Many RI housing developers and investors are pushing for a reintroduction to the state’s historic tax-credit program. Eliminated in 2008 for its lack of return in state investment, this program allowed property owners to claim up to 30 percent in tax-credits for the restoration of historic properties in Rhode Island.
Inactive for the past four years, this bill continues to be a trending topic among many supporters, including Rep. Jeremiah O’Grady, who strongly argues that NOW is the time to re-instate the tax program. Supporters of the O’Grady bill such as statewide local interest group, Grow Smart Rhode Island, hope it acts as a catalyst to a revival in the job and housing market in RI.
Since 2008, many abandoned, unfinished, or underdeveloped projects in areas such as Warwick, Pawtucket and downtown Providence have remained vacant. Yet there is still hope that there is potential for a new market. An article in PBN describes the abandonment of this stimulus incentive as a “baited hook with no barb.” In other words, maybe lawmakers gave up too soon on this program. As it stands, many developers are hesitant to take on historic projects without a tax-credit.
According to O’Grady, the revised bill is “leaner” in quantifying its tax credits, so much that lawmakers shouldn’t fear that the current budget crisis would impede on its development. The estimated total project cost will decrease from 30 percent (in 2008) to 20 percent. Developers may be eligible for a 25 percent tax credit if a quarter of the property or an entire first floor is allocated for commercial purposes. Additionally, federal tax credits of up to 20 percent may also be earned if federal requirements are met.
Not so bad of an investment, in terms of providing a softer cushion for the state. All in all, developers may earn up to a combined 40-45% in tax credits, both state and federal. It’s also important to mention the revised bill will cost the state $10 million dollars less than it did four years ago. However, the question of whether or not this bill is even feasible remains.
The argument is that reinstating tax credits on historic properties will create opportunities where it couldn’t be found otherwise. With Gov. Chafee scrambling to fill in the potholes of our state budget, can we hope that the returns will be lucrative enough in the foreseeable future? Or are we investing into a great economic incentive at the wrong time?