Tax Credit Moratorium?

The Historic Tax Credit program, which I linked to a while back, may be put on a one-year hiatus to examine its cost-benefit ratio. This program creates financial incentives to developers who wish to renovate or redevelop historic buildings in RI, and often provides the margin which turns an economically impossible project into reality. Debate on the moratorium, suggested by the State House Finance Committee, should take place this week.

[T]he state has given out many more tax credits than lawmakers anticipated when they established the program, said House Finance Committee Chairman Steven Costantino, D-Providence. "It grew bigger than we expected," he said.

Costantino said the moratorium would give lawmakers time to analyze whether the state is indeed achieving the golden returns on the credits that developers have predicted.

Costantino said the moratorium would last one year and would not affect the dozens of development projects that have already applied for the credits.

When former Gov. Lincoln Almond signed the credits into law in 2001, state officials predicted it would cost the state $16 million in income taxes over five years.

The state now plans to give out an estimated $134 million in credits over six years.

I imagine even with the greater-than-expected popularity of the program the economics make sense, and that's to say nothing of the non-quantifiable effects of having booming urban redevelopment. The tax credits have already made possible the conversion of the Masonic Temple to a hotel, the Rising Sun Mills project in Olneyville, the Royal Mills Project in West Warwick and the critical-mass breaking Peerless Building project Downcity.

Grow Smart RI has sent out a legislative alert asking concerned citizens to contact their legislators and the Governor (who does not support the moratorium). They cite a preliminary report that shows for each tax credit dollar spent, $5 is pumped into the local economy in the construction phase alone. They show $21 million in revenue returns to the state before factoring in long-term economic benefits (and, they point out, this $21M comes in before the credits are even eligible to be redeemed).

The Urblog can't quibble with making sure the program is economically sound, but we suggest a cap on next years tax credits rather than a moratorium (if well enough can't be left alone while studying the issue). The momentum generated by these credits should not be brought to a halt. Governor Carcieri has the right idea in saying that there's only so many qualifying projects out there, let's not be too drastic.

UPDATE: "House leaders agreed yesterday to drop a proposed moratorium on historic preservation tax credits." Excellent!