But these tax credits are well worth keeping.
They drive economic development by incentivizing developers to acquire dilapidated historic buildings and renovate them. Only construction work approved by the U.S. National Park Service is eligible for tax credits. This credit drives construction jobs and material purchases for the rehabilitation of properties.
The credits provide the financial incentive for developers to undertake a historic rehabilitation project. Many times, the costs for restoring an older property can be more expensive than tearing down and constructing a new building. The developer has to acquire the property, rehab it and then hope to get rents to debt service the project. The tax credits only apply if the project is finished. If it is not done right, according to very strict guidelines of the NPS, then there is no credit.
Oklahoma is a young state. Our historic buildings were built 50 to 100 years ago. This tax credit provides the financial incentive for developers to undertake the restoration of these properties, which preserves and protects historically significant buildings in our state.
In turn, the rehabilitated buildings add to the property-tax rolls, revitalize slums and create income-producing properties while providing an incentive to invest in the state of Oklahoma.
Private investment feeds off itself, with one successful development encouraging the next, until it builds into a wave of revitalization.
I believe it is critical to determine the cost-benefit of any tax credit, and each tax credit should be tracked by the state auditor. All tax credits should be measurable, known, transparent to the public and generate a solid return to the state.
Also, I believe they should be transferrable in certain instances. For example, real-estate project credits must be sold to help bridge the debt-to-equity requirement in order to get traditional funding for these projects.
In my opinion, the state’s historic rehab tax credits are an excellent example of a good public/private partnership that is a pro-business approach to improve our state. They should be retained with the oversight listed above.
Without these tax credits, I would not have invested in Oklahoma City’s historic Film Row because the risk was too great. Because of the tax credits, we have revitalized an area of town that was derelict and, in many cases, abandoned.
John M. “Chip” Fudge is chairman of Claims Management Resources in Oklahoma City.