Do you think New Orleans can continue to thrive without tax credits?

Newell Normand
Tuesday, November 14th
If the GOP tax bill eliminates historic tax credits…will new development downtown cease? Many are saying yes. Does this worry you? Do you think New Orleans can continue to thrive without these tax credits?

This Hours guest:
Mackenzie Ledet    - Director at Stonehenge Capital Company
Kim Rueben - Senior Fellow at the Urban Institute and Project Director for the State and Local Finance Initiative

Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

We're back in in this hour we're going to be talking about the tax reform package. That's moving through both houses of congress. And you know we just had this exciting. Yeah announcement of the exceed technology coming here which is a great thing. And then last week in the house in ways meat house Ways and Means Committee they released a proposed tax reform bill. That eliminates the federal historic tax credit. And it's part of an effort to pay for the tax cuts in the simplify the tax code. But for Ross in New Orleans. Folks this is not a good thing. And in many urban areas across this country it's not a good thing the historic tax credit has had a four decade track record of success. Started under the Reagan administration and he said that it made economic good sense by significantly. Leveraging private sector investment. Developers have completed over 42000. Challenging historic rehabilitation projects using the historic tax credit. 117. Billion and private investment 2.4 million jobs and returning a dollar twenty for every taxpayer dollars event. As to relates to these projects. Join us in this half hour is McKenzie live day and director at Stonehenge capital. Company who works with the east. Programs. And the historic tax credit and financing a number of deals and I'm sure they've done throughout the country welcome to the show MacKenzie. Thank you know on it to let your property today about the historic act that. Well one that you give us the background and what this actually means and and why it's important to a number of deals that are structured when you talk about taking in many respects. Blighted property. Ended distressed property that probably wouldn't ever be redeveloped. Well I think the numbers it's shared. Beat by at and packed into a program in and year correct. Many of these buildings that are rehabilitated in storage data historic tax credit program are polite and bake and build. They're not generating tax revenue and and it it. That program aloud about her two Brad and hearing the buildings down are building new construction. Can rehabilitate. These historic structure preserve the history. And during these buildings to has its about. And costlier car are more costly to rehabilitate. Or structure than it did to build a new building. And at considering that increase in cost historic tax credit program at Ben. I'm instrumental not only to New Orleans but throughout the day and urban community that you mention. We're really a lot of world community as well down and small main street communities and small downtown areas throughout the country. To revitalize these main street. The main street communities. You know and put it in its proper perspective to make the point that you just made I think since Katrina in New Orleans. The new hotel on north rampart. And I think the World War II hotel that they. Broken ground on a going to be the only two ground up hotels built in the city since Katrina. Yeah well you shared that that date with respect to the program and the nation by Louisiana. And a leader. And utilizing. Our tax credit program particularly after Hurricane Katrina. The numbers sport while and speak volume or 600 structure. Pat and rehabilitated legalize program. And that that had generated and out to Billy and qualified rehabilitation expenditures. Compare that number for new war on to the state numbers and Louisiana. As a whole throughout the state. More than 700 structures have been rehabilitated in revitalize evening Matt program so. This program had and he can that city particularly on hurricane Katrina and hopefully we'll continue to be eat this city and are there development. One of the reasons that I wanted to have this topic today was. To get our folks calling the members of congress and sand you know hey wait a minute. This is working for us and I mean I I can just go down the litany of projects in the city. Of dilapidated warehousing or otherwise it is now beautiful apartments condos hotels. You know bars. Dining establishment. I mean the list just goes on and on and on. That just very much adds to the culture and as I think you appropriately pointed out the alternative is. Tear that structured down and build something new. And net Conner I think removes the flavor. Of this place in the age of this place in the culture of the place. You're correct and we are at any. Travel to New Orleans. Sixteen our architecture to active sealed a street and a whole program. Or tax credit program away you take away. 600 but I'm building where history is not as ever and architecture. In an attic of the city are not that error. I am right now and he did mention that C a program that appeal out wait and me numbers and that the tax reform bill. Rap version of the bill pending before how. Repeal a program in pack. There are there members. And now for the many and it. Significantly reduce programming essentially cut the program and I I can act can be born DC community. And saying that we are grateful for that person and that preserves the program by. Cutting program and accurate and tort tax credit program. Would significantly impact the U that the program and so. For our early in the back at to reach out to our members of congress. We are fortunate. And that senator pat any can it be our leader Andy app are to preserve that program. They are. Tremendous advocate in ambient to try to say that program. And so we certainly and we should note that there. And trying their heart at saint the program. But all that saying and their app for. And we have a tremendous Louisiana age and how well