Bad Show in the Show Me State
By Mark Fogarty
6 min read
Scandalized Missouri Governor tosses tax credits
Affordable housing in Missouri may take a big hit after the state Housing Development Commission voted against matching Federal Low Income Housing Tax Credits with State Housing Tax Credits as they have done in past years.
In a second development, a study commissioned by Republican Governor Eric Greitens also looks to wreak havoc with the State Historic Tax Credit program, said to have been the largest program of any state in the country at one time.
Greitens led the charge against the state credit (which reports say means $140 million in Federal LIHTC credits won’t be matched), including by making some like-minded recess appointments to the Commission. The tax credit battle has been joined for the past three or four years as the state legislature has considered whether to change policy.
There are elected defenders of the state credit, such as Lt. Gov. Mike Parson, also a Republican, who voted against the move.
Greitens issued a scathing statement after the Commission’s action, saying the program was rife with lobbyists, special interests and greedy developers and syndicators who “want you to pay more tax dollars to make them rich.”
The governor, in office for only a year, switched parties from Democratic to Republican in 2015. He has spearheaded an aggressive tax reform agenda that some feel he was using to position himself for a presidential run.
However, those aspirations may be derailed by a recent scandal over a love affair with allegations of blackmail. Greitens has acknowledged the affair but denies the blackmail allegations amid growing calls for his resignation.
The fate of the State Tax Credit remains unclear if the Governor is forced to resign.
The Kansas City Star rapped him in an editorial last October, advising him to stick to his knitting in the Show Me State and leave presidential posturing for a future time when he has more experience than a single year’s tenure in the governor’s office.
The paper drew a parallel between Greitens and Kansas Governor Sam Brownback, who championed a disastrous tax reform in that state to potentially further his presidential ambitions.
Affordable housing advocates in the state dispute the governor’s thumbs-down on the program. Cheryl Lovell, executive director of the St. Louis Housing Authority, says the governor’s critique is flat wrong.
“It is a program that does great things for the state of Missouri,” she said. Her HA has used the state program “a lot” when it develops housing, and without it, “Ultimately, it means less development of housing. With the state credit, you could make deals work.”
The lack of state credits could jeopardize a big development the housing authority is involved in called Preservation Square. It has received a $29.5 million federal grant, but Lovell points out, “If you don’t construct the houses on time, it’s potentially in jeopardy.”
Jeanette Mott Oxford, executive director of nonprofit Empower Missouri, also defended the tax credit, saying that tax reform has come at the expense of affordable housing in the state. She disputed detractors who say the credit is inefficient, saying “That doesn’t take into account value over time.”
Why did the MHDC zero out the funding through a vote in December of last year? Greitens said that the program “is built on promises and kickbacks to politicians” and that “Audits from Republicans and Democrats have shown that only half of the money actually goes to low-income housing.”
Greitens formed “The Governor’s Committee on Simple, Fair and Low Taxes,” which reported on the tax credit issue on June 30, 2017.
The committee said the state LIHTC program has been returning just 42 cents on the dollar, and recommended it be converted into a low interest loan fund for affordable housing construction.
“Also, the Committee recommends that the state repurchase outstanding LIHTCs in exchange for state issued bonds, a proposal that may save Missouri taxpayers $200-250 million over the next ten years.”
The committee didn’t stop with the state LIHTC. It also recommended gutting the state Historic Preservation Tax Credit by converting it into a new state rehab tax credit program to be capped at $50 million, down from the current $140 million.
By all accounts, housing need doesn’t appear to be on the way to being solved in Missouri. The last homeless tally, by the Department of Housing and Urban Development in 2015, came up with 3,434 homeless residents of the state, about half of them in St. Louis. Lovell noted that the St. Louis Housing Authority has a waiting list of 23,000 families for Section 8 housing and another 13,000 for public housing. And Mott Oxford said there is a current need for at least 125,000 units of housing for those at or below 30 percent of AMI in the state.
Curiously, someone at the MHDC does not seem to have read the governor’s anti-tax credit memo. Still on the Commission’s website in January was a list of frequently asked questions and answers that completely disagree with the governor’s scathing statement. Here are a few of them:
Do Private Developers and Investors Make Excessive Profits from the Housing Credit?
No. Other deductions and credits can be claimed without any advance approval. Their abuse can be discovered only in random audits. However, the Housing Credit is one of the most closely regulated of all tax code provisions. A developer receives Housing Credits only after intense state scrutiny of the development and its costs. An investor can claim Housing Credits only as long as the state finds the apartments in good condition and low-income use.
Isn’t the Housing Credit Too Expensive?
Compared to what? If low-income families in urban and rural areas need apartments, the Housing Credit is often the only available alternative.
Are Housing Credits Corporate Welfare?
No. The Housing Credit does not subsidize corporations for expenditures they would make anyway, as do other tax code provisions, like business entertainment and depreciation deductions. The Housing Credit is more like the charitable deduction, which encourages taxpayers to do good beyond their own interests by rewarding them with tax reduction for helping people in need.
Something here needs cleaning up.
Story Contacts:
Cheryl Lovell
Executive Director, St. Louis Housing Authority
[email protected]
Jeanette Mott Oxford
Executive Director, Empower Missouri:
[email protected]
