HISTORIC TAX CREDITS; TIF BILLS; CRE GOVERNMENT DAY
Wisconsin’s Historic Rehabilitation Tax Credit Program: An Economic Development Tool That Works
By Tom Larson
Over the last 12 months, Wisconsin’s Historic Rehabilitation Tax Credit (HRTC) Program has been under strict scrutiny because of the program’s success and the price tag associated with it. When the state HRTC was increased from 10% to 20% during the 2013-2015 state budget, the state estimated that the demand for tax credits would be approximately $4 million to $6 million. However, the actual demand for the program was $35 million to $39 million in 2014. Because of the limited availability of state revenues, lawmakers are looking to make significant changes to the HRTC program including placing a $10 million annual cap on tax credits available.
NAIOP-WI and other interested parties have been urging lawmakers not to make any changes to the state program until they better understand the economic benefits and the net costs to the state. To date, the only number lawmakers have been focusing on is the total amount of grants awarded. They have not considered the number of jobs created or the state and tax revenues generated from these tax credits such as:
Historic Tax Credits generate jobs, tax revenue and increasing investment
- Since January 2014, $38.8 million in tax credits have leveraged $234 million in private investment expenditures in 39 historic tax credit projects. Researchers at University of Wisconsin-Milwaukee estimate that these projects will generate over $20 million in annual state tax revenue and create over 4,000 jobs.
Historic tax credits are an economic development and job creation strategy
- An independent study by Rutgers University and endorsed by the Department of the Interior found that one job is created for every $55,000 of qualified building expenditures. Using this calculation, in Wisconsin in 2014 alone, the historic preservation tax credit program created 5,290 jobs during the construction phase alone, and thousands of other permanent jobs.
Historic tax credits increase property values by a factor of 5 to 10 times
- For example, renovation of a former Pabst brewery building at 1201-1217 N. 10th Street in Milwaukee into the Brewhouse Inn and Suites led to 907 percent increase in tax assessment – the building’s assessed value rose from $1,419,700 to $14,300,000.
Payback on state’s investment begins immediately
- Independent studies have concluded that one-third of the state’s investment is paid back during the construction phase, prior to any state credits being paid out. For example, the Maryland Governor’s Task Force on their historic tax credit program found that for every $1 paid out by the state, $0.34 was returned prior to any credit being paid out and the building placed into service.
Wisconsin HTC’s are spurring significant development and investment activity
- During the 2014 legislative session, the Wisconsin legislature overwhelmingly approved an increase in the state’s historic tax credit from 5 to 20 percent. In 2014 alone, the increased tax credit brought new rehabilitation activity to communities across the state including: Ashland, Baraboo, Dodgeville, Eau Claire, Janesville, Kaukauna, Kenosha, Green Bay, La Crosse, Manitowoc, Mauston, Mayville, Monroe, Oshkosh, Portage, Rice Lake, Sauk City, Schofield, Shawano, Sheboygan, Sun Prairie, and Waukesha.
NAIOP-WI has made the HRTC program one of its top state budget priorities and is encouraging lawmakers to evaluate the success of the program and the net costs to the state, rather than focusing only on the amount of tax credits awarded. Over the next several weeks, we will continue to meet with lawmakers in hopes of preserving the program as is or making changes that will not harm the effectiveness of the program.
The TIF Modernization Package Is Introduced In State Senate
UPDATE: NAIOP board members Dick Lincoln and Mike Slavish will be in Madison on Wednesday, March 25 to testify regarding the TIF bills that were introduced.
On February 27th, the Joint Legislative Council introduced the TIF Modernization Package, which consists of 8 bills intended to update Wisconsin’s TIF Law to make TIF a more effective and flexible economic development tool.
The TIF package was the product of a legislative council study committee that was assigned the task of evaluating current TIF laws to:
- determine how they impact a local government’s finances, property taxes, economic development, and job growth, and
- recommend legislation that could improve their effectiveness.
The committee was chaired by Senator Rick Gudex and Representative Amy Loudenbeck and consisted of 18 individuals, including 6 legislators and 12 citizens. Three NAIOP-WI members served on the committee.
The Committee met for 6 months and, in the end, recommended (with almost unanimous support) to introduce 8 bills that will significantly improve Wisconsin’s TIF laws to make them easier to administer, more effective at promoting economic development, and better protect property tax payers. Specifically, the bills do the following:
- Senate Bill 50 – Makes several technical changes to the law regarding public notice requirements, time limits for joint review board actions, and maintaining industrial zoning to only industrial TIDs.
- Senate Bill 51 – Makes modifications to the functions of Joint Review Boards
- Senate Bill 52 – Allows for greater flexibility related to revenue sharing between districts within a jurisdiction and between overlapping taxing jurisdictions.
- Senate Bill 53 – Allows local government to mitigate the negative impacts to TID cash flows caused by legislative and administrative actions.
- Senate Bill 54 – Provides local communities with greater flexibility as to the composition of a TID by eliminating the 25% vacant land test.
- Senate Bill 55 – Increases the limit on the total amount of taxable property permitted within a community’s TID from 12% to 15%.
- Senate Bill 56 – Extends the sunset date for declaring a TID distressed or severely distressed from 1/1/2015 to 1/1/2020.
- Senate Bill 57 – Provides the Joint Review Board with greater flexibility Allows for greater flexibility related to redetermining the base value of a TID when the base value has fallen at least 10% for two consecutive years.
All of the bills were assigned to the Senate Economic Development and Commerce Committee, which is chaired by Senator Rick Gudex. In the upcoming weeks, the Senate committee will likely hold a public hearing on the bills and then decide whether any modifications are necessary before moving the bills through the next steps of the legislative process.
NAIOP-WI will be meeting with members of the Senate committee in hopes of gaining their support for the bills.
CRE Industry in Madison for Government Day
By Chris Korjenek
Over 50 members from 10 commercial real estate associations traveled to Madison on March 11 to meet with legislators to discuss our top legislative priorities. In addition to meeting with legislators and their staff, attendees heard from Representative Dale Kooyenga and Todd Berry from the Wisconsin Tax Payers Alliance. Finally, NAIOP Leaders Dick Lincoln, Debbie Tomczyk, Mike Mooney and Jeff Whipple met with Matt Moroney, newly appointed Senior Advisor for Governor Walker. Moroney was instrumental in chartering NAIOP Wisconsin in 2003, providing assistance including our first executive director!
Special thank you to CARW and BOMA for assisting with details of our annual trip!
 National Park Service, Federal Tax Incentives for Rehabilitating Historic Buildings (Washington, DC: December 2012).
 Final Report of the Governor’s Taskforce on Maryland’s Heritage Structures Rehabilitation Tax Credit, 2004