who are fighting hard to preserve the program so that. Meaning it it you can reach out to our members of congress back now the time things that it rat relatively quickly. And that that program as it and it great rest of elimination and it never happened before. You know to the cynics in the audience and I get a text here it's a tax breaks for the rich and advanced to the debt on our national debt those of the facts but those are the facts I mean. The fact of the matter is. Developers gather wealthy. You know if you're talking about big projects. Who's gonna do it. Poor people can't do it it's wealthy people right I mean. I goes without saying and but it doesn't add. To that to the national debt because there's a return as a positive return to the US treasury has a relates to that end. In if you don't get your resulting in shape. And these buildings just sit around they're actually a detriment to the city they're not improving the culture of the city. And not improving the tax base in the city. That's correct and you know they met at the building there and I and they are not contributing to that tax revenue for the city. For the day and certainly the federal government well lunch and then National Park Service. That administers the program commission that patty at Rutgers University every year to look at economic impact of this program. And I humans and for every dollar credit a dollar one dollar weak side in tax revenue it generate net. Certainly there and and numerous studies that and that program more than paid for itself and and as you mentioned the return. I support pack that packs. That pax world impact bait and and my developer said Ed what they can do that they there ain't got a hold blighted buildings before it. That'll built there been any developer they don't have back door tax credit program to help bring that building out. They're more likely look for a new development. Piece of property or somewhere out where not all linked to develop that property and Biden have better return on their back. It's brilliant essentially do we want to print there. And preserve architecture preserve our our history these buildings that we want to allow them to continue churning and I support our community. We got to take a break we'll continue this conversation we wanna hear from you 260187. They Will MacKenzie Leigh day director at Stonehenge capital company who has been very involved in. In historic tax credit deal also if you have a question give us are called personal Norman and everybody else. We're back then were talking about the historic tax credit provision that's in the house Ways and Means Committee bill that is going to read peel it. MacKenzie one of the things that up fine Connie unique about this tax credit is you can not avail yourself of it. Until the project is actually completed. So there's a deliverable it has to be made. Before you're able to qualify as a correct. That is correct your back by it and it's been incredibly efficient and back its program and that. You you have to apply online and demonstrate. The rehabilitation expenditures and the work they will perform. And then of course construction neatly takes eighteen months to two years and bad credit are not a bailed out. And cannot certify until that structure is quite insert it. And and commercially viable and so it'd been very different program and the way it. It was originally setup or other programs and pray that read. You know only. Only project that will be commercially by apple actually received the crap. Any other thing about these projects it it's not easy for the developers they make him jump to a lot of hoops as to certain materials and have to be used as a result of the historic nature of the facility. And things of that nature of that and that's what ultimately drives up that price by 30%. In increased cost because they just can't go in there and do whatever they want how they want when they want. That's correct National Park Service. Administer the program and an 8 at 8 o'clock rot Q. Comply. At their goal to preserve architecture and history of the building and make it great job. Doing and you I I share with every one and that the bill and the odd act. Tell a story or that kind of if you think about that out market. Are you think about the read about it now on anywhere and actor and I see now think about. Does build. It they and rehabilitated if they had not. Clay and they're wept with architecture and why and and don't. They out and have a cat and hacked in and around the mark land. And generate a fork in it Nellie an additional new. Hack it out mark and so. Otherwise known as the south market district. Yeah and that being without without these core anchor in short rehabilitation project off and these lighted areas. Chester and are never developed or never read about. This. That program had Shannon could be catalytic program as well. You know what to the Nazi hotel to see it out of curiosity. Couple months ago actually. And it's cynic area the town that you don't see a lot of walking traffic historically. But when I pulled up the first thing that I noticed I saw 3400 people walking up and down the sidewalk in that area. And people gone in and out of that facility in and actually women it's a beautiful hotel a beautiful restoration project and a and I think you are critical to this success of the city like so many other projects that have been done. And it and it it really prevent it grew up in the end it really need to revisit that. That ilk and and prevent. Street and it is all tourists like that read about it talent and the other Intel and and building a tanker the air and other. Project that he lied to or tax credit and I think it ain't. But those critics out there and and acknowledge and recognize what this program has done our city our Hurricane Katrina. Why take Andy the credit. Are keen. To provide an extra and and it Q. At our architecture in Austria. At the city at me at me on the ballot after hurricane Katrina and so. Without. In he would Mary differently and a right now in week seventeen. Yeah under un attacks line they preserved and updated the historic