State Audit Recommends Sunset Of Historic Preservation Tax Credit
You saw the original, and now here’s the sequel. Just weeks after producing an excellent report on Missouri’s Low Income Housing Tax Credit, Missouri’s state auditors have returned with a review of the Historic Preservation Tax Credit (HPTC) program. We have talked about the HPTC at length here on the blog and elsewhere, and I am delighted that the state’s auditors took a look at a program that has hemorrhaged taxpayer money for years.
What did the auditors find? A lot. For starters, HPTC tax credits have cost the state nearly $600 million over the last five years alone and more than a billion dollars over the last 10. Missouri leads the country in “qualified rehabilitation expenses” (QRE) for historic preservation, which relates to the expenses against which the HPTC could be applied. Broadly speaking, the higher the QRE that rehabbers claim under the HPTC, the more money the state will be spending on it.
So, how big is Missouri’s QRE lead? Check out this chart from page 8 of the audit.
For perspective, Massachusetts, Virginia, Pennsylvania, and New York are all original U.S. colonies. Are we to believe that Missouri should have been subsidizing preservation spending at almost twice the rate as the next closest state… and not only that, subsidizing it at that level for more than a decade?
I can appreciate that we love our old buildings in Missouri, but if anything and everything can get the stamp of being “historic,” then we degrade the things that are, in fact, historic and waste limited taxpayer resources in the process. Could some projects be worthy of taxpayer support? Possibly, but those cases would be an exception, not a billion dollar rule.
To name a fraction of the examples that underscore this reality, Norwood Hills Country Club should not have received taxpayer money. A whole host of private mansions that the HPTC subsidized should not have received taxpayer money. Check out this story, from the audit:
In 2011, the DED issued about $296,000 in credits to an applicant who renovated a 3-story, 5,400 square foot home in an affluent neighborhood in a metropolitan area. The applicant purchased the home in 1993 for nearly $300,000 and reported about $1.2 million in qualified rehabilitation expenditures. The home has a fair market value of approximately $434,000.
So the owner buys a $300,000 house, drops $1.2 million into it, gets nearly $300,000 (almost what he paid for the house originally!) in credits from the state, and the value of the house rises… about $130,000? On what planet does subsidizing a private residence in a wealthy neighborhood make any sense for taxpayers? Why did Missourians have to effectively reimburse this person the purchase price of their home? Who’s looking out for the taxpayers here? And who in their right mind and looking at the numbers thinks this is a good “investment” for the state?
The HPTC is a mess of a program. The least the legislature could do is set a date for this madness to end.