Developer-influenced bill would modify tax credit

Two bills introduced this month in the General Assembly would modify the state’s Historical Preservation & Heritage Tax Credit program without imposing an annual cap or end date, as Gov. Donald L. Carcieri – in the face of gaping budget deficits for this fiscal year and next – had proposed in January.
The bills were introduced within a week of each other in the House and Senate.
Scott Wolf, executive director of Grow Smart R.I., said House Bill 8016 was influenced by suggestions from developers and program advocates. That bill would add a payment structure that would allow credits to be spread over three years – a maximum of $6 million per year, per project – and introduce a new percentage scale, ranging from 22 to 30 percent based on the development’s final use and construction date.
That bill is backed by House leadership. On March 6, it was introduced by Majority Leader Gordon D. Fox (D-Providence), House Speaker William J. Murphy (D-West Warwick), Rep. John J. McCauley Jr. (D-Providence), Rep. Elaine A. Coderre (D-Pawtucket) and Rep. Thomas C. Slater (D-Providence).
The other – Senate Bill 3846 – was introduced March 11 by Sen. Stephen D. Alves (D-West Warwick).
That bill would make two changes to the current program: It would cut the state tax credit to 25 percent – from the current 30 percent, which is accompanied by a 20-percent federal credit – and limit allowed projects to mill buildings and complexes.
At a Senate Finance Committee hearing on March 13, Wolf testified that imposing limits on the type of building would be detrimental to the program because projects like Renaissance Providence Hotel and AS220’s The Dreyfus would have been excluded.
The tax credit program was intended to draw developers to mill complexes, said Alves in an interview last week, a few days after that hearing. His bill is an attempt to bring the program back to its roots in commercial development. Now, after the hearing, he’s looking into imposing a moratorium on the tax credit program until the issues can be worked out.
“We know the program has to shrink, but we’ll have to do that while still getting the best bang for our buck,” he said.
Developer Colin Kane, principal of Peregrine Group, said he’d support a moratorium, as long as it only applies to projects that haven’t yet started or been approved for credits. “But if they’re saying that they’re not going to issue tax credits on projects currently under way, they might as well bankrupt 100 companies,” he said.
The presence of the House and Senate bills, however, do not necessarily mean that Carcieri’s Supplemental Budget FY 2008 proposal – which, if passed, would retroactively cap the program this fiscal year and keep it at $40 million until it was phased out in 2017 – is off the table, Wolf said.
“Unfortunately, I think the governor’s plan is still alive and still under serious consideration,” he said. “So we’re redoubling our efforts to point out how damaging that proposal would be both to the state’s current economic challenges and to the future credibility and viability of the historic tax credit program.”
Carcieri offered his proposal in response to a $150 million deficit this fiscal year and a projected $384 million shortfall during the fiscal year starting July 1. The $20 million cap proposed for the current fiscal year would save the state about $23 million – to date about $36.1 million in credits has been approved and another $7 million is expected, according to Ted F. Sanderson, executive director of R.I. Historical Preservation & Heritage Commission.
Kane said his Rumford Center development would be put in jeopardy – and he’d default on his loans, which were based on his securing the credits – if the cap proposed by the governor were approved.
There are 10 historic buildings on his $40-million, 8.3-acre East Providence development. In development since 2005, it is eligible for about $8 million in state credits, Kane said. Because developers rely on those credits when they start their projects, the key to the tax credit program is predictability, he said.
“We went forward based upon our experience here in the marketplace, fully trusting that the state would honor the obligations that it honored for other developers and other owners as it related to historic tax credits,” he testified.
The program has, to date, awarded $161 million in credits to 150 completed projects, according to Grow Smart R.I. Another 127 developments – worth about $300 million in credits – have so far been approved. Grow Smart R.I. estimated that those projects will have generated more than $2.4 billion in economic activity in the state by 2012. &#8226