Even if the state weren’t facing enormous deficits, it would still be the General Assembly’s and the governor’s responsibility to make sure that tax credits are producing promised benefits. Understanding that reality, Rhode Island’s development and urban planning communities have preemptively – and convincingly – made the case that the state’s historic-preservation tax credit is more than worth it.
A report commissioned by the Coalition for Neighborhood & Economic Renewal projects that from 2002 until 2012, the program will have generated $2.46 billion in economic activity at a cost in lost tax revenue of $460.16 million. However, that new development will add $767 million in value to the local tax base, resulting in an additional $297.6 million in property tax receipts over the next 20 years. And those numbers do not recognize the additional sales and income taxes that are being paid as a result of the projects’ economic activity.
Do those figures argue for the survival of the tax credit? And if so, should it be scaled back at all?
Most of the experts interviewed by the Providence Business News agree that the tax is worth it, and that it should not be reduced. They argue that the simplest projects have already been done, and the more difficult developments will probably not go forward without a meaningful tax break, robbing the state of continued rehabilitation of old building stock that is often an environmental mess.
Some critics are concerned that, while it is the state that suffers the revenue loss, it is the local governments that reap the tax benefits. Others wonder if the credit can be structured to give incentives for specific state goals, such as affordable housing.
Those questions should be explored. Clearly, when the state is facing so much red ink, nothing is off the table. But we caution legislators to move cautiously and with foresight – cashing in on easy money today may have very harmful ramifications down the road.
