Saturday, August 20, 2011

Crowell: Shine a light on special deals and watch legislative cockroaches scramble

In his latest Crowell Connection, Sen. Jason Crowell, R-Cape Girardeau, continues writing about the abuse of tax credits in Missouri.

Over the last few weeks, there has been a lot of discussion from Jefferson City politicians suggesting the General Assembly will be called back into a special legislative session focused on “economic development.” In fact, Senate and House leadership have spent much of July in a backroom in St. Louis cutting a deal that is short on economic development and short on tax credit reform, but long on government handouts to campaign donors and special interests in the name of “economic development” and “job growth.” The General Assembly usually meets January through May, but for extraordinary reasons, the Governor or General Assembly can call itself into session to pass what it deems as legislation that cannot wait until January.

Senate and House leadership have recently announced a deal they cut behind closed doors in a non-transparent inside job, which is now being pushed to be passed in a special session. This back-room deal must not be allowed to pass. But let me be clear, there is a path to do right by the Missouri taxpayer, but it will take you demanding that Jefferson City politicians put you first instead of their fat cat campaign donors. It is my hope that together we are successful.

In this series we are discussing where we are as to a possible special session, what is wrong with Leaderships’ back-room deal, what special interest provisions must be eliminated and how we move forward with an economic development bill that puts Missouri first, not connected special interests and lobbyists. There are several issues at play; two weeks ago we discussed Aerotropolis tax credits for St. Louis Lambert Airport and last week we discussed Historic Preservation tax credits. This still leaves Low Income Housing tax credits, Brownfield tax credits, Land Assemblage tax credits, and Circuit Breaker Property Tax Relief tax credits for owners and renters of real property. We will discuss all of these issues and the changes that must be made to Leaderships’ backroom deal. You will probably learn more then you want to know, but it is vital that you know what is going on with your hard-earned tax dollars in Jefferson City.

The next issue to look at is Low Income Housing tax credits. In my opinion, for the most part, state tax credits in Missouri have become programs that favor special interests and wealthy developers who are generous to politicians’ campaigns. And these special interests are well represented in the halls of the Capitol by lobbyists who continue to convince legislators that tax credits create jobs or enhance economic development when all they really do is line the pockets of their beneficiaries. And as the influence of these special interests have grown, so too has the expansion of many tax credit programs. In total, Missouri tax credits have increased over the last 13 years by 430.9 percent, equaling $545 million in 2011. For Fiscal Year 2012, budget experts estimate the number of tax credits will grow to $639 million.

Low Income Housing tax credits were the largest giveaway in FY 2011 of Missouri’s sky rocking tax credits. It is so large, Missouri ranks number 2 in the nation for giveaways in the name of building low income. This is how the Low Income Housing tax credit scheme works; once approved by the Missouri Housing Development Commission (MHDC), Missouri provides a tax credit which can be used each year for 10 years by its allocated developers, to construct or acquire and rehabilitate rental housing. In 2011, Missouri issued $156 million worth of tax credits to developers for affordable housing. But Low Income Housing tax credits are streamed to the developer over 10 years, so taxpayers have actually been left to-date with an outstanding unfunded Low Incoming Housing tax credit liability (authorized or issued yet not redeemed) of $1.369 billion.

For example, stretched over 10 years, a developer who received $1 million in Low Incoming Housing tax credits this year is actually receiving $10 million at $1 million per year over the course of 10 years. So in this case after already receiving $1 million from the taxpayers this year, the taxpayers are still on the hook for the remaining $9 million due to the developer over the next 9 years.

To finance these housing units, the developer takes the tax credits and sells them for cash. These tax credits DO NOT reduce a developer’s tax liability; they are “cash” vouchers, which the developer sells to others at a great discount. This is why in a 2008 audit, the Missouri Auditor called Low Income Housing tax credits “costly” and “inefficient” because only 35 cents for every dollar go to development costs while the remaining 65 cents go to investors. Leaderships’ bill does nothing address this fact. Instead, Leaderships’ bill creates even more exceptions so that investors benefit first before a return on investment is realized for taxpayers.

