Saturday, June 24, 2017

The anti-WEDC- Historic Rehab Credit works- so Walker wants to limit it

I wanted to take a post to talk about Wisconsin's Historic Rehabilitation Tax Credit, which piggybacks off of a similar program at the federal level, and is used as an incentive to fix up and remodel historic homes and older structures, and turn them into new facilities that have residential and/or improved business purposes.

This tax incentive has proven quite popular in recent years, as the Legislative Fiscal Bureau says that since 2014, over $156 million in Historic Rehab Credit awards have been handed out for projects throughout the state.

Historic Rehab helped pay for some of the construction at this site

But in the state budget, Walker wanted to limit the amount of Historic Rehab Credit award to $10 million a year beginning in 2018, with potential clawback provisions allowing WEDC to take back some of the credits if the project wasn’t (yes, this is very ironic). This means that there would less of the Historic Rehab Credit write-offs and higher tax revenues coming in for the state as a result.

And Walker’s office underestimated just how big an effect this would be, as the Legislative Fiscal Bureau says that it means that many more potential projects would be affected, which would raise the amount of taxes that the state retains in future years....and raise the taxes of the individuals working on the homes and buildings.
7. The bill would limit the amount of tax credits that could be certified by WEDC to $10 million per year, beginning in 2018, and to the greater of $10 million or the amount WEDC certified between January 1, 2017, and the effective date of the bill for 2017 (Attachment 1 shows that WEDC has entered into contracts for historic credits of $10.5 million through March 24, 2017). The administration estimates that this provision would increase state tax revenues by $3.0 million in 2017-18, $14.1 million in 2018-19, $26.7 million in 2019-20, and $27.7 million in 2020-21.

8. Based on certification data for the historic credits provided by WEDC, including the final date that credits can be earned under WEDC contracts and current projections from DOR, our office has reestimated the fiscal effect of this proposal higher beginning in 2020-21. The Governor's estimates for 2017-18, 2018-19, and 2019-20 have not been revised, but the impact of the annual limit has been reestimated to increase state tax revenues by $34.0 million in 2020-21, $39.1 million in 2021-22, $44.2 million in 2022-23, $48.6 million in 2023-24, and $50.1 million in 2024-25 and annually thereafter. Once fully phased-in, the Governor's recommendation would reduce the fiscal effect of the credits to 16.6% of the current estimate.
Now, if Walker is concerned that too many Historic Rehab Credits are causing revenues to fall short and jeopardize his spending priorities (STOP LAUGHING! It might be true!), then maybe this budget provision might make sense, even if it’ll prevent a few projects from happening. The flip side of limiting the Historic Rehab credit means that less people will likely be able to use it even though they want to, as evidenced by the large number of requests and awards from 2014-2017.

If the Legislature doesn’t like that idea, and wants to keep the program operating as it has been, then the Fiscal Bureau says that it’ll cost the state $17.1 million in this budget. But keeping the current law for Historic Rehab Credits has its own problems, since this budget is already being held up due to a lack of revenues available to fund transportation and K-12 education. There may not be $17 million in breathing room in this budget to clear up without messing up some other GOP 2018 talking point that they want to preserve.

While taxes hasn’t gotten much attention as part of this budget (mostly because Walker’s tax proposals are so gimmicky and pointless),the Historic Rehab Credit shows things to be turned on its head from what we’re used to seeing in the Age of Fitzwalkerstan- a tax credit that actually works to spark economic activity and improve aesthetics and quality of life of communities. And this time it is Walker that is trying to keep it from happening (why? No idea. Is it because he's truly concerned about the cost, or because the rehabbers don’t pay him enough in donations?).

If/when the Joint Finance Committee ever meets again, let’s see how they maneuver through this, as the Historic Rehab Credit is a popular program for many community revitalizations. And even though the program seems to be working in encouraging new developments to get off the ground, it may have to go by the wayside due to past and current fiscal foolishness in other matters.


