For the gold standard in historic rehabilitation tax credits, look no further than America's heartland. Missouri's state tax credit program, one of the oldest and most influential in the country, offers a 25% credit on income-producing historic rehabilitations. Yet despite its incredible impact, legislation introduced in 2010 meant to bolster the state’s flagging economy threatened to cap and ultimately sunset out the credit. After weeks of debate in a special session, the bill was tabled, leaving the current $140 million cap in place and preserving one of the state's most important economic development tools.
The rehabilitation of the Hamilton Hotel is a good example of the program's impact. Opened in Saint Louis in 1903, the Hamilton was speculatively built in anticipation of the 1904 World's Fair. Over the course of the twentieth century, the building's function transitioned from a hotel to a medical facility to affordable housing. Rehabilitation work will restore and preserve the building's historic character while updating the property and allowing it to continue serving the community's need for affordable housing. In addition to the jobs created by the rehabilitation process, the project will create at least three permanent positions.
The historic tax credit has been a great economic development tool for Missouri. A 2002 Missouri Department of Natural Resources study found that, since its introduction in 1998, the state historic tax credit has created 6,871 jobs, $121 million in income, $283 million in gross state product, $60 million in total taxes, and $249 million in in-state wealth all at little net cost to Missouri taxpayers. Worth 25% of a projects QRE's, Missouri has one of the largest state credits in the country. Results of the 2002 study also indicate that $500 million in state tax credit allocation generated $2 billion in investment. The credit serves large and small developers alike, with approximately 2/3 of the completed projects valued at less than $500,000 each.
The state tax credit program is also valuable for its ability to create jobs. Building materials can come from anywhere, but the actual restoration work, the installation and eventual maintenance of those materials, that's all local. Donovan Rypkema, principal of PlaceEconomics, estimates that the Missouri state tax credit has created over 40,000 full-time equivalent jobs since its implementation, adding $673 million directly and $700 million indirectly to Missourians. Similarly, a 2010 Missouri Growth Association study found that the credit is associated with higher-than-expected rates of annual job growth and higher-than-expected increases in high-paying sustainable jobs, among other great economic benefits.
It's clear that the credit has become a major force in Missouri's economy, and its loss would have been a huge blow. Many projects, the Hamilton Hotel included, could not happen without state tax credit financing. Missouri's close call is a clear reminder of the importance of vigilance and advocacy; the credit is too valuable to lose.
About the Blogger: Mary Nastasi is a Junior Associate in the Northeast Office of MacRostie Historic Advisors.
Read more about Mary here.
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