To sustain the transformative momentum of redevelopment and investment in upstate and Western New York, Gov. Andrew M. Cuomo must extend the state historic tax credit program through 2024, and decouple our state program from the now-diminished federal historic tax credit. Otherwise, Cuomo’s vision of a revitalized upstate that he has worked so hard to accomplish will be jeopardized.
The governor’s proposed budget failed to recommit to the program, creating uncertainty for developers and investors who are already threatened by the significant diminishment of the federal credit program, with which the state credit works hand in hand. The state program has carried the federal program upstate, and yielded nearly $800 million of private investment in Western New York alone, breathing life into old buildings, many that are architecturally significant, and lighting a match to the economy with jobs and tax base growth.
Sacrificing the State Historic Rehabilitation Tax Credit program is no way to close a projected $4.4 billion deficit. Cuomo’s proposed budget would:
- Permit a change made by President Trump that weakened the value of the federal credit to also extend to the state credit.
- Allow the current state historic credit to sunset in less than two years.
- Cap the amount of tax credits an investor can take in a given year.
- Defer the rest of the benefits they receive for at least three years.
Collectively, these actions undercut a program that is fueling revitalization and reinvestment across New York State, especially Buffalo. Given Cuomo’s enhancement and support for this program in 2013, inaction now makes little sense.
The Senate and Assembly one-house budget bills both include reauthorization of the credit through 2024 and prevent the state credit from being diminished by recent changes to the federal program.
Both the Senate and Assembly reject the governor’s planned deferral of numerous state tax credits. If budget negotiations determine some credits should be deferred, this program should be exempted from this action. Investments to redevelop historic properties were made under set expectations and rules; those rules should not change mid-deal. There’s already a precedent: The state film tax credit program was exempted. Upstate investors utilizing the historic tax credit program deserve a similar exemption.
Only the Senate bill proposes a critical change to the qualified census tract component of the program that determines where the state credit can be used. Should a census tract fall out of program eligibility, the Senate proposes that it would remain eligible for an additional length of time, so as not to penalize recent efforts to list properties on the National Register. The Senate bill proposes 18 months’ additional eligibility; two years would be a more appropriate window. The Assembly bill should also have addressed this need.
The governor should take early action to reauthorize the program, which will otherwise sunset on Dec. 31, 2019, to provide consistency and predictability for developers and investors. To counter the impact of diminishment of the federal tax credit program, the state program must perform consistently, predictably and reliably. The governor can provide this by making the program available for an additional five years, sustaining its value by decoupling it from the federal program, and exempting the program from the sudden change in rules that a deferred payout represents.
The National Trust Community Investment Corp. made that point to the governor in a March 8 letter which talks about deals that are already being put on hold because of the proposed deferral: “This proposal has prompted an immediate disruption in our investing activity in your state with respect to projects that we have already closed as well as ones in our pipeline.”
Choices have to be made across a spectrum of programs to make up for a budget deficit the state must confront this year. But it would be wrong to score the state tax credit program strictly on “cost” and not acknowledge its greater impact on tax base development, job creation or the significant role it has played in bringing private investment to every upstate city as well as rural communities from Jamestown to Perry, Albion and Medina. The state tax credit program is providing a redevelopment incentive at every scale.