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Cutting historic tax credits is shortsighted, backers say

This article first appeared in the St. Louis Beacon, Nov. 22, 2010 - To the state commission that has recommended cutting Missouri's historic tax credit to $75 million a year from its current $140 million, the head of the Partnership for Downtown St. Louis has a terse response.

"Show us another way to create 2,000 jobs in this economy," says Maggie Campbell, "and we'll be happy to give up the tax credit."

The recommendation for cutting the credit was among several approved this week by the Tax Credit Review Commission  named earlier this year by Gov. Jay Nixon to look at the state's 61 credit programs, then come up with suggestions on how they might be treated in the future.

The goal is to cut the amount of tax credits, which have grown from 2.33 percent of the Missouri's general revenue in 1999 to 7.74 percent in 2010. With the state's tight budget, and projections that the future tax credit liability could reach $2.4 billion, Nixon is looking to the credits as a way to close a shortfall projected to be hundreds of millions of dollars.

The 25 business, community and legislative leaders on the commission held hearings throughout the state, then met this week to vote on what recommendations to send to the governor. The item on the list that may have drawn the most attention was the 11-9 vote to cut the historic tax credit, which supporters say has spurred development in St. Louis and throughout the state.

The commission also voted to prohibit the so-called stacking of tax credits -- using more than one credit on a particular project, such as the historic credit and the low-income housing credit to rehab buildings into housing for the poor.

Now that the battle over tax credits will move from the commission to the General Assembly, backers of the historic credit are marshaling their arguments.

To attorney Jerry Schlichter, who has been instrumental in downtown projects such as the Old Post Office, if the recommendation becomes law, "it's over in Missouri for the historic tax credit."

"Developers are already going to adjacent states," Schlichter added, "which ironically have used the Missouri law as a model and have increased their cap, creating in some cases a historic tax credit to create jobs. I think people will continue to point out that this has been the best jobs program in the history of the state, and hopefully the Legislature will make those jobs a priority."

Campbell called the recommendation "shortsighted," saying that the historic tax credit has been responsible for $1 billion in investment downtown in the past 10 years. Right now, she said, 65 percent of the construction going on downtown can be traced to the historic tax credit, creating 2,000 jobs.

She noted that the tax credit benefits more than just St. Louis, and it's not the urban-rural issue that some people paint it as.

"Of the 2,000 construction jobs going on in St. Louis," Campbell said, "about 65 percent of those people are driving in from rural areas. People who live in smaller towns and outlying areas, as well as in suburban areas within driving distance to St. Louis, are coming here because of the jobs created by historic tax credits.

"Products and materials are being shipped across the state, bought from suppliers all over Missouri. This is not just a St. Louis benefit. It is something that fuels the entire state."

Christine Harbin, who has studied the economic impact of tax credits for the Show-Me Institute, thinks that the recommended cuts will be good for the state. It may be difficult to stand up to what she considers special interests, Harbin said, but reducing the amount of the credits will be one of the best ways to make sure Missouri is using tax receipts more effectively.

"Tax credits are bad for Missouri," Harbin said. "I think this is a really good compromise."

As far as the specific impact of the historic tax credits, Harbin said that with a high vacancy rate in office space, businesses would be better off to look at filling up buildings that are already there rather than rehabilitating old buildings to create new space.

Campbell and Schlichter disagree. Campbell says that venerable buildings like the Arcade and the Jefferson Arms, badly in need of renovation, are not likely to be saved without the historic tax credit. And Schlichter says that rather than trying to close the budget gap by reducing tax credits, Missouri should try to make up more ground on the revenue side to make sure it has the money it needs to fund vital services such as public schools.

"This is not about the historic tax credit versus education," he said. "That's a false issue. Turning vacant buildings into occupied ones increases the value of those and adjacent buildings, which benefits education.

"This is resulting from a shortage of revenue, so why not address revenue for education? We have a tax on national internet sales that is not being collected. We are 50th out of 50 states in our cigarette taxes. If we got to the national average on cigarette taxes, it would raise hundreds of millions of dollars for education. The same thing for alcohol taxes. Those who support the current tax are favoring cigarette smokers over education.

"The Legislature is going to have to decide whether to accept this recommendation -- and destroy the historic tax credit in the process."

Dale Singer began his career in professional journalism in 1969 by talking his way into a summer vacation replacement job at the now-defunct United Press International bureau in St. Louis; he later joined UPI full-time in 1972. Eight years later, he moved to the Post-Dispatch, where for the next 28-plus years he was a business reporter and editor, a Metro reporter specializing in education, assistant editor of the Editorial Page for 10 years and finally news editor of the newspaper's website. In September of 2008, he joined the staff of the Beacon, where he reported primarily on education. In addition to practicing journalism, Dale has been an adjunct professor at University College at Washington U. He and his wife live in west St. Louis County with their spoiled Bichon, Teddy. They have two adult daughters, who have followed them into the word business as a communications manager and a website editor, and three grandchildren. Dale reported for St. Louis Public Radio from 2013 to 2016.

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