It is Complicated!

As we all know by now, the Michigan Historic Tax Credit (HTC) is on Governor Rick Snyder’s budgetary chopping block. This tool has brought successful historic rehabilitation to communities across the state. Since 1999, only $128 million of HTC has leveraged $1.46 Billion in direct rehabilitation work for those taking the commercial credit. This includes 36,000 jobs created directly because of the credit. The numbers work out so that for every $1 of credit $11.37 in direct economic activity results. This does not include the additional $251 million in Federal Historic Tax Credits in Michigan – all money that is coming back to our economy!

For individuals, who use the tax credit on their personal state liability, the numbers are just as staggering. There have been almost $34 million in investments, taken from communities across the state – including places like Calumet, Holland, Lathrup Village, Pleasant Ridge, and Romeo. Of course, bigger cities, including Ann Arbor, Detroit, Flint, Grand Rapids, Kalamazoo, Lansing, Midland, and Ypsilanti have benefited too. These homeowner investments stimulate economic activity, stabilize city neighborhoods, sustain walkable, authentic places, put existing infrastructure to good use, grow local tax bases, and support smart growth and land conservation.

So, if HTCs are eliminated, how can we keep some of the good that has happened to date? Rather than continue with the credit, among the suggestions being discussed in Lansing is implementing an allocation that would include both historic and brownfield credits. But, MHPN believes that allocations will not work. Among the many issues against allocations are:

  • Restoration projects can be years in the process facing the uncertainty that there will still be funds available at its completion.
  • Michigan HTCs are typically the third or fourth level of financing on any project, but even so may be the gap-financing piece that makes the project possible.
  • If a single “pot” of money is dedicated to both brownfield and historic projects, the likelihood is that there will not be sufficient funds for both kinds of efforts to meet the needs and there is no way to increase the size of the pot if projects seeking the funds increase – as has been the trend with increased historic projects since 2009.
  • There is no guarantee that that money would not be re-allocated before the allotted time was up – potentially resulting in a substantial decrease in the available funding.
  • If allocations are adopted, there is also a possibility of focusing only on “target areas.” This would be a selected number of communities where all of the allocation would be spent. This would mean there is a very good chance that YOUR community will not be included. So, smaller projects, which have seen the greatest benefit by the introduction of the Michigan HTC, will not be possible at all in the communities that often benefit the most.
  • Allocations would virtually exclude the private homeowner from benefiting from the HTC, AND, would likely limit the number of communities who can participate in the program – once again leaving smaller communities outside state investment.

MHPN strongly believes that the current HTC program requires a small amount of investment by the state with a return that is much greater than the expenditure. Furthermore, the current legislation has the transparency being sought, and yet manages to assure that the credits are appropriately claimed. As it is currently legislated, the HTCs are:

  • Approved based on the planned work, but awarded based on the final project. The award doesn’t happen until the work is done and the economic influx for the community has already occurred. Once the work is done, the developers can’t even claim the credit until they get a certificate of occupancy – thus placing the building back on the local tax rolls!
  • If a completed project does not meet the requirements of the Secretary of the Interior Standards for Rehabilitation, final approval is denied and no credit is issued.
  • There is a recapture period for HTC reclaims credits granted to buildings sold within a designated period of time.
  • Projects from across the state, no matter what size community they are located in, can be eligible for Michigan HTCs if they meet the eligibility requirements based on historic significance.

It is time to realize that the Michigan HTC is a solid program providing economic incentive to both commercial and homeowners and it needs to continue! Please reach out to your state representative or senator and make sure your voice is heard on this issue before it is too late!

Elaine H. Robinson

MHPN President

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