Supplemental Budget a Go
The RI Senate has approved the supplemental budget, largely in the form that the governor proposed. I haven’t had the time to figure out this, though:
The plan restores $5 million of the $7 million the governor had proposed to eliminate for the Neighborhood Opportunities Program, which supports affordable housing initiatives. That funding will go to projects that were already in the works and had been promised state support.
The General Assembly also saved the Historic Tax Credit program, which the governor had originally scrapped in his supplemental budget proposal, but did so in a separate bill passed by both chambers and signed into law earlier this month. While the bill closed the program to new proposals, it kept commitments to already-approved projects, albeit at a slightly lower reimbursement rate.
The press release isn’t explicit about what the trade-off was in order to make these “saves.”
Justin, The General Assembly did not save the Historic Commercial Tax Credit program. They put a two year moratorium on any new projects which means no tax credits for next two years retroactive to January 2008. So if there is no tax credit program; who’s is going to invest in Rhode Island? It was already reported in the newspaper that a $3 million project will be shut down in Pawtucket. How many more will be shut down? In order to fulfill current tax credits commitments on projects already in the works, the state will have to create a $280 million trust fund. Those contractors and investor still in the program must pay to the state 2.5% in total taxes of their project up front even if they do not now know if they are going to complete or scale back the existing project. The Rhode Island Historic Commercial Tax Credit program was one of the first in the nation and highly recognized by Washington, DC and the rest of the individual states as a role model. Massachusetts Connecticut and New York have started Historic Commercial tax credit programs modeled after Rhode Island. “Lipman, Frizzell & Mitchell, LLC (2005) In 2005, Grow Smart Rhode Island commission the real estate consulting firm of Lipman, Frizzell and Mitchell, LLC of Columbia, Maryland to perform an economic and fiscal analysis of the Historic Preservation Investment Tax Credit. The study was based on 111 projects enrolled in the program from its inception in 2002 through September 23, 2004. The analysis concluded that up to that point the tax credit had cost a total of $145.47 million. However, because the credit is not granted until a project is completed and receives a certificate of occupancy, the study found that approximately 20 percent of the state’s investment… Read more »
Ken
Informative summary.
When asked what will you give up to get that back, our pols decided they would give up nothing else in trade. Nothing.
Those tradesmen won’t necessarily be moving to CT or MA any more than they’d have to move to an adjoining county in a real state.
Its too bad, but we have to put some things on hold. The excessive cost of this state’s government has to be reduced. No amount of supply side inducements is going to make that fact disappear.
Rhode Island has capped and stopped the Rhode Island Historic Commercial Tax Credit program for the next 2 years while Massachusetts and Connecticut same program is operational and indicated to expand. No business person in their right mind is going to stay in Rhode Island and pay full price when they can move to the other states and receive tax credits.
So you feel and are comfortable with the State of Rhode Island giving up a $1 tax credit that generates a $5.47 State of Rhode Island economic return plus putting property back on the tax roles and creating jobs, income tax, sales tax, housing and small and medium business space for economic business.
Currently Rhode Island subprime foreclosures are estimated to now cost the state over $1.7 billion in lost property tax on state and city and town levels. That I believe includes associated loss of neighboring properties adjacent to the foreclosure property. That is from the 2005-2006 reset, the 2007-2008 reset is coming which increase property tax loss rising more. Rhode Island unemployment is running 6.1% and climbing.
ChuckR please explain to me how you feel that at this time in Rhode Island financial problems the state can justify giving up a $1 spent to $5.47 return?
“ChuckR please explain to me how you feel that at this time in Rhode Island financial problems the state can justify giving up a $1 spent to $5.47 return?”
I don’t feel that way. But the vast majority of our legislators do, or have been cowed into going along to get along. I’ve voted against every damn one of them I could, but that hasn’t been successful.
Addendum
CuuckR,
I hate to throw salt on the wound but people on Smith Hill have to look at the whole picture before they accomplish knee jerk legislation.
The RI Historic Commercial Tax Credit return documented positive numbers for 2006-2007 which I posted in earlier posts on this blog.
Right now most all homes in RI will suffer a loss of value due to subprime foreclosures so if you are a homeowner you might or could be paying property taxes and mortgage payments for a higher rate than your home is presently now worth. You’ll have to wait till city/town tax reevaluation plus the next reset of subprime interest rates is due which will drive up Rhode Island foreclosure numbers.
I feel confident all local 39 city/town taxes will increase due to increased gasoline, heating oil, natural gas, electricity, food (for school breakfast, lunch, school transportation, and salt/sand trucked in for winter prices to name a few. I am not going to address added financial stress due to state level or no funding loss to all 39 cities/towns and education departments.
All of this will be on top of your individual family and personal comfort requirements for living and entertaining in the State of Rhode Island plus projected increase in medical insurance costs.
Ken,
You said that “people on Smith Hill have to look at the whole picture before they accomplish knee jerk legislation”.
No, they don’t. The only thing that the General Assembly is concerned about are the state funds that they control.
You’re right that the historic tax credit results in increased revenue from property taxes, but that tax revenue is usually received by cities and towns. The General Assembly doesn’t care.
I hope that when the economic ship is righted, the historic tax credit is restored. RI has a terrible economy and no growth, but it has always been able to say that it has character. Without the tax credit, RI will even lose some of that.
Anthony,
The State of Rhode Island coffers derives income from local city/town property taxes. Not to mention additional tax receipts from the economic activity generated from the historic commercial tax credit program in the form of income tax from wages, workmen’s compensation tax, sales tax from construction material purchases, sales tax from reselling of the property and individual units.
This is why the study I quoted indicated and multiple studies indicates the state of RI recoups 20% of the 30% tax credit up front by the time the project is finished. Problem is all of the tax receipts go into the RI black hole called the general fund.
Both the Governor trying to kill the program outright and the GA putting a 2 year hold with lowered tax credit and requirements for up-front monies from the private investors and developers is basically killing the golden goose that was giving RI a return of $5.47 on every $1 tax credit during a time when RI needs economic activity.
Addendum:
Anthony,
Rhode Island Property Taxes: Among the Highest
Rhode Island is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Rhode Island’s localities collected $1,757,602,000 in property taxes in fiscal year 2004, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, Rhode Island collected $1,532,000 in property taxes during FY 2004, making its combined state/local property taxes $1,759,134,000. That brings its per capita collection to $1,629 and ranks Rhode Island’s combined collections 5th highest nationally.
SOURCE: The Tax Foundation http://www.taxfoundation.org/research/topic/56.html
The subprime foreclosures and lost of estimated $1.7 billion in state and local property taxes is directly affecting the state budget deficit and local cities and towns. Subprime foreclosures will continue to rise thus continuing to lower receipts from property tax at the state and local levels.
By halting any new participation in the Historic Commercial Tax Credit which would keep ongoing construction and revitalizing of properties that are not on property tax rolls for the next 2 years the state has created a hole and finical burden when economic activity is really needed.
Now that the state has changed the rules of what was a national model to all other states in the nation, Massachusetts and Connecticut will look more inviting to investors who will most likely not return to RI.