A tax credit program that generated $432.5 million in economic activity before running out of money could receive new life in the upcoming conference weekend, just as long as one important kink gets ironed out.
As originally proposed, the Historic Tax Credit and Mississippi Small Business Investment Act would provide $100 million to rehab historic buildings used for residential and commercial purposes.
Under the original bill, sponsored by Senate Finance Chairman Joey Fillingane, R-Sumrall, no more than $8 million would be allocated to projects in any one year.
A House version bumped the overall cap to $120 million, but removed the annual cap.
Fillingane told Mississippi Today on April 12 that he hasn’t had a chance to look at the House’s changes to the measure awaits action in a joint conference committee; members of that committee have not been named.
The Legislature created the program in 2006 after Hurricane Katrina to help pump life into the state’s hurricane-ravaged economy. It allows developers to apply for a 25 percent credit against eligible costs. If approved, they collect a cash refund of 75 cents on the dollar from that amount.
Mississippi landmarks and buildings listed on the National Register of Historic Places qualify for the program; nonprofit organizations are not eligible.
By the end of 2014, the original $60 million the Legislature allocated had dried up, leaving several projects hoping to take advantage of the tax credits in limbo.
Among them, the revitalization of buildings in downtown Jackson across the street from the King Edward Hotel. New Orleans-based HRI Properties, which redeveloped the King Edward and nearby Standard Life, plans to renovate the buildings into lofts.
The Capitol Art Lofts will consist of 31 residential units, common areas, gallery and studio space; artists and health-care workers will receive leasing preference.
Josh Collen, an HRI vice president, said once approved to receive credits for the $10.4 million project HRI could close on the deal within 60 days. In addition to the state historic tax credits, the arts lofts will use federal historic tax credits and low-income housing tax credits. Collen added that the proposed yearly limit would be problematic because developers can’t forecast precise costs and therefore cannot factor the credits into project financing.
“A cap would functionally kill a lot of good projects,” he said.
Still, some 25 projects await the Legislature to reauthorize the historic tax credit program, according to a story in the Winter 2016 issue of Elevation, a publication of the Mississippi Heritage Trust. These include the rehabilitation of 18 vacant storefronts in Water Valley, the Centennial Plaza project consisting of 10 buildings and 57 acres in Gulfport and a former Sears location in Greenville.
In August 2015, a research team at Mississippi State University’s John C. Stennis Institute of Government prepared an analysis of the program’s economic benefits at the request of Speaker Philip Gunn, R-Clinton.
Researchers concluded that tax-credit-related development over a nine-year period spurred 5,573 full-time jobs and contributed $200 million to state gross product, along with $16.4 million in local and state tax revenues.
Authors of the report said historic tax credits are better for the state’s economy in the long term than other kinds of incentives, such as credits for large-scale manufacturing facilities.
“All states have experienced the euphoria of successfully recruiting large industries, only to have these industries shutdown or substantially reduce their workforce within a few years due to macroeconomic events or global competitive pressures,” researchers wrote.
“Investments in the rehabilitation of historic buildings exhibit less mobility when compared to alternative investments that receive tax incentives because they are place-based; historic renovation increases the value of the structure upon completion of construction and makes an ongoing contribution to the historic aesthetic of the community regardless of its use upon being placed in service.”
When House and Senate conferees meet, committee members will have to wrestle with the fate of an amendment Sen. David Blount, D-Jackson, successfully added to the Senate before it went to the House. The Blount amendment would eliminate a cultural retail attraction tax credit the Legislature approved in 2013 for any project not under construction by summer 2016.
According to the Mississippi Development Authority, projects with a $100 million investment, 50 tenants and features that highlight Mississippi culture can receive the credit, which gives a portion of sales tax generated back to the developer.
“The state of Mississippi and taxpayers shouldn’t be subsidizing shopping malls in a budget crisis,” Blount said last week.
The House stripped out Blount’s amendment. Fillingane said although he believes the retail credit should be curtailed, he hopes conferees can work out an agreement that won’t stymie renewal of the historic tax credit program, which Blount also supports.
Chris Gouras, a consultant to D’Iberville-based Ramco Developments, which plans to build a $350 million Gulf Coast Galleria just north of Biloxi, said the credits critical to financing large-scale retail developments.
“I think legislative efforts to undo those approved projects is bad public policy,” Gouras said.