France school and work and reopen did as a school in a needy communities so cool. I support this honor percent I mean we can point to so many different things and because we are an older city and have older structures. You know we we have the tri Centennial year this year. I think that speaks volumes says too wide this is important and we need to reach out to our members of congress. To convince them that this program has to be preserved in its entirety because I agree with you I don't think 10% is gonna get us anywhere. Yeah it is debt cutting in half essentially. Now minority kill the program I mean I think you know it it it's proven to be fast efficient and effective program. And they are hard to see something like that and reduction in program. When when Democrat had written to be patient and active. Think that we're grateful for senator cap support Senator Kennedy supported well. Absolutely and McKenzie holiday thank you so much we really appreciate your insight have a great day. We're back in where have been talking about the a very small part of the overall tax reform package which was the historic tax credit in this half hour. Joining us is Kim Rubin senior fellow at the urban institute and project director of the state and local finance initiative. And we're gonna talk about the overall tax reform package to see. Who the winners and losers are welcome to the show cam. So Kim this is very much a moving target and we have the house plan we have the senate plan. And we have this overarching. Political strategy of the Republicans saying that this is a tax cut for the middle class. Which is it. Well but there are different parts skilling on that. It is get top of that plan that pretty it. Cup that one point five trillion dollars came with the PR. EP are not am. And as we've model we find them most of the then it's on the early data. Actually go to people on higher part of the distribution. Leon in the top 1% or at the top besides at a 100%. So as we know the devil's always in the details. So that when we're looking at what is being proposed. What is actually go on. Your number's been going on for the personal or individual and we feel like you're on tax form. He sent changes on that will be cut to near her. Tax rates strip some people. Some of that will indeed there's an expansion of the standard deduction which is the amount that people take if they don't itemize or list what their deductions are. There's a lot of attention being paid to the fact that the state and local tax deduction. It eliminated which for some people in your audience probably will affect them. Consent means that they won't be able to use deduct their property taxes are there income taxes in the house version. Deduct up to 101000 dollars of their property taxes on the and it they don't like you. Deduct anything. For most people they're gonna find that they're not gonna optimize anymore that there indicate the standard deduction which means. Even then they could still in varied did not. Hop. Have a deductions for their mortgage interest. It will pay for it to do that because these targeted actions or go away. And that often means that they give to charity. Might not be detectable or access to it just means that. It easier for people and indeed their taxes. They're probably they might leave some you do making some of these other. Op team that they had been getting that rebate from the fat or acts of a big part of this is much of benefits are much of the tax cuts actually goes on the corporate or business side of it isn't necessarily about individuals it's about sort of streamlining. And lowering. Rates that businesses are paint on the tax that. So we've heard a lot of but this corporate tax rate getting cut to shoot 20%. And you met right can you explain at Tora listening audience. And apparently the if you look on paper right now that the US corporate tax rate is 35%. Which is one of the highest in the world. In practice most firms aren't keen 35%. They're actually came last because they're hole owed. Deductions or credits that they can get that and so partly be the argument is we can be more competitive if we Britain met at. Tax rate down now it doesn't it's clear it's still probably count to 20%. If it was that 25 or 27%. Maybe that would be okay. And it might mean that some of the deductions on the individual side or some of the specific. Tax credits like that land for her which story they're renovating historical property. Could be tapped so. A lot of the tax cuts that are being in eliminated right now in Harvard are going to pay for that lower tax rate for corporations. So when we dropped to twenty. Because at 35 they do allow them some deductions are they gonna eliminate those deductions are they and get those deductions. Off of a 20% rate. And some of them again and on that wall so. Part of what's different and there are also allowing. Business to keep expense or tape and that it is any investments they're making right now. In this same period rather mundane and average number of yours which is what we are currently doing. And settle some of the specific deductions or go away kind of late in the credit for her historical properties and some of credits for sort new energy uses or her. Specific priorities that had. In getting preferences. Some are actually not go the way and you know there are also different. Part of what is. Mean it's not being eliminated if you look at the senate Ballard how on some planes in have to wait to see. But they land time and went and that getting. Adopted by either house and the other in the negotiate to figure out whether a specific business is better or worse. There are specific types of businesses that are more word about that. For example. Realtors and home builders. Are kind of weary people in construction are a little bit more beat cop some of these credits. About investing either on the individual side. Or things like that new markets tax credit which helped bill instruction and I'm makeup or some of the credits for affordable happening or don't know way. So for him indeed she's been more nervous than others just. They see in