Wisconsin Ends Tax Credit for Historic Buildings

The state halts expanded tax credits for renovating old buildings. Gov. Scott Walker says he's concerned about the impact on tax revenues and budget.

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By Jason Stein

 

Only a half year after the approval of a multimillion-dollar tax credit for rehabilitating historic buildings, Wisconsin Gov. Scott Walker's administration is halting it out of concerns about its impact on the state's tax revenues and budget.

Lawmakers and Walker increased the credit not once but twice last year, quadrupling it to 20% for qualifying projects.

In debate last fall, a few conservative Republicans in the Legislature and articles in the Milwaukee Journal Sentinel questioned whether the law could end up cutting state tax revenues by much more than predicted by supporters. But the proposal passed the Legislature last fall with largely bipartisan support and was signed into law in December by Walker.

Republicans, developers and local officials successfully advanced the measure by making an unusual alliance with Democrats, trade unions and historic preservationists. The legislation provides the tax credits to developers who restore historic buildings, typically located in urban areas such as Milwaukee.

In a letter this week to the Legislature's budget committee, the head of the Wisconsin Economic Development Corp. said that 29 projects already have been approved and are eligible for a potential $35 million in state tax credits. That's nearly nine times the $4 million set aside for the program in the state budget for its first year.

So WEDC is halting the program for now while it studies its effects, WEDC chief executive officer Reed Hall wrote.

"If fully realized, this amount of credits could potentially result in nearly $180,000,000 in additional economic development in communities across the state," Hall said. "While this is certainly a testament to the program's success and need in Wisconsin, it also underscores the necessity to review the fiscal impact to the state budget."

Kelly Lietz, the vice president of marketing for the WEDC, said that the agency's review of the tax credits will consider whether caps are needed for either individual awards or the overall program. WEDC will also take into account the demand for the program when it makes recommendations to Walker for the 2015-'17 state budget.

Several lawmakers quickly committed to restoring the credits. "With the success of this credit, many jobs were created and historical buildings revamped. We look forward to discussions on how to keep this credit viable in the future," Rep. John Nygren (R-Marinette) and Sen. Alberta Darling (R-River Hills), the co-chairs of the Legislature's Joint Finance Committee, said in a statement. "I am committed to working aggressively with our WEDC board and various economic partners to ensure we can continue this popular program and create jobs for Wisconsin families," said Assembly Minority Leader Peter Barca (D-Kenosha), who also sits on the WEDC board.

Walker signed the tax credit law in December at the proposed $35 million Hotel Northland redevelopment in downtown Green Bay, which would convert that vacant building into a boutique hotel.

The projects before WEDC so far include 10 potential developments in Milwaukee, including a John Pritzlaff Hardware Co. building just south of downtown; the Milwaukee Paper Box Building at 1560 W. Pierce St.; and 700 Lofts on W. Michigan St. Other projects are being proposed for cities around the state such as Madison and Racine and smaller communities like Ashland and Rice Lake in Barron County.

The proposal's lead Assembly sponsor, Rep. Chad Weininger (R-Green Bay), has said Wisconsin needs to offer credits that are competitive with those provided by other states, noting they had been shown to spur projects. Weininger has said the program was needed to revamp aging buildings that are a drag on the state's cities.

According to the National Trust for Historic Preservation, 31 states provide historic preservation tax credits. Most of those credits are in the 20% to 25% range for commercial restoration projects.

Skeptics note, however, that the money being invested in restoring hotels and other buildings will have to be made up by other taxpayers or taken from other priorities in the state's budget, which could have their own economic payoffs.

The tax credits could benefit developers with little or no tax liability, since they can be sold to businesses such as utilities or banks that aren't involved in the actual restorations.

(c)2014 the Milwaukee Journal Sentinel

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Daniel Luzer is GOVERNING's news editor.
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