Tue April 8, 2014
Commentary: Historic Preservation Means Economic Growth
As the Missouri legislature debates the future of the state’s historic rehabilitation tax credit program, I would like to consider the meaning of the term “historic preservation” in the context of economic development.
In this context, historic preservation simply means the repair and reuse of high quality existing buildings.
Large numbers of useful buildings in town centers and urban areas across the region are under-performing as economic assets because they need to be repaired and brought back into productive service.
These buildings represent a vast untapped economic resource. Consider that the materials in a historic building have already been extracted, refined, transported and assembled. The land has already been prepared for construction, the infrastructure and services are already in place and the vast majority of energy required to create a useful finished product has already been expended. All they really need is large amounts of skilled local tradespeople to put them back in order. These are all important considerations for a society that desperately needs jobs and is increasingly concerned with sustainable practice and rising energy costs.
While it has been well documented that investment in the urban core and in small town main streets can be enormously valuable, this type of growth frequently requires a catalyst.
With an eye toward revitalizing existing, but underutilized buildings, the Missouri legislature approved a new economic development program in 1997; the State Historic Rehabilitation Tax Credit.
The program was designed to create jobs, attract private investment, and grow the tax base by providing incentives that helped to put buildings back into productive use.
The experiment worked. According to studies by Saint Louis University, Rutgers University and the Missouri Department of Economic Development, the program has produced more than 43,000 jobs, leveraged nearly $7 billion in direct private investment, and returns $1.50 in tax revenue for every dollar the state invests.
The program is literally the most effective economic development initiative in the history of the state. Despite all this, the state auditor’s office recently characterized the performance of the program as merely “fair” as if there were other programs that had put up comparable numbers. He also pointed out some reasonable ways to make the program more efficient. Good, let’s do that. Let’s make a great program even better.
“No” say some in the legislature, let’s make it worse. Right now, the cap on the amount of money the state allocates to the program annually is larger than the amount redeemed. This means that people who want to use the program can build it into their financing packages and have confidence in their project budgets. This is a good thing.
Unfortunately, some of our representatives are trying lower the cap to an amount that is less than what is typically redeemed. This means that every year some people will get to use the program, and others will not. If you build the credits into your financing package, you will be rolling the dice. This uncertainty will lead to paralysis. This is a bad thing.
If the state legislature is serious about creating jobs for Missourians, why is it trying to cripple a program that creates thousands of jobs? If it is serious about cutting taxes, why would it kill a program that grows the tax base? If it is serious about increasing funding for important things like education, why would it kill a program that generates a substantial return on its investments?
Lowering the cap on the Historic Rehabilitation Tax Credit Program will chase jobs and investment out of Missouri. Show me how that makes economic sense.
Andrew Weil is the executive director of the Landmarks Association of St. Louis.
Historic Tax Credit