Missed opportunity on credits

Cornish Associates President and CEO Arnold “Buff” Chase said his company has five historic Providence buildings lined up to buy and restore once Rhode Island brings back its historic tax credit program.
But his wait will continue for another year.
Despite a last-minute push and compromise bill, efforts to bring the state historic tax credits back before the end of this year’s legislative session were denied by House leadership last month.
As a result, Cornish, which hasn’t embarked on a new downtown historic project since 2005, and other developers say they will remain on the sidelines as far as historic renovation projects are concerned until something changes.
“We will not proceed on any of our projects downtown without tax credits,” Chase said. “For us it is a real blow, and we think it was really a bad policy of the leadership to not push this forward. I feel like in this recession, if we had gotten the credits, we would have created activity to prime the pump and get the economy moving again.”
Since the historic tax credit program was suspended in 2008, the development, preservation and building trade communities have tried a number of tweaks and alterations to the program to revive it.
The proposal put forward by the Senate in the waning days of the legislative session looked to fund projects only from the $25 million pool of tax credits developers reserved in 2008 that have since been abandoned.
Under the proposal, Rhode Island’s tax credits, which had been worth 30 percent of eligible construction costs, would have been scaled back to 20 percent.
Still recovering from the failed efforts to get a bill passed last week, members of the coalition of businesses and organizations pushing for the credits vowed to try again next year and said the Senate’s $25 million abandoned-credit approach could be the basis for the next push.
“It’s early, but I do think the Senate came up with an intriguing approach to build off the relinquished credits,” said Scott Wolf, executive director of Grow-Smart Rhode Island, which led the effort to bring back the credits. “It’s possible that could be the way to go next year, but it is early.” House leaders who left the tax credits out of the budget and denied the stand-alone bill proposed by the Senate cited the cost of the program as the major stumbling block.
But supporters of the program blame a climate of fear caused by the collapse of 38 Studios LLC and the cost of a $75 million loan guarantee to the video game company for ruining the tax credit’s chances.
In addition to the intense fallout over the loan guarantee itself, the 38 Studios bankruptcy has drawn attention to the state’s film tax credit program, which the video game company turned to as lifeline. The state never issued any film tax credits to 38 Studios, but concern about it raised suspicion about the concept.
“I feel terrible that the tax credits, which have done no harm, have bitten the dust because of one of these really ridiculous special deals in 38 Studios,” said James Hall, executive director of the Providence Preservation Society. “The only economic growth in Providence and visible construction is all happening around historic buildings. I can’t help but think if $75 million had been dumped into historic preservation, we would be seeing an incredible deal for a lot of companies.”
One of the reasons supporters thought this would be the year the tax credits returned was public conceptual support from House Speaker Gordon D. Fox, Senate President M. Teresa Paiva Weed and Gov. Lincoln D. Chafee. Fox’s endorsement carried the caveat that the program had to be made affordable under the state’s current budget conditions.
The depressed condition of the market for new construction, historic or otherwise, has added new impetus for something to generate activity. “It’s extremely slim pickings,” said Robert Baldwin, president of the Rhode Island Builders Association, about new construction going on in the state. “There is so little activity in Rhode Island right now. We thought last year was bad, this is worse.”
In late May, the budget watchdog Rhode Island Public Expenditure Council said issuing new historic credits from those previously abandoned “may allow for a targeted, short-term economic stimulus.”
According to the state’s Office of Revenue Analysis, since the start of the tax credit program in 2002, 246 projects (which include phases of multistage projects) have been completed, while 14 have been abandoned and 72 uncompleted projects with reserved credits are still eligible.
Redeemed credits have cost the state $276.2 million, while $155.5 million in credits are still pending for eligible projects that haven’t been completed.
Rep. Jeremiah O’Grady, D-Lincoln, a sponsor of one of the bills that would have brought the credit back, said the actual value of credits the state is liable for is likely smaller than that $155.5 million figure, because developers who reserved credits in 2008 had to guess the size of their projects and often did so on the high side.
“I fully expect that many of those projects reserved high, and there will be additional abandonment of excess credits,” said O’Grady, who is also a project manager for the nonprofit Olneyville Housing Corp.
Since it suspended the program in 2008, Rhode Island joined New Hampshire – which doesn’t have a state income tax – as the only two New England states without an active historic tax credit program.
Chase pointed out that with the federal credit, state credits can trigger both federal and private investment that wouldn’t otherwise occur.
“These projects bring federal dollars into the state and that’s a significant loss of capital coming into Rhode Island if it doesn’t happen,” Chase said. •

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