In the same report, the Auditor also criticized the selection process of not documenting how projects are selected; highlighting that political influence impacts the selection of projects. The Leaderships’ bill instead of reforming this process will give more influence to special interest developers and campaign contributors by allowing both the President Pro Tem and Speaker of the House the ability to appoint, without a confirmation process, members to the board that decides who receives Low Income Housing tax credits. In addition, the law if passed will allow politicians to put those with conflicts of interest on this board because there are no conflict of interest provisions to prevent campaign contributors from buying their way onto this board.

Leaderships’ bill also boasts the establishment of new caps. But the truth is there is no savings because of caps. Tax credit expenses will actually be higher in the future than they were in 2011 because with the new board, they spend more than in 2011. With a new board that will have no accountability measure for their spending, the result will be greater wasteful spending of your hard earned tax dollars. The crony capitalism of this new board will cost taxpayers even more than they are paying now for this wasteful program and that is by design.

Let me provide you with recent abuses of this program that the Leaderships’ bill does nothing to reform and in fact, increase the outrageous amount of tax credits issued:

· Schultz School Senior Housing project in Cape Girardeau used state Low Income Housing tax credits to rehabilitate 45 housing units. The developer received $372,997 per unit.
· Bethel Ridge Estates in Columbia received $320,476 per unit to rehabilitate 42 units and then was awarded another $339,588 per unit to rehabilitate another 42 units for Bethel Ridge Estates II.
· Sycamore Village Apartments in Perryville received $207,500 per unit to rehabilitate 36 units.
· Cape Riverview Apartments 2 in Cape Girardeau received $196,047 per unit to rehabilitate 43 units
· Breezeway Estates in Perryville received $253,333 per unit to rehabilitate 15 units
· West Court Manor in Cape Girardeau received $205,917 per unit to rehabilitate 48 units
· Eagles Landing in East Prairie received $116,000 per unit to rehabilitate 30 units.

I believe now is the time to make fundamental positive reforms to Low Income Housing tax credits. We should subject awarding tax credits to a transparent process, where your representatives will have the chance to look at all the things we spend your tax dollars on and prioritize accordingly. In Missouri, the method by which we set Missouri’s priorities through the appropriation process where we ask each of the state’s expenses to stand in line before your representatives in the General Assembly; requiring them to demonstrate why, with limited resources, they should be funded over others. By making tax credits subject to the appropriations process, all state expenditures would now stand in line and prevent favorites, by allowing those who receive tax credits to cut to the front of the appropriations line.

As you know, I have concerns with awarding any new tax credits while cutting education budgets in Missouri. As conceived by Senate and House leadership, Low Income Housing tax credits are a special interest giveaway to fat cat campaign donors. But, if Low Income Housing tax credits are going to be about true economic development, we must make the changes we’ve discussed. And if Senate and House leadership fight us and fight the elimination of these special interest provisions, then they must be defeated as well.
Now is the time for government to live within its means, not spend money it does not have by authorizing giveaway tax credits not tied to performance. Together we have an opportunity to do right by the Missouri taxpayer but it will take you, the bosses of the politicians, to demand the right legislation is passed, if there is a special session. This can be done by taking back our state government and holding Senate and House leadership accountable; shining a bright light on the problems with their back-room deal and watching them scatter like cockroaches from their current position. Again, I need your help holding these politicians accountable. They are counting on your silence. In the coming weeks we will examine further the issues and changes needed for a taxpayer first special session.


Anonymous said...

Run for Governor. Please!

Anonymous said...

Why is he not the Senate Majority Leader? Finally a public official that is for the people instead of the lobbyist and special interest that can buy influence.

Anonymous said...

With thinking like this, I'm surprised he hasn't been run out of the Republican party. He'll probably pay the price with crummy committee assignments and refusal to proceed with his bills next session.

Anonymous said...

I wish he represented this area in SW MO. He should run for a higher office.