Audit: Missouri Housing Tax Credit Inefficient
JEFFERSON CITY, Mo. (AP) – Missouri’s low-income housing initiative is inefficient and among the costliest in the nation, State Auditor Tom Schweich said Monday while recommending changes to the program.
The new state audit generally confirms the findings of previous analyses but could supply fresh data for some lawmakers who have been pushing to pare back the state’s low-income housing tax credit.
Missouri authorized more than $2.5 billion in tax credits that helped finance about 47,000 low-income housing units since 1998, the audit said. Yet most of that money has not actually gone toward construction.
The audit said about 42 cents of every $1 in tax credits is spent on construction, with the rest going to federal taxes, investors and syndication firms that resell the tax credits. Another reason for the inefficiency is that the tax credits are paid out over a 10-year period and thus fetch a lower price when they are sold in the marketplace.
“They are really nice facilities,” Schweich said. “We saw the benefit of the program.”
“But the ultimate conclusion is it needs to be made more efficient,” Schweich added.
A spokesman for the Missouri Housing Development Commission, which awards the tax credits, declined to comment about the audit.
Gov. Jay Nixon, who has supported limits on the housing tax credits, said Monday that the audit should be a “wake up call to the Legislature.”
“We need to get economic efficiencies in these programs and save dollars,” Nixon said.
The Missouri Workforce Housing Association, which represents the industry, plans a lobby day Wednesday at the Capitol. Although some changes may be fine, the association generally believes the program is working well, said Executive Director Jeff Smith, a former Democratic Missouri senator who served a federal prison sentence for campaign finance violations and now lives in New York.
Missouri’s tax-credit program is linked to one administered by the federal government, which allocates housing tax credits to each state based on its population. Missouri’s share has been about $13.5 million annually. The tax credits run for 10 years, meaning Missouri can authorize about $135 million of federal housing tax credits.
Since 1997, Missouri law has allowed the state to issue its own tax credits on a dollar-per-dollar match with the federal ones. Missouri is one of 13 states that have their own housing tax credits and the only state besides Georgia to provide a full match of the federal credit. Missouri awarded the largest per capita amount of housing tax credits nationally in 2012, the audit said.
Schweich’s audit said the costs were lower in other states because the tax-credit programs were structured differently. Instead of following the federal government’s 10-year tax credit model, some states award their credits for five years or less. Other states set annual dollar amount limits on their tax credits.
Schweich recommended several ways lawmakers could make the tax credit more efficient, such as reducing its duration or modifying its structure so that the state tax credits no longer count against a recipients’ federal tax deductions.
Smith said many association members would support a shorter tax-credit-payout period.
A commission appointed by Nixon recommended in 2010 that the duration of Missouri’s housing tax credit be pared back to five years instead of 10. It proposed a cap of $16 million annually in credits, which would have equated to $80 million over five years instead of the current $135 million over 10 years.
Nixon called a special legislative session in 2011 to revamp Missouri’s many tax credit programs, but it ended with lawmakers at loggerheads, in part, because of disagreement about whether to trim the low-income housing tax credit.
In 2012, Nixon’s commission issued an updated report that softened its recommendations for the housing tax credit. It suggested capping the tax credits at $115 million over 10 years or, alternatively, limiting the credits to five years.
But the Republican-led Legislature has remained at odds, with some senators preferring to scale back the program more than some House members. Last week, the House passed a bill that would gradually lower the limit on low-income housing tax credits to $110 million by 2019.
Associated Press writer Jordan Shapiro contributed to this report.
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