Tax credits have become a hot topic in Louisiana political circles the past several years as a way to shore up the state’s finances, with some programs being scaled back or outright eliminated because of little return on investment.
With the state Legislature expected to meet soon for a special session to deal with a $1.9 billion revenue shortfall, including a $750 million deficit this current fiscal year—and all options being laid out on the table to fix the state’s books—some advocates are worried the state’s Historic Tax Credits program, which allows developers to recoup some of the money spent refurbishing historic buildings, may be one of the items on the chopping block.
“It’s not a bad thing to look at everything that’s out there,” Downtown Development District Executive Director Davis Rhorer says. “But in the case of downtown Baton Rouge, we can show the effectiveness of the (Historic Tax Credits) program.”
Rhorer points to several projects that have revitalized the downtown area, including the Hotel Indigo, Holiday Inn Express and the A. Hays Town building at 500 Laurel Street. Rhorer says those projects would not have gotten off the ground without the tax credit program, and he estimates that hundreds of millions of dollars have been invested in restoring downtown Baton Rouge because of it.
The state program, which allows developers to recoup up to 25% of qualified expenditures on historic restoration projects, is sometimes coupled with the federal program, which allows for a refund of up to 20% of qualified expenses. Those programs are intended to help developers offset the high cost of refurbishing and renovating old structures.
Studies performed in 2011 and 2015 by economist Timothy Ryan and Maryland-based Novogradac & Company LLP, respectively, have found that the state received about $3 in increased tax collections for every dollar spent on the tax credits.
The issue of the Legislature eliminating the tax credits has come up before in the past several years.
During last year’s regular legislative session, state lawmakers approved extending the tax break on renovating historic buildings until 2018, and then dropping the tax break to 20% after 2018.
Developer Dyke Nelson’s DNA Workshop is behind the renovation of the old Union Federal Savings and Loan Building at 500 Laurel Street and the 440 on Third development that features Matherne’s Supermarket. Without the Historic Tax Credits, Nelson says, neither project would have come to fruition.
“There would not be a grocery store in downtown Baton Rouge if not for the tax credits,” Nelson says. “The difference between having the Historic Tax Credits and not is the difference between the project happening or not.”
Nelson says the program is successful not only for renovating downtown Baton Rouge, but also has been used in Shreveport, New Orleans and Lake Charles.
The state of Texas recently enacted its own historic renovations tax credit program, which is modeled after the Louisiana program. Nelson says it would be a shame if lawmakers decide to roll back or eliminate a program that is emulated by other states.
“I’m hopeful that we won’t take a step backwards,” Nelson says.
—Ryan Broussard
