, likens it to the federal home mortgage interest deduction: A crucial economic element of the real estate market landscape that, if capped, would result in chaos.
The historic preservation tax credit has become a fixed part of cities’ economic landscapes. Capping the credit would render the program so unreliable and speculative that construction capital would dry up. Progress in St. Louis would grind to a halt. It’s as simple as that.
No doubt some of Missouri’s tax credit programs need fixing. Some may need to be ended. But the historic tax credit program has been a singular success. Leaders in St. Louis, whether in the political, business or civic communities, must wage all-out war to save it.