  1. So please explain why it is "progressive" to spend public money creating Disney versions of history?

    I once thought that "historic preservations" of buildings was kewl and even important, however, then I began to see:

    1. Usually, the sites being preserved have little-or-nothing to do with anything that supports or even begins to address the needs of TODAY'S generations.

    2. Most times, like the Beulah Brinton House in Bay View (Milwaukee), the end-result of "historic preservation" is to create shameless propaganda. If you take a tour of this outrageous example of disinformation, you will be spoon-fed lies that this family were progressive social folk -- NOTHING COULD BE FARTHER FROM THE TRUTH. These are the people responsible for the Bay View Massacre where people were killed to organizing for 8 hour days and Sundays off.

    3. Holding on to make-believe fairy tales about our past prevents any progress promoting social equity and a just economy today. This is especially true when taxpayer money is used to create the propaganda.

    The "economic activity" you refer to is not justified -- it is less-than a drop in the bucket -- not at all significant. Anyone wants to make these irresponsible public subsidies needs to wake-up and look at other ways we can stimulate our economy for diverse and increasingly deprived populations.

    So how is it "progressive" to promote subsidies for otherwise well-off developers and business owners when the North side of Milwaukee is increasingly becoming an economic dessert where official unemployment rates vastly exceeds 50% in some demographic groups.

    Building condos and preserving buildings that no longer serve an economic purpose just means we have less to spend on programs that would be authentically progressive.

    Frankly, this is a disappointing post, because you have a better understanding of economics than to proclaim that this "economic development" does anything helpful to the vast majority of people in Milwaukee and Wisconsin.

    1. You have solid points here. I agree that there are many other needs in cities like Milwaukee that are ignored in favor of these flashier projects like Pabst. Enterprize zones are definitely part of this equation, although much of that gets abused through cronyism- a lot more than Historic Rehab, I'd argue.

      I don't think we should confuse the often-abused handouts of TIFs (done at the local level by setting aside districts where property taxes are written off) with Historic Rehab credits, which only give out funds if something is done. The added tax base is absolutely something that should be used by local communities to fund societal helo in places that need it over giving away more tax breaks on top of it.

      I'm more pointing out the irony that here is a program that actually has resulted in people building and rehabbing places into other/better uses, and Walker wants to stop it. But when it comes to "expansions" of existing businesses/donors that don't add any long-term jobs and often end up in outsourcing due to corporate greed, Scotty can't give them enough money.

  2. Strange definition of "works". Maybe imagining what could have been our "history" is fun for some, but such pleasures are not entitled to subsidies when so much else that supports real people living TODAY is either being cut or unfunded.

    Sure, in an economic environment where more people were able to raise their families and live with some dignity, giving public money for private development may have some merit.

    But not with the cut-cut-cut mentality where entire demographic groups are marginalized and unable to participate in our economy. Legitimate progressive causes cannot and do not include subsidizing relatively well-off contractors and property owners and pretending that rehabbing old buildings somehow makes us all better-off.

    If history is your passion, your post is understandable. To a real progressive that understands what the republican agenda being force-fed Wisconsin, this is a post that sets progressive causes back and creates justification for GOP eliminate needed programs.

    1. I don't pretend that the projects themselves will make everyone better off, but it might lead to more economic activity instead that otherwise wouldn't see it. There's certainly been a lot demand for Historic Rehab work over the last 3 years, which makes it odd that Scott "Open for Business" Walker wants to limit it.

      But you are correct that it could lead to a Potemkin Village where a few flashy projects get attention, but bigger needs are neglected because the benefits from a bigger tax base and jobs are not distributed to other parts of the community.

      I gey your point about how a huge amount of tax breaks often give the excuse for more GOP spending cuts (certainly that is true for the horrid M&A credit and other Walker tax giveaways to the rich and corporate). I just think a targeted one like Historic Rehab does seem to be translating into a lot of construction work. But as you point out, government then needs to use those economic sparks to,improve quality of life outside of the,neighborhood being fixed up, which Walker and WISGOP are NOT doing.