Oklahoma historic tax credits in jeopardy

[Just the facts]

End all subsidies and historic preservation and urban development will win out every time - because it is economically superior when placed on a level playing field with any other kind of human development.

[Spartan]

So, the big picture is that because the state govt is bigger than city hall, not only will they suspend the historic tax credit (thus pulling the rug out from under the FNC and other projects) to solve the mega shortfall, but we're also going to be increasing the state sales tax to pay for education, probably replacing the MAPS tax.

The state government doesn't fund cities. Now they are taking away means that cities can find funding themselves. I'm not sure what they want cities to do. Seemingly nothing.

[Bunty]

The difference between Okla Repubs and Texas Repubs is Texas repubs for the most part are more focused on growing Texas' economy. They certainly do goofy wacky social issue things like any other state (dem states do it too, you just don't live in a dem state so it's not in your face) but they have had a lot of success at creating a good business environment.

With two major hub airports and from having two of the nation's top 5 largest metro areas, Texas surely doesn't need much help from Republican politicians with growing itself. If Oklahoma would copy some government reform ideas from TX where practical, it would help, correction reforms, for instance.

Oklahoma needs to figure out what more it can uniquely offer the nation's 4th largest metro area from just across the Red River border, other than Las Vegas style casino resorts.

[Plutonic Panda]

http://journalrecord.com/2016/11/03/...s-real-estate/

[Spartan]

It's pretty clear the vast majority of voters are more concerned with social issues than economic development. That once again, is a matter of opinion, what should we as a state care about? Personally, I think it's the churches job to dictate morality not the states and the two should be separate. However, I'm clearly in the miniority on that.

The difference between Okla Repubs and Texas Repubs is Texas repubs for the most part are more focused on growing Texas' economy. They certainly do goofy wacky social issue things like any other state (dem states do it too, you just don't live in a dem state so it's not in your face) but they have had a lot of success at creating a good business environment.

It'll change over time as the population in Oklahoma ages and demographics shift.

I can assure you though, having lived in 2 blue states, democrats do just as much terrible stuff. No one has a majority on that.

I think the difference you have identified is that between a large state and a small state.

Oklahoma, being a small state, is controlled by vested political interests that don't want change. I think broadly they are losing the battle bigly, but in a small state like Oklahoma the old guard can make a stand for those good old fashioned values upon which we used to rely.

For instance does anyone really think OKC will ever be able to go after slum lords? Heck no. And where does a municipality's ability to fight slum lords fall within community values and limited/local government - who cares? The slum lords won because they can get a hearing at 23rd and Lincoln, where OKC voters keep sending Republican legislators who deep-down hate OKC.

Human voters are idiots. My second fav all-time quote was when David Walters was voted out of office he said, "The people have spoken, the bastards." I think Hillary's "triumph" over Bernie proves that the other side is also dealing with majority idiot control, to your point that there are idiots everywhere. Myself as someone whose work is split evenly between MI/OH/PA, I have watched the emergence of Angry TrumpLand up-close.

This Election Week... nothing changes.

At least our historic tax credits are safe for now. That's more than Michigan can say.

[rte66man]

This Election Week... nothing changes.

Hear hear. Held my node and voted absentee, but I am under no illusion that either candidate can mandate real change.

[warreng88]

http://journalrecord.com/2016/11/03/...s-real-estate/

Study: State should keep historic tax credits

By: Molly M. Fleming The Journal Record November 3, 2016

OKLAHOMA CITY – In the last 11 years, the development investment in historic rehabilitation projects has increased by 82 times, far exceeding the pace of other states’ similar programs.

That was one of the findings reported in the Oklahoma Incentive Evaluation Commission’s historic tax rebate study. Public Financial Management Inc. prepared the report released Wednesday. Ten other incentive program reports were released as well.

PFM praised the state’s 20-percent state historic tax credit program for paralleling the 20-percent federal tax credit program. Both credits can only be used on buildings listed on the National Register of Historic Places. The tax credits are not awarded until the project is completed and the state historic preservation office approves the rehabilitation.

The State Historic Preservation Office oversees the program. Melvena Heisch, who works directly with the developers seeking the tax credits, said the report affirms what she sees firsthand.

“We see it on the grounds every day, what these projects are doing for communities,” she said. “The product that they’re supposed to produce is what they’re producing.”

Besides restoring buildings, the tax credit program has created jobs. In 2015, more than 800 jobs were established, according to the report.

Lingo Construction Services President Stan Lingo said his company has grown about 20 percent every year for at least the last four years. The company is often hired for historic rehabilitation work.

Historic rehabilitation projects tend to require more labor than other construction work, said Peter Noonan, senior vice president and manager at Commerce Bank in St. Louis. The bank frequently purchases the historic tax credits. Noonan said historic rehabilitation project costs are about 60 percent labor, compared to 40 percent labor for a tilt-up construction project.

The PFM report said the state tax credit program should continue, but it suggested capping the amount available.

“In order to keep administration burdens to a minimum once a cap is in place, the team recommends that projects be accepted on a first‐come, first‐served basis in lieu of a supplementary assessment procedure,” PFM said.

There are 11 other states that do not cap their tax credit programs. Thirty states offer some type of historic tax credit program.

Lingo did not favor capping the amount available and said he thinks it would limit redevelopment.

“If it is a good thing for the local communities to spend money and enhance the economy, why cap it?” he said. “People taking the risk would not be able to count on the tax credit being there.”

Developer David Wanzer, who is working on The Town House on NW Fifth Street, said he hadn’t reached a conclusion on what he thinks about capping the amount. He said a large project like The Skirvin Hilton Hotel renovation could use all the allotted funds and then other developers couldn’t get the money.

