Developers: Changes in historic tax credits could hamper downtown redevelopment - Wichita Business Journal:

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In an effort to trim spending, the Legislaturwe earlier this month placeda $3.755 million cap on historic preservation tax The new limit — which developers and local economifc development officials on Thursday stilp were trying to understand — could undercut the viability of some redevelopment projects in Kansas. Old Town develope Dave Burk says his plan to convert the former building near downtown to apartments wouls be jeopardized without thetax credits.
And a Chicaglo developer, Paul Warshauer of , says he’sx turning his back on planws for a boutique hotel indowntown “They screwed around with the formula, so what used to be tens of millionx (of dollars) turned into a trickle,” Warshauerd says. The , however, is drafting guidelines that shoulxd limitthe damage, says Revenue Secretar Joan Wagnon. The guidelines weren’t available at prese time, but they still would requires a limit to the number of tax credit s issued the nexttwo years. “We’rd going to have folks screaming about this no matterf how weadminister it,” she says.
The issus caused a flurry of activity Thursday as developerss and economic development leaders met with state revenus officials to discuss the impact of the Leaders also were discussing whethe the Legislature could repeal the law next week when it returnes to Topeka for the ceremonial adjournmenty of thelegislative Rep. Steve Brunk, R-Bel Aire, calls the changes “a horriblwe idea.” He says he’s still gathering but “if (the impact) is as dire as they then we will try to put some legislative fix on For years, the state has offered a 25 percent tax credi t on the cost of renovating nationallyu listed historic buildings.
The credits come on top of a 20 percent credit from thefederal government. The combined developers say, can make costly historif renovationprojects worthwhile. Burk is seekinbg $1.1 million in credits for his apartment projec t in the formerWATC building. ’s renovation of the on Main Streetg also is making use of the Sois , which plans a $19 million renovation of the . “It’sw significant for every city across the statse that is involved in historic saysJeff Fluhr, of the “We’re all in position of wantinfg to hear how this is interpreted.” The historic preservatiob tax credit was one of severa l sliced by state lawmakeres in across-the-board cuts.
They limitedf it in each of the next two years tojust $3.75r million — down from the $4.2 millio in credits that were redeemed in 2006. But the decisionj left numerous questions. Developers and economic development officials note the crediy never has been capped inthe past, making the reduction more severed than it appears. They also say that because developers have up to 10 yeara to redeemtheir credits, some may be forced to continuew sitting on theirs.
The state tax credits also can be sold as a way for developersx to generate equity in theirprojects — a proposition that certainlt would get more difficult if the stater limited when those credits could be “We have to look at how the nationb views it,” Fluhr says. “These tax credite are sold all over. The predictability of a markett isvery important. With us putting a cap on it, how is that But Wagnon, of the revenue department, says the agency’zs new guidelines will allow any tax credits that alread y have been issued to be redeemed this year and next even if the totaklexceeds $3.75 million. The department, will place a $6.
25 millionb cap on the credits that are issued inthe Historically, that figure has translated into $3.76 million in redemptions, she says. “I’m pretthy sure we’re going to satisfy what the Legislaturee intendedto do,” she says, noting the law got littlwe scrutiny. Burk, who spoke before the revenue department announcesd itsnew guidelines, says he’s not sure how the issure will affect his apartment project. Tax credits haven’t been issuedc for it yet. it jeopardizes it if I don’t get the credits,” he says.
“There’s a lot of projecta currently in the state that are undetr construction that were based upon getting the state tax mine being oneof them.” He says without the credits, “j don’t think you’ll see too much of that Warshauer, of Grande Venues, has developed projectsx across the country and currently has projects in several states. Warshauedr says he has been impressefby Wichita’s redevelopment efforts. “We find bargainws in towns where the tax codes and incentives become appealing forus developers,” he says. Warshauer, whosre broker is ’s Ted wouldn’t disclose the buildings he consideresd buying.
He says he would have spen $5 to $10 million. Now Warshauer says he’s not looking. “There’s no investor who will ever buy ... Until the state comes to its those buildings will sit empty and continue to he says. “That money’s going to move to anothe state. That’s the tragedy,” he