Novogradac & Co. Report Demonstrates Overwhelming Success of Alabama HTC, Evidence Justifies Extension
In only 3 years, HTC program responsible for over 2,100 direct construction jobs, 1,370 permanent jobs, $384 million in investment in Alabama
January 27, 2016
MONTGOMERY, Ala. – The results are in, and it’s official: The State of Alabama’s three-year experiment with Historic Rehabilitation Tax Credit was an overwhelming success.
We’ve seen the evidence from Mobile and Birmingham markets about the economic activity that was jump-started. Specific projects such as the Lyric Theater and Redmont Hotel – long-since thought impossible to bring back to economic viability – have surprised many by coming back from the dead in a big way. However, proof that the HTC was providing a real economic impact has so far been anecdotal. For some legislators, the lack of hard evidence provided political cover for outspoken opposition to extending the program.
Alabama Historical Commission has received the results of a Comprehensive Economic Impact Study on the Alabama Historic Rehabilitation Tax Credit Program. The report – issued Tuesday by national certified public accounting and consulting firm Novogradac & Company, LLP – is the result of a 3-month study conducted to model the past and future impacts of the program. The conclusion, according to Novogradac? “It is our opinion that the Historic Rehabilitation Tax Credit is beneficial to the State of Alabama and should be extended”
Highlights of the study include:
- “The Alabama Historic Rehabilitation Tax Credit is responsible for 2,133 direct construction jobs and 1,373 operational-phase jobs. The operation jobs are expected to grow over time.
- Projects utilizing the Alabama HRTC can be considered anchor tenants for several development districts, and provide significant “halo effects” in downtown areas.
- A model of the program’s tax impact demonstrates that for every one dollar of tax credit allocation the state invests in the program, $3.90 is returned to state/local tax collections over a 20-year period.
- The modeled tax impacts demonstrate that by 2019, the State of Alabama will break even on its current investment of $60 million in tax credit allocation.
- According to the Alabama Department of Revenue, $630,281 of tax credits were claimed in the 2014 tax year out of the $2,249,101 of tax credits authorized through tax credit certificates issued by the Alabama Historical Commission for projects completed in the 2014 tax year.
- The program demonstrates the ability to leverage large amounts of private investment. The program is responsible for over $384 million in investment in the state. Upon interview with several developers, each expressed that the rehabilitation would not have been possible but for the credit.
- The types of projects utilizing the Alabama HRTC have a significant effect on the tax outcome of the model. Alabama’s investment pipeline includes a large percentage of Mixed-Use development, which generate significant tax impacts.”
It’s not clear in today’s report by the Birmingham Business Journal whether Senator Trip Pittman, R-Daphne, who is chair of the Finance and Taxation General Fund, had read this report, so it’s too soon to say whether he will concede that the program worked. For the time being, though, it’s a far safer bet for those who support the extension of the program to remain vigilant.
You can download the full report below. Stay tuned for more updates as the legislative session unfolds.