Lawmakers debate costs of historic tax credit boost

By Dan Shaw

If an increase in Wisconsin’s historical renovation tax credit has the intended effect, state government will part with more revenue than first predicted.

Senate Bill 132, which was approved by the Senate Committee on Workforce Development, Forestry, Mining and Revenue on Wednesday, would increase the tax credit the state offers to encourage the renovation of properties on the National Register of Historic Places. The bill would increase the rate from 10 percent to 20 percent.

The state Department of Revenue, according to a fiscal estimate attached to the bill, studied the use of the credits from 2007 to 2009 and concluded the proposed increase would cost the state another $4.33 million a year.

But state Sen. Glenn Grothman, R-West Bend, the only member of the committee to vote against the bill Wednesday, cast doubt on that figure. If the bill achieves proponents’ goal of stimulating more historical renovation work, he said, then history cannot be relied on to provide a good estimate of the effect increasing the credit would have on state coffers.

Grothman cited testimony from Racine Mayor John Dickert, who said Wednesday he is aware of as much as $100 million worth of development projects that could go forward in Racine were the preservation credit increased. The credits are applied directly to expenditures on a historical project, so that amount of work by itself could cost the state $20 million.

“I question,” Grothman said, “this rather modest fiscal note.”

But state Rep. Cory Mason, D-Racine, said he would not mind having the sort of problem Grothman is worried about. Mason referred to a University of Minnesota-Extension study of Minnesota’s historic preservation tax credit, which was established at a 20 percent rate in 2010.

The study found that the credits were used on 16 projects in Minnesota’s 2012 fiscal year, generating $559 million in project expenditures, $181 million of which went to laborers.

Mason said a similar boost in spending in Wisconsin could lead to greater tax collections, helping to offset the effects of the tax credits.

Mason also noted that an amendment approved Wednesday will help lawmakers better understand the effects of SB 132 if the bill is signed into law. The change would require the Department of Revenue and Wisconsin Historical Society submit a report by June 30, 2016, showing whether the increased tax credit is costing more than it is bringing in. If so, the agencies are directed to recommend a discontinuation of the credits.

That amendment replaced a sunset provision that would have forced lawmakers to vote in July 2018 on whether the credit should be continued.

But Grothman said the change also makes it harder for opponents of the bill, who now cannot count on the increase automatically going away under a sunset provision.

“A future Legislature,” he said, “will have to act to repeal it.”

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