“Where in the Rhode Island FY 2015 Budget Are Historic Tax Credits?”
The House has voted to approve Rhode Island's FY 2015 budget and many are asking why the historic tax credit (HTC) program funding vanished.
The House has voted to approve Rhode Island’s FY 2015 budget and many are asking why the historic tax credit (“HTC”) program funding vanished. The pluses of the HTC for the Rhode Island economy in general, and for the Rhode Island real estate community in particular, are many and incontrovertible.
Grow Smart Rhode Island (“Grow Smart”) has been in the forefront of the fight to retain the HTC program, and has marshaled some very persuasive facts which our legislators have apparently ignored. For example, Grow Smart notes that the HTC “program has an excellent track record. From 2002 to 2008, it generated $1.3 billion in new private investment in Rhode Island’s real estate economy. This resulted in an estimated 22,000 construction jobs, 6,000 permanent jobs, and total wages of more than $800 million.” In addition, after a legislatively mandated hiatus, when the program was reinstated in last year’s budget, although approximately thirty new projects were approved for funding, there remain numerous projects in the queue waiting for HTC funding. It is likely that without funding for the HTC program, many of these projects now will never happen with a resultant loss of many millions of dollars of construction jobs and new developments that would have benefited one of the worst economies in the country.
The most troubling news related to the legislature’s failure to include HTC funding in the budget comes from the State Budget Office, which has reported that the $52,000,000 proposed by the governor for additional HTC funding would come from bonds authorized in 2008 by the General Assembly. Thus, no new bonds would need to be issued for several years to come and as a result there would be no interest payments due until FY 2019. It is projected that the increased valuations from renovated and reconstructed projects completed with HTC funds during the next few years would more than offset any interest and other costs of the bonds.
There has been little controversy over the effectiveness of the HTC program in increasing the scope of real estate development and in raising the tax value of properties developed with HTC funding. Scott Wolf of Grow Smart has been quoted as saying that “[t]he evidence that the historic tax credit makes a real positive difference can be seen on the ground in communities throughout the state – in bustling commercial properties like Hope Artiste Village in Pawtucket and along Westminster Street in Providence, in new apartments for urban workers and new affordable housing units. It can be seen in increased property tax revenues from rehabbed buildings. It can be seen in neighborhoods that have been rescued from the blight of vacant, derelict buildings.”
So, why is HTC funding missing from the budget? Is it the specter of 38 Studios? Is it a desire by the legislature to punish those deemed to profit from the HTC program? Whatever the reason, one thing is clear: the failure to fund the HTC program hurts the Rhode Island real estate community with the serious and negative ripple effect of hurting all Rhode Island taxpayers at a time when both need all the help our elected representatives can provide.