Developers statewide could find themselves defaulting on renovations of historic properties under a proposed two-year moratorium on tax credits awaiting Gov. Brad Henry’s signature.
And other projects — such as Muskogee’s landmark Manhattan Building, which marks its centennial next year — may never get started if the proposal becomes law.
After the successful $6 million redevelopment four years ago of an old downtown Muskogee building into the Surety Apartments, Gary Hassenflu bought the nearby 10-story Manhattan Building with similar plans to add more housing — with the assistance of state historic tax credits.
The $7.4 million project is among $50 million in historic building renovations planned statewide by Hassenflu’s company, Garrison Development, that he says "certainly won’t happen” if the moratorium becomes law.
"The adjoining jobs won’t occur,” Hassenflu said. "And on those jobs the state will forgo revenue, and also the property tax revenue and construction sales tax revenue.”
Bob Blackburn, director of the Oklahoma Historical Society, warns many of the state’s leading developers of historic properties could be bankrupted by the pending legislation because they are midway through projects that won’t get the tax credit financing as promised.
"Even if this is a short-term moratorium, it will destroy the credits’ effectiveness long term,” Blackburn said. "There are 36 projects initiated now depending on this credit. And it takes four years to get these projects to completion. This will bankrupt many of these developers; they will not be around to pick up the pieces when it comes back around. We will lose a generation of developers who specialize in historic preservation.”
Blackburn noted Kansas reversed a similar roll-back in historic tax credits after facing lawsuits by developers.
"They determined the litigation was going to cost more than the savings in tax credits,” Blackburn said.
The historic tax credits are among 30 that would be under a two-year moratorium starting July 1 as part of Senate Bill 1267. State Tax Commission shows the moratorium would bring in about $25.7 million to state coffers for fiscal year 2011, which begins July 1. In 2012 the suspension is expected to increase tax collections by $50 million.
Paul Sund, spokesman for Gov. Henry, said the moratorium is part of the overall budget agreement that will protect education, public safety and other programs from deeper budget cuts.