Wanzer had some projects in the pipeline this year when the Legislature was considering ending the program. With this Legislature-required study giving approval to the tax credits, he said more legislators will be able to see the statewide effect the program has, and that it is beneficial to Oklahoma.

“This is a great third-party finding that substantiates some other research and discussion points that have been ongoing over the last several years,” Wanzer said. “My hope is that it will alleviate some other fears in the market that the tax credits will be ended.”

[Spartan]

That's absurd to accept projects on a first-come, first-served basis.

Also can a moderator fix spelling in this thread title?

[Urbanized]

So...we want to take a program that is demonstrably not only fulfilling its purpose but beyond that is punching WAY above its weight in economic impact and...cap it? Seems about right. Let's not let ROI get TOO favorable.

It's like giving a hysterectomy to the one goose that lays the golden eggs.

[turnpup]

It's like giving a hysterectomy to the one goose that lays the golden eggs.

That's hilarious! And yeah, no kidding.

[kwhey]

Just do what OKC always does. Bulldoze all of the historic buildings.

[Plutonic Panda]

Yeah no kidding! We've already lost so many buildings in the past 5 years it is unreal this keeps happening.

[Spartan]

So...we want to take a program that is demonstrably not only fulfilling its purpose but beyond that is punching WAY above its weight in economic impact and...cap it? Seems about right. Let's not let ROI get TOO favorable.

It's like giving a hysterectomy to the one goose that lays the golden eggs.

Explain. With technical details, not metaphors. ROI is a function of a lot of things on these historic deals, but leveraging obviously helps the program, while it may not be so good for any single deal.

I just don't understand how you have a historic tax credit program without any policy whatsoever.

[Urbanized]

I think my comment is pretty self-explanatory. How's this for technical: an arbitrary hard cap is dumb.

The program already has policy and controls attached. There are plenty of hoops through which to jump; attaining National Register designation, acceptance for federal tax credit eligibility, SHPO review, etc.. It's not like we're building a bunch of new historic buildings to ride some imagined wave of taxpayer money. It's not like every Tom, Dick and Harry is going to hear about this "gravy train," become a developer, and run out and grab free cash.

These are difficult deals already. HP work is specialized. There is a ton of work involved in getting these credits; they are for deals that are by their nature tricky and slow, and often (usually..?) are the difference between renovation and eventual demolition. As we can easily see in OKC thanks to hundreds of examples, deferred maintenance, building abandonment and (ultimately) spec demolition usually only serves to take a long-term opportunity off of the tax rolls forever.

The study shows that community ROI on these projects as a group is inarguable, and I suspect that you'd be hard-pressed to find instances where they have been applied in such a manner that it had a negative impact on the community or on long-term tax receipts. Until someone cites examples, I'd maintain that an arbitrary hard cap on a program that demonstrably exceeds all expectations - including growing the taxable economy - is bad policy. In ANY way.

[Spartan]

I think my comment is pretty self-explanatory. How's this for technical: an arbitrary hard cap is dumb.

The program already has policy and controls attached. There are plenty of hoops through which to jump; attaining National Register designation, acceptance for federal tax credit eligibility, SHPO review, etc.. It's not like we're building a bunch of new historic buildings to ride some imagined wave of taxpayer money. It's not like every Tom, Dick and Harry is going to hear about this "gravy train," become a developer, and run out and grab free cash.

These are difficult deals already. HP work is specialized. There is a ton of work involved in getting these credits; they are for deals that are by their nature tricky and slow, and often (usually..?) are the difference between renovation and eventual demolition. As we can easily see in OKC thanks to hundreds of examples, deferred maintenance, building abandonment and (ultimately) spec demolition usually only serves to take a long-term opportunity off of the tax rolls forever.

The study shows that community ROI on these projects as a group is inarguable, and I suspect that you'd be hard-pressed to find instances where they have been applied in such a manner that it had a negative impact on the community or on long-term tax receipts. Until someone cites examples, I'd maintain that an arbitrary hard cap on a program that demonstrably exceeds all expectations - including growing the taxable economy - is bad policy. In ANY way.

Sorry I didn't know what you meant by "let's not let ROI get too favorable," but now I follow. I think it's worth noting the distinction between a project's pro forma cash flow or DCR/IE metrics etc, and what the community gets "ROI," such as quantifiable increase in spending, activity, etc. A pro forma for tax credits won't actually have an explicit ROI field, but there are things like developer's fees, management fees, deferred developer/management fees, reserves, etc., where there is a LOT of wiggle room.

A cap is used to increase the number of projects that can get a finite amount of credits that the state can offer. There are deals that could withstand more debt leverage, or that could use tax credits to leverage several forms of gap financing. In Ohio for instance, there are $65 million in state historic tax credits up for grabs each year, so the $5 million cap is used to ensure at least 21 projects, and leverage incentives are built in to encourage big projects to reduce their credit request. This is how you squeeze that into 50+ funded projects a year. Ohio also just unveiled the catalytic award, which is a separate round for a single $25 million award (it's a 15-20% credit) meaning a winning project has to be in excess for $100 million, hence the name "catalytic."

Having these different policy goals built into the tax credit program has enabled a really strategic and overall catalytic impact. Ohio, Missouri, and Virginia have the 3 largest tax credit programs bc of leverage, so that's why I use them as examples (besides that I'm honestly more familiar with OH and VA these days).

[deleted personal attacks] ~ Pete

[Pete]

I deleted a bunch of posts that were emotional personal attacks.

Please stay on topic and debate the point, not the poster.