New Gov. Mike Parson said he has no plans to reinstate a popular low-income housing tax credit program.
In November 2017, the Missouri Housing Development Commission voted to cut the program, a move led by then-Gov. Eric Greitens’ appointments to the commission. The only dissenting members of the commission then were Parson, who was lieutenant governor at the time, and John Hensley, who was standing in for Missouri Treasurer Eric Schmitt. With Parson’s inauguration as governor last week, housing developers were hoping for a quick restoration of the program.
“We’re not going to be issuing any low-income tax credits this year,” the governor said in a Tuesday news conference. “What I will do is that I will develop a commission that will truly do a study. We’ll get some good people on there and we’re going to talk and see how we’re going to reform that. It will be reformed. For low-income housing to come back, let me make that clear, to even have a shot at returning, we’re going to have to have total reform.”
In January 2017, Greitens created a committee to study how taxes could be reformed in Missouri, including the state’s system of tax credits. That committee suggested transforming the tax credit program into a low- or no-interest loan program. That suggestion did not gain traction in the legislature in 2018.
Phil Steinhaus, CEO of the Columbia Housing Authority, said that not restoring the program now would have a significant impact on pro- jects to be funded this year.
“Normally you apply for both state and federal credits, but the state funding (for the tax credits) went south,” Steinhaus said. “Removing all the state credits means you have to ask for more federal credits. When you take a third of the funding pool out, a third less projects” are created.
House Budget Committee Chairman Scott Fitzpatrick opposes the tax credit program as it existed. Days before the Missouri legislative session ended, Fitzpatrick utilized a state law to prevent tax credits from being issued, according to St. Louis Public Radio. He is aware of Steinhaus’ concern, but is willing to hold out until the rules are rewritten.
“If there’s a temporary pause or reduction in the projects for the time being, it’s something I can live with to get some sort of reform for the program,” Fitzpatrick said.
The committee chairman’s biggest issue with the program is in how the funds were used. A 2017 report from State Auditor Nicole Galloway says the program was run in a grossly inefficient way. She said that only 42 cents of every $1 of credit was being used for low-income housing projects. Reports from previous auditors also have criticized the program as inefficient.
“I’d like to see a significant amount of reductions on spending and some caps on credit. The program costs up to $200 million a year,” Fitzpatrick said. “In addition to capping the credit, maybe some kind of requirement that at least some larger percent gets invested into the project, because a lot of the money bleeds into the developers.”
Rep. Kathy Swan, R-Cape Girardeau, is a supporter of the program. Swan wants it to return, although she thinks the Missouri legislature needs more control over the program.
“Currently, the legislature plays little to no role in considering the annual redemption of the entire tax credit program on the state budget,” Swan said. “We need to include this discussion as part of the annual budget process each fiscal year and I have filed a bill regarding this issue for the past few years. It would start a much needed discussion regarding budget prioritization.”
Each session from 2015 through 2018, Swan’s bill has failed to get a committee hearing or vote, the first major steps in the lawmaking process.
Steinhaus thinks that politics have gotten in the way of progress in affordable housing. He said the Missouri Housing Development Commission’s structure hurt its ability to act fairly.
“It would be beneficial to depoliticize the process. The commission right now has appointees that are fixed positions that include the governor, lieutenant governor, attorney general and treasurer,” Steinhaus said. “I think that’s one of the reasons why state credits were eliminated, because the governor decided he didn’t like the program and then voted in several people who didn’t like the program to remove it.”
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