February 2, 2010

O’Malley working to keep historic credit alive

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By Erich Wagner
Erich@MarylandReporter.com

The Bromo Seltzer Tower in Baltimore
was rehabbed using the credit

Gov. Martin O’Malley still has work to do to convince lawmakers to extend a popular tax credit for historic redevelopment that he touted in his State of the State address Tuesday.

But he may have already made some headway in the Senate committee where a similar proposal failed last year.

The Maryland Historic Structure Tax Credit is set to expire at the end of the year, so this session is the last chance to renew the 14-year-old program that rewards owners and developers for improvements to properties deemed historic by state and federal officials.

The heritage tax credit has stirred objections in the past because it has primarily benefitted Baltimore City. In 2003, the law was modified so that only 50 percent of the rewards could go to any one jurisdiction, but in 2007, the cap was raised to 75 percent.

O’Malley hopes to satisfy officials from other districts by expanding the credit to sustainable and eco-friendly construction and restoration in non-historic structures, such as business districts and BRAC zones.

Extending and expanding the program was one of O’Malley’s legislative priorities last year, and passed the House before dying in the Senate. Senate Budget and Taxation Committee Chairman Ulysses Currie, D-Prince George’s, is confident that he can get O’Malley’s proposal to the Senate floor.

However, Currie said he still has some issues that he hopes can be addressed early in the session. The heritage tax credit, as first enacted in 1996, was open-ended, meaning there was no limit on the amount of money given out in any given year. In 2003, the program was capped at $23 million, and the cap was increased to $25 million a year in 2004.

“I have a concern that is an open tax credit,” he said. “We closed it and asked [O’Malley] to put cash in the budget.”

The bill may face more resistance in the House, where lawmakers are reluctant to approve more spending while other areas of the budget suffer, particularly aid to local jurisdictions.

Del. Justin Ross, D-Prince George’s, said that the bill would have broad support in a typical budget year, but it is likely to be more heavily contested this session.

“It keeps development and construction rolling,” Ross said. “But we have to make a lot of very difficult decisions, and we’re not done talking about the budget yet.”

Del. Melvin Stukes, D-Baltimore City, said the tax credit is essential to growth and development in the city, which he says has to provide services to more residents with less tax revenue.

“It just comes with the territory, when you squeeze that amount of people into 80 square miles,” Stukes said. “And especially when 60 to 65 percent of the state’s people that live in that poverty level or below live in Baltimore, it needs help. We don’t have the tax base that other jurisdictions have, because they have space to grow.”

O’Malley has proposed a transfer of the entire $40 million of the heritage tax credit reserve fund to the general fund for use this year. The reserve fund is intended to reimburse the general fund when the tax credit is given out, with the fund balance carrying over into future years.

Shaun Adamec, a spokesman for the governor, said that despite diverting money away from the tax credit’s reserve fund, the transfer would have “no impact” on recipients of the tax credit now or in future years.

“Whenever you make a [fund] transfer, the money goes to other things,” Adamec said. “When revenues improve and when we budget for future years, that money will be reimbursed.”

Sen. David Brinkley, R-Carroll-Frederick, said he likes the idea of the heritage structure program. However, he said he’s not sure about the “green growth” aspect.

“There’s a lot of inventory of older properties, and anything that we can do to perhaps give the edge to redevelopment and get it back on the tax rolls,” is positive..

Sen. David Harrington, D-Prince George’s, a sponsor of the legislation in the Senate, pointed to a 2009 Abell Foundation report which said that every tax dollar invested in the heritage tax credit would net $8.53 in economic output.

“The tax credits are, in a way, an investment, a way to generate taxes,” Harrington said. “By sustaining these communities, you’re preventing flight or businesses moving out of these communities, and the hope is you’ll get a return on this investment.”