upper their credit. Being ignored. We know we have some people and attacks line at a talent as maybe they should focus on the corporations being able to follow a postcard. Well and he couldn't match and that activity and in. A post card as well it's fleeting. Because it is actually. Appear taxes that's the problem exactly figured out everything that goes in the worksheet before you actually get. Goes on the bank when you have. Blankley you have to figure at a case like take this from the mine multiply it by unit seventeen point 4%. And deduct that from something happens that'll work and part of you know I don't know if people think that it too complicated right now. On the corporate side especially is individuals but there's something called pass through income. Where for people who claim their business and come on their tax. Their individual tax return. They're you know or re cue. But cops they're worried about people taking their waging and making get this thing and that's they have all sorts of new rules about how much of it can be at that lower race. Can we get it we gotta take any real quick break you can we picked this conversation up right after the break if that's or are we we got to take a break stay with this this Noual Norman talked in tax reform. When WWL. We're back and we're talking to Kim Reuben a senior fellow at the urban institute and project director for state and local finance initiatives. Can one of the things that in our remember in the first bush tax shears and when they were doing tax reform that. In our hurt a lot of bowel was gone on and I was all excited and I thought it was going to be. A couple of thousand dollars and and ended up being somewhere between two and 300 dollars. And it's almost the same thing being revisited down because a lot of the pundits are saying. That of the folks that make between twenty and 30000 dollars a year that they might experienced 10% less to the government which equates to about a 140 bucks. And and I think that's very and it's. It apart and it is people who came less in taxes are getting at last. Money back but also a lot of the cut here. Our. Are going to corporate or business interests and then more of them are going to the top just summer but. You know we're seeing where rates are going down a little bit and then on the corporate rates are coming down and a lot of capital are owned by day higher income folks and you know there's the repeal of the estate tax and for people who were you know half play with millions of dollars. That money is no longer you know be tax when he died over time and so. A lot of the benefits go to the very top of the ink condition specious and so when people are talking about. He barked cuts especially when they're talking about large cuts but cut salaries they're getting gala in wages are in the go up by 4000 dollars. That means that corporations are in and that taking. Increase profits. And investing in their companies and increasing wages for individual that's not a direct. Tax cuts for the people. Yeah I mean it would seem to me that there would be an additional. Requirement so that yeah you gonna get this in yes it's gonna have to yield to 4000 and in order for you to get the the the tax credit. You got to invest a 4000 a certain way in the employment base whether that be through. My preference would be health care a direct a direct payment into a health care plan and you get. You get the the tax incentive. And. Right hey you could imagine that there was something like that that would sources. Make it. Where street sport to see how it affects. Wages and people who were working for these companies the other thing that's a little weird that the more about the house plants. And the senate plan. As part of their pay for a sir how their intent you know get. Stay with within that one point five trillion dollar deficit. They're having a lot of things that are benefiting workers are individuals so there's a lot of how to repealing. And benefits for education. Right now. Employers can behave or people to go to school and paid for their tuition. Up to about 5000 dollar and that's going away. And then there's no tax consequence to the recipient per. Right now but right but see you know if it's gonna Broward and they actually have to pay taxes on. Those payments and then there's a lot you know focus on the fact that. You're getting rid of the deductions for student loan interest for new student and so. There's a lot of things that if you think that which is if we're trying to do you. Is actually increased wages or increase the benefits for workers you would think some of the things that are. That was held firm. Investing in workers themselves rather than investing in capital or other things could be a much more direct way of increasing the return yeah. Why not pick one out payroll taxes why not just the employee portion of the payroll tax. And you couldn't imagine doing something there right now the fact that our Carol taxes. Go to fund social security and Medicare you don't necessarily line. Those numbers to go down the cause we want them money in there and it isn't really sitting in there and that we're using you know some of this. Can be moved around that tendon problem government. The fact that. Can not only in Indian rooting him and this is radio I gotta get to a break was that this will continue this conversation this is Noelle Norman on WWL. We're back in Kim we'll give you voted the last comment. Well we'll see where and look if they manage to wrap it up the for a Thanksgiving but where it will be here looking at what did you do. Things as it goes through the house and senate. The Thanksgiving time line I'm not sure I'm gonna build on that one. Down. The absolutely with thank you so much the insight we truly appreciated and taken time out of your busy day. Thank you to thank everybody we had a great three hours I thought the come a station was Greg we had a lot of information. But a lot of important issues and don't forget. Wednesday night the debate on WWL radio at 7 PM join me Stephanie grace and Dave Collins. We hope to have. A lively time thank you so much.