If the Missouri General Assembly adopts all recommendations made by the bipartisan Missouri Tax Credit Review Commission, the state would save $220 million by cutting 28 tax credit programs.
The commission, appointed in July by Gov. Jay Nixon, examined ways to improve efficiency on all of the state’s 61 tax credit programs. Co-chairmen Steve Stogel, president of St. Louis-based DFC Group Inc., and former state Sen. Chuck Gross, outlined the commission’s findings in a Nov. 30 conference call.
As the commission spent the past four months examining state tax credits, members sought a $1 return on investment for every $1 tax credit issued by the state, according to Mark Gardner, one of two Springfield representatives on the committee, along with Jim Anderson, Springfield Area Chamber of Commerce president. Gardner is president and general counsel of Gardner Capital Inc., a tax credit broker for affordable housing projects.
Programs that did not produce more than $1 of benefit faced elimination, Gardner said, unless they were programs such as donation credits or those designed to provide a social need such as low-income housing.
“Even if (low-income housing) had not met the dollar-for-dollar test, it wouldn’t have been eliminated,” Gardner said.
The cuts are necessary, Gross said, because the state is facing a budget gap of nearly $400 million.
Additionally, as state revenues have declined, tax-credit spending has grown, creating a hindrance on the state’s ability to fund other programs.
Between fiscal 1998 and 2010, tax credit redemptions grew 408 percent to $521.5 million, representing an average annual growth rate of 17.4 percent, the report states.
During that same 12-year period, net general revenue collections increased 14 percent to $6.8 million. The report also found tax credit redemptions as a percentage of net general revenue increased from 1.7 percent in fiscal 1998 to 7.7 percent in fiscal 2010.
“Tax credits work best when they deliver what they’re intended for – putting people to work, boosting development and building strong communities,” said Gross, St. Charles County director of administration.
Nixon asked the commission, which included members of the state Senate, House, and community and business leaders, to avoid disturbing projects already awarded tax credits and under way.
“The commission took this direction very seriously, adopting a do-no-harm principle,” Gross added.
Among the 28 programs recommended to be eliminated or capped are:
• Low-income housing tax credit for senior citizens who rent, resulting in annual savings of $58.3 million;
• Film production tax credit, capped at $4.5 million;
• Wood energy tax credit, resulting in $3.4 million savings.
• Rebuilding communities tax credit (currently earning only a 13-cent return on $1 investment) resulting in $1.8 million savings; and
• Self-employment health insurance tax credit, resulting in $1.4 million savings.
In some cases, programs would not be eliminated but combined to improve efficiency, Gross said.
For instance, the commission recommends folding the brownfield jobs and investment tax credits into the enhanced enterprise zone tax credit program. The brownfield credits are awarded to businesses that create at least two new jobs or retain at least 25 jobs at a formerly contaminated site that successfully participates in the Department of Natural Resources’ Voluntary Cleanup Program.
Suggested modifications to the historic tax credit program include reducing the annual cap to $75 million from $140 million beginning July 1, 2011, with no effect on projects already under way. Also, the commission recommends the prohibition of stacking multiple tax credits for the same project.
In recent years, developers have received state and federal low-income housing tax credits and historic tax credits on the same projects.
Gross said eight committees met starting in September to gain input and help determine where tax credit cuts and changes could be made before reporting to the commission Nov. 1.
The commission’s recommendations have been passed to Nixon and will be considered by the General Assembly beginning in January. Details are available at www.tcrc.mo.gov