THEY SAY nothing succeeds like success. But that hasn't held true for Maryland's obscure historic tax credit program. Right now, it's under attack in Annapolis because it has done so well that some politicians think it's costing too much money.
It would be a shame if short-sighted legislative thinking were to hobble the program, which has become a godsend for developers who need upfront cash for difficult rehabilitation projects. In places like Baltimore, tax credits literally have made the redevelopment of several neighborhoods a possibility.
Here's how the program works: Developers can sell credits amounting to 25 percent of project costs to investors looking for tax shelters. Or they can use the credits to diminish their own tax liability. They can even cash in the unused credits. Perfectly legal.
The tax credit program is so popular that in a two-year period ending in 2001, it helped finance 247 rehabilitation projects around the state. Nearly 90 percent were in Baltimore, according to a survey by the real estate consulting firm Lipman, Frizzell & Mitchell.
The state spent $38.9 million on the projects, but that money spurred another $155 million in private investment. That's not a bad leverage ratio.
Nevertheless, Sen. Barbara A. Hoffman, a Baltimore Democrat, and Del. Sheila E. Hixson, a Montgomery County Democrat, are worried about the millions taxpayers spend on those credits. They chair the General Assembly's two tax committees and have introduced bills that would limit historic credits to a statewide maximum of $25 million a year.
That kind of cap could have a devastating effect on the recycling of old commercial and residential buildings.
Think of projects in Baltimore such as the Can Company in Canton or the redevelopment of historic buildings on the west side of downtown. None of them would be worth a developer's time or energy without tax credits, and both the city and the state would be worse off for the loss.
The fact is, the money spent on tax credits starts streaming back to the state the minute construction commences and creates badly needed jobs. More permanent taxable revenues are created when the project is completed.
When the Ways and Means Committee hears Delegate Hixson's House Bill 759 on Wednesday, it should assess the tax credit program's overall impact on Maryland's economy. Such a review is bound to show that the program generates so much new revenue that its bottom-line cost to the state is not as shocking as might initially appear.
Legislation sponsors say that Baltimore's difficult and delayed Hippodrome performing arts center project would be grandfathered in. So would be the office conversion of the colossal former Montgomery Ward warehouse.
That's reassuring, but doesn't settle the issue. What about redevelopment projects that aren't even on the drawing board yet? Any change in the tax credit program is a serious threat to their success - and by extension, a threat to the city's revival.
Senator Hoffman and Delegate Hixson can't think that's a good idea.