Raleigh, N.C. — The House Finance Committee approved a measure Tuesday that would rehabilitate the state's now expired historic preservation tax credit, which developers use to turn old houses, factories and warehouses into spaces that can be used for home and work.
More than half of the 120 House members have signed on as bill co-sponsors, a sign that it is likely to pass a floor vote and a reflection of the fact that the credit that expired on Jan. 1 had been used in 90 of North Carolina's 100 counties.
"This is a huge economic boon for the state of North Carolina, and we can see it in all of communities as we travel," Rep. Stephen Ross, R-Alamance, told the committee.
The state's expired historic rehabilitation tax credit was allowed to expire as part of a recent tax reform push by Republican leaders. In general, tax reform tried to lower rates in exchange for closing special tax breaks and loopholes. The old credit was uncapped for any particular project, meaning it was a big potential liability every year.
The new tax credit program proposed by Ross and his colleagues would be capped at $4.5 million for "income producing" structures, typically large old factory and warehouse buildings that are turned into offices, apartments and the like. For "non-income producing" properties, typically historic single-family homes, the credit would be capped at $22,500. Total cost for the new program is estimated to top out at $8 million per year.
Developers would be offered richer credits up to those caps depending on whether the property in question was in an economically distressed county or met other benchmarks for being historic.
The new program would expire in 2021. The credit, backers say, repays the state in jobs and tax dollars, making it a net return on investment.
Gene Rees, a Mount Airy businessman, said the credit often starts paying for itself before a particular project is 100 percent completed and able to draw down its state funding. The money, he said, helps redevelop downtown areas that were affected by the recession and loss of manufacturing jobs.
"I can tell you we need every recruiting tool we have to recruit industry and young professionals into our community," Rees said. "A desirable downtown is certainly one of those assets we have to have."
Although the program is generally popular with House lawmakers and has the backing of groups like the North Carolina League of Municipalities and the North Carolina Metropolitan Mayors Coalition, there is some skepticism about the bill.
Rep. Jeff Collins, R-Nash, pointed out that cities and counties would benefit most directly from the credit because now-unused properties would return to the tax rolls. But nothing in the bill requires those local governments to invest in tax credit projects.
"I don't see any local commitment required here, and that's really, really bothered me," Collins said, suggesting the bill be amended.
Ross said many communities do invest in these projects, but he would not want to make that a requirement because it could put the credit out of reach for small towns without a lot of income.
Rep. Bert Jones, R-Rockingham, suggested the state would be better off turning the money it would use to for tax credit into a block grant program for small towns.
"Even though I support (reusing) historic buildings, I think there are better ways to get at it," Jones said.
While that sentiment is not widespread in the House, the state Senate has been much more resistant to reviving the credit.
House Finance Committee Chairman Rep. Jason Saine gave a nod to this dynamic when he opened the meeting Tuesday morning.
"Welcome to Finance, where hopes and dreams begin, and then we hand them over to the Senate, and they kill them," Saine, R-Lincoln, said.