The original report submitted November 5th was returned to the HTC Sub-Committee for reconsideration. The Sub-committee was asked to reconsider its recommendation of keeping the $140 Million dollar Cap which was instituted by HB 191 in 2009. Previous to HB 191 there was no Cap on the HTC program and no other tax credit program has had a mandated cap installed.
Prior to the final HTC Sub-Committee meeting an amendment to the original report was developed which included a suggested $90 million Cap for three years and then would in subsequent years increase by an index tied to the growth of general revenue resulting in a $100M - $120M program. Additional transition rules for protection of ongoing projects were also included in the proposal to the HTC Sub-Committee for consideration.
In an early morning meeting November 17th the Sub-committee reconvened to discuss this proposed amendment of reducing the Cap yet again. After much deliberation, the sub-committee voted on the $90M cap amendment and it was voted down. An alternate amendment to set the cap at $100M was also narrowly voted down.
It was finally determined the original program’s cap of $140M should stay in place as originally determined in the first report as a $90M Cap was too drastic of a change and would keep program uncertainty prevalent. This decision was reached after many experts in the field spent numerous hours deliberating the overall impact this would have to the program. It was also felt by the business community that keeping the current HB 191 instituted Cap in place followed Governor Nixon's charge to; Create Jobs, Protect Missouri's AAA rating, protect those who have already made an investment in Missouri, and maintain control over the Tax Credit programs.
During the TCRC's review of the final HTC Sub-Committee meeting, the TCRC rejected the $140M Cap recommendation of the HTC sub-committee and allowed a lower Cap figure of $75 Million Dollars to be nominated by outgoing Senator Matt Bartle as a way to “gain control” over this program. The $75 million was approved and will be the recommended HTC Cap to the Governor in the final TCRC report. The former elected officials on the Commission (Senators Bartle, Gross, Rep Flook) were the vocal opponents that forcefully pushed their position of lowering the cap. Some transition rules were approved as submitted by the subcommittee and other recommendations modified.
The Chairman of the HTC subcommittee Zach Boyers aggressively defended the original recommendations and voiced his opposition to the $75M figure as it was arbitrary and based on a flawed premise with no economic justification. He stated that the credit works and has achieved the program’s social and economic objectives. He asked the Commission why they picked $75M why not $50M or $90M or $150M. He followed up with the question - "do we have an alternative program to drive the economy? Other states are using Missouri as the model and are moving their programs toward ours and we are backing away from the model of success. Changing the cap to $75M is a significant bad move for the state."
The HTC sub-committee analyzed in depth program efficiencies and made some significant recommendations that will change elements of the program. Some of the efficiencies were adopted and some modified. The residential component of the program was a big topic with motions to eliminate the currently eligible owner occupied residential properties altogether and reduce tax credit limits. The HTC subcommittee had recommended a reduction of the owner occupied structures from $250,000 of tax credits down to $150,000 in TC- which was then amended to not allow homes with a purchase price over $350,000 to be eligible with a maximum of $50,000 in TC. The TCR Commission (Mike Wood) then amended this recommendation to reduce the purchase price of an eligible home to $150,000. There was a vote on a motion from Craig Van Matre to eliminate single family homes from the program all together and it was defeated. Chairman Boyers again defended the importance of residential stabilization as a crucial component of economic recovery in many of the distressed communities. There was a motion to require owner occupied users of the HTC program to live in the home 10 years or the credits would be clawed back. The motion was defeated. There was also discussion on the Neighborhood Preservation Program for rehab of older homes and it was voted that this program could not be combined with historic tax credit programs.
The HTC sub-committee recommended that developments using both historic and low income housing tax credit programs would be limited to 20% HTC. Senator Bartle had an amended motion to eliminate the stacking of the two programs entirely and it passed.
There was discussion of the recommendation of eliminating the deferred development fee that is cash-flowed over 6 years from eligible QRE’s. This was approved.
The TCRC global sub-committee then discussed the issues of all tax credits required to be in the appropriations process and have sunsets. Commission Co-chair Steve Stogel made a motion that HTC and LIHTC would not be subject to Appropriations but they would be subject to sunsets in six years. They also recommended sunsets for other social, banking and insurance tax credit programs. Senator Bartle requested a division of the question and wanted a vote on Appropriations separate from the sunsets. Craig Van Matre proposed an alternative that would have required an annual appropriation of tax credits that would be categorized in three groups and prioritized. Stogel aggressively opposed this proposal as creating massive uncertainty in all of the programs and that all business certainty would be taken away. Several other commissioners spoke against the proposal and it was defeated. Senator Gross made an alternate motion that required the Legislature to come up with a replacement program to HTC and LIHTC with a sunset in two years- the motion was defeated. The motion to require HTC and LIHTC to go before Appropriations was defeated.
The motion to sunset all programs was broken into three categories;
A) 2 year sunset- Banking and Insurance
B) 4 year sunset- Agricultural, Environmental, Economic Development and Distressed Communities
C) 6 year sunset- Historic, Low Income Housing and Social
The motion passed.
Commission member Ray Wagner also discussed the frustration that the HTC industry was having with DED and the need to resolve significant issues. Sallie Hemenway of DED and Rex Burlison of the Governor's office indicated a strong willingness to have further discussions on this matter.