Several bills have been filed in the Missouri Legislature this session that would gut the Missouri Historic Tax Credit (MHTC) program.
That’s no surprise. The use of tax credits as an economic development tool has come under fire in recent years by critics who claim it is out of control and an inefficient use of tax dollars.
Efforts to curb the use of special interest tax credits gained momentum last year after state Auditor Nicole Galloway issued a report indicating that over the past decade, tax credit redemptions have increased 20 percent at a cost of $5.4 billion. That is money that could have gone to fund schools, public safety or other social services.
Lawmakers, who have been forced to cut spending the past few years, are understandably looking for ways to dig themselves out of a severe budget deficit. Tax credit programs are an easy target.
But lawmakers should exercise caution when it comes to the MHTC program. Why? Because MHTCs have proven to be a catalyst in protecting and preserving rural town squares and main streets across Missouri.
We know because we have witnessed that impact firsthand. MHTCs have played a vital role in the revitalization of Downtown Washington. Since 2001, over $2 million in MHTCs have been issued to restore numerous buildings in the historic downtown corridor, as well as to help fund the conversion of the old Deb Shoe Factory on Sixth Street to senior apartments.
Those who labor to preserve Washington’s historic corridor point out that MHTCs are not “easy money” and reject critics’ assertions that the properties would have been redeveloped without the tax subsidies. The MHTC program requires $4 in private funding to be invested and for projects to be put into service before any $1 tax credit is granted.
It can be expensive to save historic buildings. In Washington, the MHTCs have made the difference in some projects going forward by providing the necessary gap financing. The credits have proven to be an important tool in the economic development toolbox. They have also helped to boost property values, property taxes and in some projects, sales and use taxes.
Supporters of the MHTC program argue it should be protected because no other state economic development program has consistently leveraged so much private investment for economic impact: Tens of thousands of construction jobs and permanent jobs, and more than $9 billion in upfront private investment since 1998.
They say that no other economic development tool has come even close to that success. They have a point.
If lawmakers need persuading on how MHTCs can be used properly to preserve and revitalize historic properties, they should come to Washington. They will be impressed.