JEFFERSON CITY – State Sen. Jeff Smith says he can’t walk down his street in the Shaw neighborhood of St. Louis without seeing the benefits of Missouri’s historic preservation tax credit.
Many of the century-old homes on Flora Place have been renovated with help from the program, which pays 25 percent of the construction cost. Smith said his block captain told him: “I wouldn’t have redone my house” without it.
Smith, D-St. Louis, has been busy defending the tax credit lately to Senate colleagues. Last week, several Republican senators proposed a bill that would make the program subject to annual appropriations and cap it at $50 million a year. That would be a 70 percent reduction from the $170 million authorized last year.
The proposal is sending tremors through the St. Louis offices of downtown boosters, the mayor, developers and banks. Scores of projects have relied on the credits to breathe life into areas such as the Washington Avenue loft district and landmarks such as the Old Post Office, Cupples Station and the Chase Hotel in the Central West End.
Mayor Francis Slay said Friday that the credit “might be the most important tool in the renaissance of the city of St. Louis.” He said it had spurred $1.8 billion worth of construction in the city, turning around deteriorating neighborhoods and business districts.
But although preservationists have prevailed in past legislative skirmishes, this year promises to be tougher. Republicans, who control the Senate, are holding up Gov. Jay Nixon’s jobs bill and say it won’t pass unless it includes caps on all tax credit programs.
“Nobody’s debating” the merits of rehabbing buildings, said Sen. Brad Lager, R-Savannah. “We’re saying we do not have unlimited resources in Missouri.”
SOaring Program cost
The state has dozens of tax credit programs subsidizing everything from high-tech businesses to farms. Combined, they cost the state more than $532 million last year.
When the state issues a tax credit, the treasury agrees to forego that amount of money. The recipient gets a voucher, which can be used to reduce income taxes or various business taxes. In most cases, the credits also can be sold to a bank or wealthy investor.
Historic preservation is drawing the most attention because it is one of the largest outlays and one of the few programs that has no cap. It exploded from $2.5 million in credits being redeemed in 1999 to $140 million claimed last year.
Over the program’s 10 years, historic credits have cost the state $646 million. As a result, Missouri leads the nation in fostering investment in historic buildings, ranking No. 1 in a 2007 study by the National Park Service.
More recently, the Legislature’s Joint Committee on Taxation surveyed other states about their preservation efforts; 28 responded. None came close to the $140 million that Missouri spent. The two largest programs were in Virginia ($80 million) and Ohio ($60 million).
There’s no consensus on exactly how much the state benefits from its investment.
To its admirers, the credit generates jobs, increases tourism and boosts income, sales and property taxes paid into state and local coffers.
Sen. Smith told colleagues on the Senate floor last week that the state got back $1.78 for every $1 of tax credit.
But that figure came from a state study that was six years old. The updated calculation by the Missouri Department of Economic Development estimated that every dollar returns only 23 cents.
Jim Farrell, who lobbies for the Missouri Coalition of Preservation and Economic Development, said the 23-cent figure fails to take into account construction jobs, business for suppliers and spinoff benefits.
“Where there was a vacant or underutilized building for 40 to 50 years, now it’s turned into the Westin Hotel or lofts,” Farrell said. “It doesn’t account for that.”
Preservationists cite an analysis by Washington economist Donovan Rypkema, who concluded that the program had produced 40,000 jobs in a decade.
Then there are intangible benefits that flow from cleaning up contaminated or crime-ridden properties and rebuilding housing where people can walk to shops and schools.
Patty Maher, a general contractor, uses the tax credit to restore homes in south St. Louis neighborhoods such as Benton Park, Fox Park and Forest Park Southeast.
“Every area I’m in was once a really bad, boarded-up area, and they’ve all come around in the past 10 years,” Maher said. “Now, everybody wants to live there.”
work in progress
No matter how worthy the projects, Lager, chief sponsor of the Republican plan, said historic buildings should compete with other worthy programs for state money.
“Go out and tell some guy who lost his job that we’re giving 25 cents on every dollar to restore an old building when he can’t feed his family,” Lager said.
In addition to capping the program, the pending bill would set a $25,000 credit limit for homes, base overall allotments to urban areas on population and bar recipients from drawing benefits from multiple programs for the same project.
Preservation proponents say the bill would kill the program by creating uncertainty and drying up private financing.
“If they don’t know the credit’s going to be there, they’re just not going to be able to do the project,” said Debbie Sheals of the Missouri Alliance for Historic Preservation.
Countered Sen. Jim Lembke, R-Mehlville: “We have a pie that’s only so big.”
Senators invited critics to look over their bill and send in suggestions. But historic preservation coalition members balk at any talk of compromise.
“This is like asking which door you want to take to go to the slaughterhouse,” said St. Louis attorney Jerry Schlichter, who helped draft the law setting up the credit.
For his part, Smith said the $50 million cap was “irrational.” To kill it, he promised to invoke the Senate’s tradition of letting any senator talk endlessly.
Said Smith: “I’ll stand as long as I have to stand.”
(The jobs bills are SB45 and HB191.)
Largest recipients of historic preservation credits
Here are the five largest St. Louis-area recipients of historic preservation credits in fiscal year 2008, which ran from July 1, 2007 to June 30, 2008.
Log Number Property Tax credit Project Name Property Address Zip Issue Date Rehab Costs Project Costs Tax Credits Jobs Housing City Recipient Units
45275-HTC St. Louis Orchard Dev. Group III LLC The Ely Walker Building 1520 Washington Avenue 63103 6/25/2008 $52,264,091.00 $61,074,873.00 $13,066,022.75 10 174
34608-HTC St. Louis TLG Marquette, LLC The Marquette Building 314 N. Broadway 63102 5/21/2008 $47,924,095.00 $57,692,050.00 $11,981,023.75 85 79
33748-HTC St. Louis University Village Apts., LP Stix, Baer, Fuller Relay Station, C.P. #1 3712-48 Laclede 63108 11/16/2007 $40,383,388.28 $54,120,375.51 $10,095,847.07 104 129 & 3717 Forest Park
36885-HTC St. Louis 1641 Washington, LLC The Ventana 1635-41 Washington Avenue 63103 5/30/2008 $20,838,826.00 $28,529,121.00 $5,209,706.50 10 91
35239-HTC St. Louis Loop Lofts, LP Loop Lofts 1019 N. Skinker Parkway 63133 9/17/2007 $19,014,967.00 $22,084,579.00 $4,753,741.75 5 104
Source: Mo. Dept of Economic Development
Shaw Archives 