The state’s historic building tax credit program, seen by developers and preservationists alike as a key tool in incentivizing historic redevelopment, would be sharply curtailed if changes to a bill approved this morning by a Senate committee become law.
Lawmakers are taking up the tax credit during the special session because the program—which allows developers to recoup 20% of their cost on a historic building renovation project—is set to expire at the end of 2021.
HB4, which would have extended the program in its current form until 2028, sailed through the full House earlier this month.
In a lengthy hearing this morning, however, the Senate Revenue and Fiscal Affairs Committee slapped three amendments onto the bill that could seriously hamper the program’s effectiveness.
The changes would reduce the credit amount to 10% from 20%, shorten the extension date to 2023 from 2028, and cap the total program at $75 million per year, with a restriction that no more than 50% of the annual cap can be designated for one region of the state.
Downtown Development District Executive Director Davis Rhorer is concerned about the amendments because of their potentially negative impact.
He says reducing the amount of credits a developer can claim will affect the feasibility of certain redevelopment projects. Shortening the extension period of the program to just 2.5 years will create a lot of uncertainty around projects that could take several years to complete, and capping the program at $75 million will make large-scale projects difficult, if not impossible.
“A reduction in the eligible credit percentage and annual cap, as recent amendments to HB4 have proposed, will potentially reduce the number of buildings that can be redeveloped across Louisiana and in our downtown area,” Rhorer says.
Downtown has been the biggest, though not the only, beneficiary of the program in Baton Rouge. Of the 110 projects that have been made possible by the state tax credits over the lifetime of the program, 87 are downtown. They include such signature projects as the Kress Building, Hotel Indigo Hilton Capital Center, 440 on Third, the Commerce Building and The Watermark hotel.
Most developers who have taken advantage of the program have used it in conjunction with federal historic building tax credits, which are currently set at 20% of project expenditures.
Together, the two programs have been indispensable in revitalizing older neighborhoods and restoring blighted properties to commerce.
“They have really transformed downtown,” Rhorer says.
The amendments to the bill added by the committee today could be removed when the legislation gets to the Senate floor, likely some time next week, though it is unclear if there will be any effort to do that.
If the Senate approves the bill it must then go back to the House for approval of the changes and would most likely end up in conference committee.
If the measure passes in its current amended form, lawmakers could still revisit the program during the 2021 session to change it again before it expires.