State Treasurer Scott Fitzpatrick, left, on Wednesday defends accelerating redemptions of low income housing tax credits during a meeting of the Missouri Housing Development Commission while Commissioner Mark Eliff, center, and Lt. Gov. Mike Kehoe, commission chairman, listen. (Rudi Keller/Missouri Independent)
The Missouri Housing Development Commission is moving ahead with a plan to accelerate redemption of some low-income housing tax credits despite misgivings of powerful members of the state Senate.
The 10-member commission voted unanimously Wednesday to speed up the payouts on half of the tax credits that will be issued later this year or early in 2022. The decision was spurred by a favorable report on a pilot program that put 20 percent of the tax credits issued last year on an accelerated redemption schedule.
“We are trying to do the best thing we can to get the most bang for our bucks without additional taxpayer dollars going into it,” Lt. Gov. Mike Kehoe, chairman of the commission, said during discussion of the plan.
During the meeting, commissioners discussed letters they received from four lawmakers – Senate Majority Leader Caleb Rowden, Senate Minority Leader John Rizzo and Sens. Denny Hoskins, R-Warrensburg, and Bill Eigel, R-Lake St. Louis – that questioned the wisdom of the change.
The report, from a subcommittee led by State Treasurer Scott Fitzpatrick, found that the tax credits for projects with an accelerated redemption were more valuable to investors.
The tax credits, once awarded, are sold to investors to raise cash for construction. The return from credits from projects with accelerated redemptions were about 18 percent above the return for other projects, the report stated.
In their letters, the lawmakers questioned whether that was proven. No money has actually changed hands on any of the projects approved in December, so the higher price is a promise, and subject to change, the lawmakers wrote.
Hoskins, who was at the meeting, said he will hold hearings next session on the accelerated redemption program. Hoskins chairs the Senate Economic Development Committee and works as a consulting manager for Tidwell Group, an accounting and consulting firm that includes low-income housing tax credits among its specialties.
“I would welcome a committee hearing so we, the legislature and the committee, can hear about these accelerated tax credits and if they are in the best interest of Missouri taxpayers,” Hoskins said.
During the meeting, while Kehoe said it was important to listen to criticisms of lawmakers, Fitzpatrick downplayed the depth of any opposition.
“We are very sensitive to legislative intent and what the building across the street wants us to do,” Kehoe said during the meeting in the Truman State Office Building near the Capitol.
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The deals will close before lawmakers meet, Fitzpatrick said, so the proof will be stronger in favor of accelerated redemptions.
And, he added, the House Budget Committee resolution passed in June authorizing low income housing and other tax credits for the current fiscal year included a provision allowing accelerated redemption.
“The other thing is we got four letters, and there are 197 people in the General Assembly,” Fitzpatrick said.
The commission approved a letter to the four lawmakers, and members of the House Budget Committee and Senate Appropriations Committee, acknowledging the concerns and defending the proposal.
Missouri has two types of low-income housing tax credits but the most expensive one, and the one most sought by developers, is awarded in conjunction with federal credits. Under commission policies, when it approves federal tax credits for a project, it awards state credits equal to 70 percent of the federal credits.
In recent years, the credits have cost the state as much as $169 million. In the fiscal year that ended June 30, the total was $144.4 million.
The decision to put half of the new state credits on an accelerated redemption schedule is included in this year’s plan for allocating funds for low-income housing construction.
When the commission met to award credits in December, it approved 36 projects to build or renovate 2,234 low-income units throughout the state. The credits for each project are redeemable over 10 years and the project must remain as low-income housing for 30 years.
In the past, all the credits were redeemable in equal amounts each year. Under the change, redemption is front-loaded, with about 72 percent of the state credits redeemable in the first five years and the remainder over the next five.
Along with the allocation plan, the commission unanimously approved the notice to developers that it will start accepting applications for tax credits and other funding.
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From the time the commission approves a project, it takes eight months or longer to line up the investors and close on the sale of the tax credits, Executive Director Kip Stetzler told the commission.
After that, the project must be completed and leased before the credits can be redeemed, he said.
“The impact on state general revenue is approximately 2 years after a project is approved,” Stetzler said.
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