Tax credits for historic development under fire

TOPEKA — A set of tax credits aimed at funding the renovation of historic properties came under criticism Wednesday in a House hearing.

"I can't really get excited about projects that take money out of the taxpayers' purses and put it into private developers' pockets," John Todd, a Wichita businessman, told the House Taxation Committee.

The committee heard testimony on House Bill 2496, which would eliminate a cap lawmakers placed on the money available for historic tax credits late in the session last year. What was supposed to be a 10 percent reduction limited the money available annually to $3.75 million in 2008.

The program doled out $10.5 million in tax credits and could be expected to cost the same in 2011, the state Revenue Department estimated.

Developers and city officials argued that the credits —which developers use to leverage money for projects —help refurbish old buildings and bring them back on the tax rolls.

"The property taxes go up and help local communities provide vital services," said Dale Goter, a lobbyist for the city of Wichita.

He pointed to the city's Old Town area as a successful use of the tax credit program. The cap implemented last year put a halt to similar developments, including the downtown Broadview Hotel.

"This is a program that provides benefits to communities big and small in Kansas," said Larry Baer, assistant general counsel for the League of Kansas Municipalities.

Supporters of the historic tax credits have previously told lawmakers that since 2002, when the credits began, the $66.4 million in state historic tax credits have brought in $264 million in private money.

Wichita businessman Craig Gabel called the tax credits "just another government program run amok."

Why should Drury Inn Southwest, the company that owns the Broadview, receive the tax credits, he asked.

The city of Wichita already has granted $25 million in industrial revenue bonds to the project, which will allow the owners to forgo property taxes for 10 years.

"Why should they receive tax dollars over school funding?" he asked.

Rep. Arlen Siegfreid, R-Olathe, who supports the House proposal, noted that Kansas was competing with surrounding states for development dollars and jobs. The historic tax credits help Kansas bring business to the state.

"If we just sat here with our hands in our pockets we would be losing jobs," he said.

Preservation consultant Brenda Spencer pointed to a project she was involved with: renovating the old Mess Hall Building on the VA Campus in Leavenworth. The project would generate $700,000 in tax revenue for the state during construction and create 400 permanent jobs, she said.

A similar measure, Senate Bill 430, has already been adopted by the Senate. That measure removes the cap and instead changes the amount of credits a project is eligible for.

Under the Senate version, a private development could access tax credits worth 22.5 percent of the project's value, instead of the current 25 percent, and a nonprofit project could access up to 27 percent of a project's value, instead of 30 percent.

The bill passed through committee with no opposing testimony although some Senators criticized the bill as spending money that the state did not have.