Guest MINDSETTERS™: Historic Tax Credit Program at Risk

Guest MINDSETTERS™: Historic Tax Credit Program at Risk

Last week, the House Finance Committee declined to recommend funding for the Historic Tax Credit program in the upcoming state budget, despite its success ($1.3 billion in new private investment in Rhode Island’s real-estate economy between 2002 to 2008), its popularity (last year’s reinstated program received project requests totaling twice the amount of available funding) and, the fact that the Chafee Administration – because of the program’s success and popularity – included the Historic Tax Credit program in its FY 2015 Budget proposal.

Some House leaders claim that the Historic Tax Credit will add too much to the state’s indebtedness. But in actuality, there would be an immediate positive impact on Rhode Island’s economy from the Historic Tax Credit for the following reasons:

• Employment taxes through construction and other jobs generated by projects will be pumped into the economy right away.
• New jobs will be created years in advance of any outlay of state funding because credits are not released for any project until it is completed.
• Sales-tax revenues resulting from construction materials and other goods purchased for projects also benefit the state well in advance of any outlay.
• Rhode Island’s fiscally stressed communities benefit significantly from Historic Tax Credits because vacant or severely underutilized historic buildings can be transformed into bustling centers of activity and commerce with dramatically elevated property values.
• A 2007 study for Grow Smart RI concluded that each $1.0 million of state Historic Tax Credits leverages $5.35 million in total economic output.
• The Budget Office forecasts no fiscal impact to the state budget from the proposed $52 Million in debt service until FY ’19 because bonds won’t need to be issued until the projects have been completed and the tax credits have been claimed.

We urge the House leadership to change their position and amend their budget to include the Historic Tax Credit.

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The facts are clear: In less than one year the reinstated program has already ignited 26 new projects that will pump nearly $180 million into the Rhode Island economy, but 27 additional projects are waitlisted and are unlikely to go forward if the Historic Tax Credit is not included in the budget. By not including funding in the upcoming budget, the state risks forgoing up to $160 million in construction activity alone. Significant sales- and employment-tax revenue also will be lost.

Moreover, Rhode Island would be giving up its competitive advantage to Connecticut, Massachusetts, Maine, and New York, neighboring states that have well-funded state Historic Tax Credit programs. Developers and businesses that are seeking out authentic and historic work environments would have one more reason to bypass Rhode Island for more welcoming northeastern locations.

And with all of the concern about our state’s overall business friendliness, why would we want to undermine much of the benefit of tax reforms that are included in the House Finance Budget? Suspending funding for the Historic Tax Credit for the second time in six years is a move that is likely to reinforce Rhode Island’s image among investors and entrepreneurs as a state that cavalierly and repeatedly changes the rules for economic engagement and private/public partnerships. Why would we do this to ourselves?

Finally, the Historic Tax Credit program is everything that 38 Studios was not. The Historic Tax Credit is a proven incentive program that plays to one of our state’s long-established strengths and that only takes effect once a project is successfully completed. From 2002 to 2008, the program created $1.3 billion in new private investment in Rhode Island’s real-estate economy, which resulted in 22,000 construction jobs, 6,000 permanent jobs, total wages of more than $800 million, and dramatic increases in the assessed value of buildings that were restored.

We need our elected leaders to heed this urgent call and include funding for the Historic Tax Credit program in the FY 2015 budget. It is a sound and critical investment in Rhode Island’s cities and towns and a proven job-generator and revenue-producer, which our state sorely needs.

If the priority is “jobs and the economy,” leaders must take action now to put the Historic Tax Credit back in the budget. There is no better economic recovery tool that we have at our disposal.

 

Scott Wolf

Executive Director

Grow Smart Rhode Island

 

Valerie Talmage

Executive Director

Preserve Rhode Island