OKLAHOMA lawmakers are debating whether to preserve some tax credits at the cost of higher income tax rates for all. In Oklahoma City, that debate's outcome could determine whether officials preserve some old building or encourage new construction.
Developer Paul Coury says redevelopment of the Osler Building in MidTown Oklahoma City wouldn't work without state tax credits for rehabilitating historic structures. For preservation boosters, that's reason enough to maintain the credits. But Coury's comment is a tacit admission that the project isn't economically viable without taxpayer subsidies. For free-market realists, that's reason enough to kill the credit.
Coury notes that older structures such as the Osler, built in 1929, involve challenges. It has tight, u-shaped floor plans and column spacing that complicate overhaul efforts. Such obstacles are routine when repurposing older buildings; consumer preferences and construction practices have changed dramatically through the decades. Consider that the first hotel didn't provide central system air conditioning in every public room until five years after the Osler opened.
Due to such design challenges, historic rehabilitation requires compromises that may limit a structure's appeal to modern consumers. Defenders of rehabilitation efforts argue other factors offset the trade-offs. Coury declares, “These older buildings create a more aesthetically pleasing appearance to an older area than anything you could do with new construction.”
Therefore, one choice facing policymakers is whether the tax code should favor aesthetics over functionality. The prior can require tax subsidies that the latter doesn't need.
Policymakers must also consider whether the benefits of preserving old structures outweigh associated costs, both through tax credit impact and the loss of new construction. If buildings like the Osler were razed and new structures took their place, would the new facilities provide more economic impact? Perhaps not, but there have been instances where a new start was clearly preferable.
Few would argue Oklahoma City should have simply refurbished its old ballpark instead of building a new one in Bricktown. One reason the Thunder is now in Oklahoma City and not Seattle is the new downtown arena. New hotels have been built in Oklahoma City as well.
Some of those facilities were taxpayer-financed, but city taxes funded those projects. The state's historic rehabilitation tax credit requires citizens across Oklahoma to subsidize projects mostly in Oklahoma City and Tulsa even as some small-town Main Streets die and local buildings rot. That's a tough sell.
Other perception problems challenge the tax credit's long-term viability. State Rep. David Dank, R-Oklahoma City, pointedly notes the state “apparently values old buildings more than we value old people” based on tax treatment.
The number of potential historic rehabilitation projects isn't the only metric lawmakers should consider. They also must account for the less-obvious impacts of tax policy. Focusing tax resources on preservation of older structures can reduce opportunity that would have been generated if new facilities replaced the old, or if the overall income tax rate were lowered across the board.
We support historic preservation, but the invisible hand of the market remains in effect. Whether a tax credit boosts historic rehabilitation or Oklahoma coal production, lawmakers must remember that a tax policy's immediate benefits can be more than offset by unintended consequences.