Story Published:
Mar 27, 2009 at 10:31 PM CDT
Story Updated:
Mar 28, 2009 at 10:28 AM CDT
SPRINGFIELD -- With just more than a month left in the legislative session, Gov. Jay Nixon's key economic initiative remains stalled over the issue of tax credits. It's a debate about the best way to encourage development with taxpayers' funds.
Most recently, the state has been giving out between $500 million and $700 million in tax credits each year. The credits are used to reduce a developer's tax bill in order to get an expensive project off the ground. Some Republican senators say the tax credits have spun out of control.
A redeveloped building at 400 E. Walnut St. is a downtown gem. It houses 16 apartments, an elegant bridal shop, a buzzing arcade, and even modern office space in the basement.
Just nine years ago, the building was completely dilapidated. Developer Dan Scott says he could never have restored it without state money.
"The building wouldn't have been possible without tax credits," he said.
Scott's $3 million project received about $600,000 in state tax credits for historic redevelopment. The building was a hotel for decades. Scott rents the apartments for around $900 a month.
If a building like this one qualifies for the National Historic Registry, it's eligible for tax credits. A group of state senators believes the credit program has become an automatic giveaway that needs to be reined in.
"Right now what has happened is the tax credit process has been structured as an entitlement. If you do certain things you automatically get government funding," said Sen. Brad Lager.
Lager is leading the push for reform. He proposes all money for credits go through the regular, more merit based, appropriations process, and that the historic tax credit program be capped.
Scott says limiting the program at this time of economic uncertainty would make developers nervous. Much of Springfield's downtown revitalization is due to these tax credits. The money has allowed the city to keep its core personality, to renovate old buildings rather than bulldoze them.
"What would downtown Springfield look like if 100 separate building or homes had not been improved?" he asked.
While Scott sees the credits as the path to renewal, Lager views them as a program running out of control.
"If the business plan is so poor that the private sector won't do it, then I don't believe the taxpayer should have to fund it," he said.
This entire tax credit debate is tied to Nixon's Quality Jobs bill, which would expand the incentives given to businesses. The House urges the Senate to get that portion of the bill passed and sent to the governor.
