Tuesday, February 9, 2016 11:00 am
OKLAHOMA CITY – The state Senate Finance Committee approved a bill Tuesday that would cut a tax credit for developers who restore historic buildings.
Senate Bill 977 would put a two-year moratorium on the 20-percent tax credit awarded to developers who rehabilitate a historic hotel or newspaper plant building, or any other certified historic structure. State Sen. Mike Mazzei, R-Tulsa, wrote the bill.
Mazzei said the Senate Finance Committee is studying all cost-saving ideas at this point.
“My personal opinion is it’s more important to look at the tax credits that aren’t truly generating jobs and payroll and creating a net economic benefit versus their cost,” he said. “For those that know me, the tax incentives that are creating net economic benefits, we need to keep approving and reauthorizing. Those that don’t, we need to cut.”
Mazzei said the bucket of tax credit moratoriums proposed in SB 977 would save the state $4 million in fiscal year 2017 and $140 million in FY18.
“But at the end of the day, that particular approach … is not my preferred strategy to deal with the financial crisis,” he said.
The historic tax credit itself cost the state $5.7 million in FY15, Mazzei said. But if the program were suspended, it would not save the state any money until FY19 or later because developers have funds they have not claimed. He said it is not likely there will be a suspension in the program because it’s been a good economic development tool.
The tax credit is typically awarded to developers who redevelop buildings eligible for the National Register of Historic Places list.
The measure caught the attention of architects and developers. This is the second time the tax credit has been addressed. In fiscal year 2011, the Legislature and Gov. Brad Henry passed a budget agreement with a two-year deferral on the tax credits. Therefore, the credits could not be claimed until 2013.
Developer Judy Hatfield said the on-again, off-again tax credit could hinder future developments. She used state and federal tax credits when she rehabilitated the Carnegie Centre library into downtown apartments.
“If you stop right in the middle, you’ve made serious commitments,” Hatfield said. “Financing hinges on knowing that it’s a viable program. This is the wrong time for us to cripple development.”
On Tuesday, the Senate Finance Committee passed an amendment that would make projects already under construction eligible to receive the tax credits. Developer David Wanzer and The Pivot Project team have two rehabilitation projects under construction, with two others starting soon. He said he’s hopeful the Main Street Arcade Building and the Tower Theater would still be eligible for the tax credits.
“Some of these projects we take on literally do not happen but for the availability of state and federal tax credits,” he said. “That’s really key. These projects we take on, (we) do them in a meaningful and thoughtful way because of tax credits.”
While Hatfield and Wanzer work in Oklahoma City, the Oklahoma Historical Society’s State Historic Preservation Office gets applications for tax credits from all four corners of the state. In 2016, an Okmulgee project was certified for tax credits. In 2015, other cities with approved projects included Bartlesville, Pawhuska and Enid.
“It doesn’t impact just cities,” said Lindsey Ellerbach, executive director of the American Institute of Architects-East Oklahoma chapter. “It will make an impact on smaller communities around the state.”
AIA Central Oklahoma Chapter Executive Director Melissa Hunt said the Oklahoma City organization’s leaders think the tax credit pays for itself. Hatfield echoed the sentiment, adding that the construction work creates jobs and brings viability to buildings that were once vacant.
Hunt said the tax credit doesn’t allow for excess spending, as the money is not awarded until the project is finished. The State Historic Preservation Office has to certify the project, and then the Oklahoma Tax Commission issues the tax credits.
Hatfield said the Carnegie library was being evaluated as a storage building before she revitalized it. Now it houses the University of Central Oklahoma downtown campus, an architect’s office, a restaurant, a spa and even a 3-week-old baby.
“I could not have done that without both the state and federal historic tax credit,” she said.