Why Rhode Island needs historic tax credits
A growing drumbeat of negative commentary is throwing doubt on the effort to re-establish a Historic Tax Credit program in Rhode Island. Even as they acknowledge the undeniable benefits of tax credits, writers of articles, blogs and letters to editors raise the fear that credits will go right to the “Superman Building,” and plunge us into another 38 Studios debacle. The only way to avoid this, they suggest, is to abandon reinstatement of Historic Tax Credits altogether.
We suggest a different way.
Let’s go forward and secure the jobs, increased sales and property tax revenues and neighborhood revitalization a new Historic Tax Credit can bring to our state. Let’s move ahead with a new Tax Credit program – but design it to generate the results Rhode Island needs and wants.
These facts show the importance of enacting a new Historic Tax Credit program.
FACT: It is a jobs engine.
The first five years (2002-2006) of Rhode Island’s original Historic Tax Credit program pumped approximately $535.25 million of private investment into our economy. The well-regarded national economic model, IMPLAN, calculates that investment created some 6,185 construction jobs and 2,145 permanent jobs – more than $332.96 million in wages! That money flowed into the RI economy, and, it’s estimated, created another 2,944 jobs. Unemployment in Rhode Island’s construction industry today exceeds 20 percent; the Associated General Contractors of America reported a 12 percent construction job loss in Rhode Island in February alone. We need to fire up the tax credit jobs engine again.
FACT: It generates revenue for the state. It adds to municipal bottom lines.
Construction spending and hiring by developers boosts state revenues from personal income taxes and sales taxes on construction materials. In the first five years of the original program IMPLAN estimated that sales and income tax revenues during construction brought in an extra $39 million. Municipalities benefit enormously when blighted, often vacant buildings get back on the tax rolls. The 150 projects completed by the end of 2006 added an estimated $267.6 million to the value of taxable property in our towns.
FACT: Without it, Rhode Island cannot compete with our neighbors.
Connecticut, Massachusetts and Maine attract developers and create new jobs with their effective Historic Tax Credit programs. Our stock of historic structures and communities rival (we’d say surpass), our neighbors.’ So we should have the advantage. But without a Historic Tax Credit, we can’t compete. Furthermore, developers interested in rehabilitating historic properties don’t just measure Rhode Island against our neighbors. They measure us against 30-plus states whose historic rehab tax credit programs attract investment that could come to Rhode Island. Only if.
What essentials must state leaders and advocates consider when designing a new Historic Tax Credit program?
Given Rhode Island’s continuing economic challenges, the prudent thing is to be bold. We applaud proposals to use abandoned credits to fund a new program. But our state needs a robust program that creates and sustains job growth, a multi-year commitment that goes beyond the pool of abandoned credits. We need to generate lasting economic benefits for the state, our cities and towns, our work force. A short-term fix won’t do.
Remove the concern that a single giant project might soak up all the credits. The new program must make credits available for a range of projects. We believe that the solution – used in many other states – is to put reasonable caps on the credits available to any one project.
Maximize the economic benefits of the Historic Tax Credit program by continuing to include affordable housing as an eligible use of credits. Until it ended in 2008, the Historic Tax Credit helped fund construction of 596 low- to moderate-income housing units. When workers who are beginning to move up the economic ladder have a supply of affordable housing, they stay in Rhode Island and contribute to the state’s economy.
Incorporate appropriate reporting requirements so the state can accurately evaluate the program’s impact. These requirements must be carefully selected so they are useful and not burdensome to developers.
Apprenticeship programs that train craftspeople to restore and re-purpose historic properties are a good idea. But Apprenticeship requirements currently proposed for larger Tax Credit projects could have an unintended consequence: disqualification of many contractors from bidding on Historic Tax Credit projects because they can’t meet the stringent requirements being recommended. Let’s make Apprenticeship program provisions inclusive rather than exclusive.
Jobs. Competitiveness. Increased tax revenues. Affordable housing. Revitalized communities. These undeniable benefits – along with enhanced tourism, greater public safety, cleaned up contaminated sites and protection of open space – make it time for the General Assembly and governor to create a new, well designed Historic Tax Credit Program and put it into action. It will go a long way toward making Rhode Island strong again.
Scott Wolf is the executive director of Grow Smart Rhode Island. Valerie Talmage is the executive director of Preserve Rhode Island. This was also signed by Susan Arnold, CEO of the Rhode Island Association of Realtors; Chris Hannifan, executive director of the Housing Network; Karen Jessup, interim executive director of the Providence Preservation Society; and Greg Skoutas, president of the Rhode Island Commercial and Appraisal Board of Realtors.