Developers explore suit over historic tax credits

As state lawmakers consider a proposed retroactive cap on the R.I. Historic Preservation Investment Tax Credit, affected developers like Urban Smart Growth are exploring legal options to ensure they get what they feel has already been promised.
At issue is the point at which developers have a legal right to collect their Historic Preservation Investment Tax Credits. Lance Robbins, an attorney and principal with Urban Smart Growth, thinks it may be when they earn their Part II approval – when the R.I. Historical Preservation & Heritage Commission tells them that they’ll get the tax credits if they undergo the rehabilitation.
“At that point, the state has made a promise to you, which you are then spending money in reliance on,” Robbins said last week. “At that point, you might have a vested property right.”
Since coming to Rhode Island during 2005, Urban Smart Growth has planned current and future developments totaling about $152 million, including the $35 million Hope Artiste Village in Pawtucket
Robbins said filing a lawsuit in response to a cap is “nowhere anyone wants to go. And different developers will have different urgencies and responses, depending on how they’ve financed their projects.”
But he said Urban Smart Growth’s attorneys are nonetheless looking into possible legal actions to pursue if a retroactive cap is approved. In January, Gov. Don Carcieri proposed a $20 million retroactive cap for the current fiscal year and a $40 million annual cap until 2017, after which the program wouldn’t be funded. The House Committee on Finance is now holding public hearings on the proposed changes.
The 30-percent state tax credit program, which advocates and developers say is a proven economic driver for the sate, could be capped by state legislators when they vote on Carcieri’s FY 2008 Supplemental Budget later this spring.
Jeff Neal, spokesman for the governor’s office, insisted that capping the program wouldn’t put the state in any legal jeopardy.
“We do not believe that any lawsuit to that affect would have merit,” he said.
Michael Hanna, a certified public counsel with Providence’s Sullivan & Company, helps clients through the process of filing taxes and claiming the credits.
He says developers may indeed have legal rights to promised tax credits.
“These people entered into business transactions under assumption of existing law,” Hanna said. “To the extent that they changed the law in the process, (the developers) might have an argument, but I’m not a lawyer.”
George Marderosian, owner of Clubhouse Capital, a Providence-based real estate advisory firm, said the program might be better fixed with a “fine-tuning” in its scope and eligible projects.
“It might make sense to limit tax credits to projects that will deliver some long-term economic benefits to the city and state – and to projects utilizing mostly, or all, Rhode Island contractors,” he said.
As long as developers are unsure about the future of the program, construction on some projects could be delayed or halted, said Steve Nappa, owner of Providence-based Nappa Build Corp. He said his company is currently working on two projects that are using the tax credits.
“When the governor came out and announced that this was going to happen, he really put the break on a lot of projects that were grinding forward,” Nappa said. “And until some definitive statement is made to the contrary, contractors like me and those that we service have no choice but to sit on the sidelines.” &#8226