Governor tightens tax credit programs by $47 million

Developers and business owners depending on state tax credits to help fund their projects may have to look elsewhere after Gov. Jay Nixon’s budget cuts in special session.  

A $280 million cut in state programs in the fiscal 2011 budget includes $47 million extracted from Missouri’s tax credits, which provide about $600 million in incentives annually, largely for developers and various social causes. The budget was signed June 17 and took effect July 1.

The cuts are in addition to the $650 million in spending reductions and 1,000 job cuts Nixon and the General Assembly already enacted for fiscal 2011. Nixon and Department of Economic Development Director David Kerr in April proposed a $135 million reduction in Missouri’s tax credit programs, and after consideration by the House Job Creation and Economic Development Committee, the proposal did not come up for a vote.

State Budget Director Linda Luebbering said much of the $47 million in savings would come by greater scrutiny of applicants resulting in denied or delayed tax credits.

“They’re not coming from specific programs at this point in time,” Luebbering said, adding that the reduction would consist of two portions.

“First, we’re estimating that redemptions are just going to be lower than we originally estimated,” she said, citing the economic slowdown. “The rest of it is really just for all of the programs. DED is going to just make sure that they’re doing a complete and thorough job of analyzing a return on investment.”

One business owner whose company received an Enhanced Enterprise Zone tax credit said his business might have expanded outside of Missouri had it not been for the credit. Rogersville-based Mid-Am Metal Forming is planning a $1.6 million facility expansion, which the DED announced in April would receive $64,295 in EEZ credits.

“Sure, we would have done it, we just would have done it in a different area,” said President Dave Johnson. “My decision is where do I expand? Do I expand in my home in Rogersville, Mo., or do I expand in one of the other states that I’ve developed businesses in? These decisions came in large part due to the economic incentives that Webster County was able to come forward with.”

The company, which has locations in Williston, S.C., Terrell, Texas and Rogersville, manufactures curved-metal pieces used in the construction and aviation industries.

The state’s six-year-old Enhanced Enterprise Zone program offers tax credits to businesses in specific geographic areas that meet certain criteria, including the potential to create sustainable jobs.

Luebbering said no EEZ credits already issued would be affected.

“We’re really looking at projects that have not yet been approved and looking at return on investment on those new projects,” she said.

Luebbering said 2009 property tax payments were $585 million. The budget department subtracted $119 million for the senior property tax credit from that amount, thereby leaving it intact, and cut 10 percent of the remaining $466 million.

Johnson said Missouri should be more active offering businesses tax credits similar to other states such as South Carolina and Texas, where he operates plants.

Springfield commercial real estate broker Mike Mellinger of Mellinger Commercial LLC helped in obtaining grant funding for development of 1717 Marketplace in Joplin, a shopping center anchored by a Walmart Supercenter on Range Line Road and also home to Academy Sports and Westco Home Furnishing.

Mellinger pointed to the importance of tax credits because of increased demands on developers.

“I think that they’re an important tool in development, and there’s several reasons why,” he said.

Mellinger said cities and retail stores are asking developers to help fund their stores through grants.

“The retailers expect the developers to do more than they ever have in the past. This isn’t just a Springfield thing, it’s anywhere. The cities, because of a tightened budget, require more of developers. At the end of a process, there’s only so much rent that can cover so much cost.”[[In-content Ad]]