The Buzz

Delay by Missouri puts housing projects in peril

Updated: 2014-01-31T05:10:28Z

By JASON HANCOCK

The Star’s Jefferson City correspondent

— Boeing Co. made clear earlier this month it would not build a new assembly plant in Missouri.

In doing so, it passed on $1.7 billion in incentives offered by the state. And the mere act of putting that package together has left Missouri with a hangover.

A shift in state tax breaks designed to lure the plane maker could threaten the construction of housing for the homeless near Ninth Street and Troost Avenue and an expansion of St. Michael’s Veterans Center, both in Kansas City, and dozens of other housing projects across the state.

To piece together the Boeing offer, Gov. Jay Nixon cut a separate deal with conservative senators that froze $14 million in tax credits for low-income housing developments.

The Missouri Housing Development Commission is expected to release those credits in March. But many worry that might be too late. Construction projects, and particularly their financing, are time-sensitive affairs.

“Any delay can put a project in jeopardy,” said Evelyn Craig, president and CEO of reStart Inc., a nonprofit based in Kansas City that provides housing and support services to the homeless. Craig’s organization saw its credits for 33 transitional units for homeless people among the batch frozen in December. “I’m very worried.”

The situation has led several lawmakers to call on the housing commission — currently made up of four Nixon appointees along with the state treasurer, attorney general and lieutenant governor — to meet before March to release the tax credits.

“The governor’s deal was to hold (these credits) until we see what Boeing was going to do, but that’s no longer on the table,” said Sen. Jamilah Nasheed, a St. Louis Democrat.

Craig said a delay of a few months can have dire consequences. Developers can’t leverage additional funding to make a project work until the credits are officially issued, she said. Investors often have other options for their money, meaning a delay could cause them to walk away.

“A three-month delay in issuing the credits can also affect the time of year we can start construction,” Craig said. “A project can get pushed back six to eight months, which can impact budgets or the purchase of property.”

Nasheed said she believes the commission will listen to the governor if he calls for an early meeting.

Asked about the issue this week, Nixon said the decision was in the hands of the commission. But he agreed with the March time frame for releasing the credits.

Lt. Gov. Peter Kinder, a Republican and the lone vote against delaying the tax credits last month, wrote a letter to state Treasurer Clint Zweifel and Attorney General Chris Koster asking them to join in his call for an early release of the credits.

An early meeting can be called by the chairman or at the request of two commission members.

The commission’s “swift funding approval will ensure these projects are commenced, loan commitments are fulfilled, our laborers and contractors are working, and ultimately our poorest citizens find decent, affordable housing,” Kinder said in his letter.

Both Koster and Zweifel declined to comment.

The rift is already bubbling up in the legislature. Last week, Nasheed briefly blocked Nixon’s nominee for a spot on the Public Service Commission over the tax credit delay. She eventually relented, saying the nomination should not be used as a political pawn in her dispute with the governor.

The housing commission’s delay was designed to give the General Assembly time to pass an overhaul of the tax credit system — an issue that has flummoxed Missouri lawmakers for years.

In particular, the legislature has focused on paring back tax credits for developers of low-income housing and historic redevelopment, which together made up about $223 million of the $513 million in Missouri tax credits redeemed in the 2013 fiscal year, according to state data.

“We are spending too much on tax credits,” said Sen. Will Kraus, a Lee’s Summit Republican. “And we’re not getting the return on investment that we should be demanding.”

Last year, differences between the House and Senate — which are both controlled overwhelmingly by Republicans — once again stalled momentum on a tax credit reform plan.

The same story has played out for at least five years, with each side questioning the other’s motives and any legislation stalling amid political gridlock.

Senators contend donations from developers who benefit from the status quo contribute to the logjam. They point to the recent revelation that Jeffrey Smith, a Columbia developer of low-income housing, donated $25,000 to House Speaker Tim Jones last month by filtering the money through 10 separate political committees — a practice that obfuscates the source of the money.

Smith did not respond to requests for comment.

House leaders balk at that notion that they are to blame for the lack of progress, pointing out that they’ve passed several tax credit overhauls. Last year the House voted to cap low-income housing tax credits at $110 million annually, down from $135 million, and historic redevelopment credits at $90 million, down from $140 million.

Fueling the push to rein in tax credits are several audits that have called into question the value of the low-income housing tax credit. A 2008 study of the program found that only 35 cents of each dollar spent on credits actually went into construction of apartments and single-family homes. The rest goes to federal taxes, developers, investors and brokers.

But supporters say the subsidies have revived older downtown areas and urban neighborhoods, providing construction jobs and affordable rental housing for low-income families and seniors.

“People who don’t think this is yielding the state anything or getting the state a return on its dollars need to come to my district,” Nasheed said. “There is a human factor to consider.”

To reach Jason Hancock, call 573-634-3565 or send email to jhancock@kcstar.com.

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