Governor Paterson’s Support Needed on Expanded Rehabilitation Tax Credit Program Legislation
Economic and Policy Benefits Make this Legislation a Key Component of Tax and Economic Stimulus Program
While New York State faces tough choices ahead in a time of revenue shortfalls and budget deficits, Governor Paterson must continue to support and invest in programs that will accelerate New York State’s recovery from the current economic downturn. Signing the expanded Rehabilitation Tax Credit Programs into law will serve as an economic stimulus directed to where it is most needed in New York – the downtowns and older neighborhoods that serve as the core of our communities. Background Legislative Bill A.30000 (Formerly A.7935-B (Assemblymember Sam Hoyt, Buffalo)/S.5425-B (Senator Frank Padavan, Queens.) In 2008, this legislation passed the NYS Senate unanimously and by consent. It passed the NYS Assembly with overwhelming bi-partisan support. Expands incentives and programmatic features of NYS Rehabilitation Tax Credit Programs established in 2006. The 2006 program set incentive levels too low and too narrowly restricted program availability: as a result, the current NYS rehabilitation tax credit has not seen significant use over the past two years. Commercial Program changes: The maximum credit value is increased to $5 million per project (the current program credit value is limited to $100,000 per project). The commercial credit rate is increased to 10% of qualified rehabilitation costs (the current program credit rate is 6%). The commercial credits will now be assignable and transferable within business partnerships. These changes to the commercial credit program are designed to significantly increase investment in rehabilitation and reuse of historic commercial structures, and accelerate use of the federal reinvestment tax credit in New York, particularly Upstate. The lack of federal rehabilitation tax credit use Upstate – over the last decade, less than 4% of $320 million in federal program use in New York– underscores the need for a more effective state-level incentive to attract new investment to municipalities in New York State.
Residential Program changes: Extends the program to a broader range of “distressed areas” to make the credit available to a wider range of municipalities and older neighborhoods.
Doubles the maximum credit value to $50,000 (the current credit is limited to $25,000). Allows the residential credit to be taken as a rebate if the user’s income is less than $60,000 annually. These changes extend the residential tax credit program to a far larger number of municipalities and neighborhoods than the existing program, offering a significant new financial incentive that will attract reinvestment and home ownership back to community cores to reclaim older housing stock for reuse and thereby address vacancy, demolition and affordable housing issues faced in many Upstate communities. More than 26,000 homes are estimated as qualified for the new program, in cities, towns and villages throughout New York. Policy Benefits An expanded New York State Tax Credit will serve numerous economic development and municipal reinvestment goals across New York State by directing new investment back to existing infrastructure, supporting smart growth planning, conserving energy use, and promoting open space and farmland conservation efforts. Economic Benefits Documentation of fiscal and economic benefits of rehabilitation tax credits in other states with programs similar to New York State note significant positive fiscal benefits from such programs. Missouri and Rhode Island tax credit programs report returns on investment of $3 and $5 dollars respectively for every dollar invested in rehabilitation tax credits. Advocates of the rehabilitation tax credit program in Rhode Island have hailed their program as the most successful economic development program in state history.
Fiscal Impacts No revenue impact in 2008. Program will be effective as of 1/1/2009. Limited revenue impact in 2009 and 2010 due to program start and implementation. Credit cap of $5 million dollars per project limits the costs of larger, downstate projects while providing a critically-needed threshold funding incentive for larger Upstate projects, such as mill buildings and downtown offices. This cap will significantly cover costs associated with smaller rehabilitation projects, such as Main Street-type commercial structures that serve as the commercial cores of towns and villages throughout New York State. Projected 2-3 years until program reaches full implementation, with a projected annual cost of $25-$40 million dollars for the commercial program, and less than $1 million for the residential program.