Ehrlich supports tax-credit renewal

Program aids restoration of historic buildings

Legislators concerned about cost

December 23, 2003|By Michael Dresser | Michael Dresser,SUN STAFF

Gov. Robert L. Ehrlich Jr. said yesterday he supports continuing a popular tax-credit program for rehabilitating historic buildings, but warned proponents that they might have to accept limits to win General Assembly approval.

The governor said he would make extension of the Maryland Heritage Structure Rehabilitation Tax Credit -- which has been called the economic spark behind Baltimore's west-side redevelopment -- part of his legislative agenda for next year.

"Our entire administration is willing to support it full-force," he said.

He warned, however, that he probably will not be able to deliver on a task force's recommendation that the program go forward without a limit on the amount of credits that can be used in any year. He said his administration will probably propose a relatively high limit and bargain with lawmakers to keep it from going too low.

Ehrlich's remarks came at the final meeting of a task force on the tax credit. The group approved a report calling for the program to be extended through 2010.

The program will expire June 30 unless reauthorized by the legislature. It allows developers who rehabilitate qualifying historic properties to get a 20 percent tax credit on the project.

Legislators on the committees that oversee the state's budget were alarmed when the program's popularity exceeded all expectations early this decade. The greater-than-expected drain on the state's revenues led the General Assembly to impose a $23 million limit on credits for commercial projects in 2003 and a $15 million limit for the first six months of next year.

The program has been criticized by some legislators because almost 90 percent of the credits have been used in Baltimore. But members of the task force from other parts of the state voiced strong support for the program, saying it has also given impetus to redevelopment efforts in such cities as Frederick, Cambridge and Salisbury.

Ehrlich rejected opposition to the program based on regional concerns. "We're trying to get away from the parochialism," he said.

The governor's support for the tax credit won praise from one of his chief political rivals, Mayor Martin O'Malley.

"Historic tax credits are one of the most effective tools we have in rebuilding Baltimore," Mayor O'Malley said. "It's very simple: The more historic tax credits available, the more smart growth Maryland will see. We look forward to reading the governor's proposal."

Ehrlich established the task force in September and named Comptroller William Donald Schaefer, a vocal supporter of the tax credits, to lead it.

It fell to Warren G. Deschenaux, the Assembly's top policy analyst, to explain to a task force made up largely of cheerleaders for the program why some legislators believe their desires may be beyond the state's means.

Noting that Maryland faces a revenue shortfall of about $1.5 billion this year and next, Deschenaux said the cost of the unlimited tax credit had proven virtually impossible to forecast. He said a tax credit has first claim on the state's revenues and could not be reined in through the budget process.

Deschenaux said legislators might consider a grant program because of its more predictable impact on the budget and the ability to distribute the benefits more equitably among the jurisdictions.

That suggestion drew strong opposition from developers, who argued that a grant program would be driven more by politics than by market forces.

David Hillman of Southern Management Inc., a leader in the west-side redevelopment project, said a grant program would not bring high-caliber developers to the state.

"A grant program will attract `wannabes,'" said Hillman, who said his Virginia-based company has invested more than $100 million in Baltimore during the past decade, much of it qualifying for the credit.

Deschenaux also suggested the alternative of limiting the credit while finding a funding source to underwrite it.

His suggestions earned him a lecture from Schaefer. "You don't have a vision. You just add up numbers," Schaefer said.

Sun staff writer Doug Donovan contributed to this article.

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