Historic tax credits defended

The Ehrlich administration rolled out the big guns yesterday to defend a tax credit that rewards owners and developers for rehabilitating historic properties, and to criticize a proposal to convert it to a grant program.

Three Cabinet secretaries joined Comptroller William Donald Schaefer and prominent developers to urge a House committee to pass Gov. Robert L. Ehrlich Jr.'s bill (HB 289) to extend the Heritage Structure Rehabilitation Tax Credit Program through 2010.

The program has been praised for spurring investment in Baltimore and criticized because the bulk of its benefits have flowed to the city, but yesterday's hearing showed the tax credit has fans across the state.

The mayors of Frederick and Rockville showed up to praise the program, and committee members heard stories of how it is working in towns from Easton to Cumberland.

"This is every area of the state affected by this bill," said Schaefer, who headed a commission that recommended extension of the program. "I can't tell you how strongly I feel about this one."

The program has proved so popular and effective since its inception in 1996 that legislators have struggled ever since to rein it in. While few doubt its effectiveness in spurring revitalization of older communities, legislative analysts and lawmakers have been troubled by its growing and unpredictable cost.

Those concerns prompted Del. Sheila E. Hixson, chairwoman of the Ways and Means Committee, to introduce competing legislation (HB 679) that would turn the tax credit for commercial projects into a grant program that would compete for budget dollars each year.

Ehrlich has rejected that notion and thrown his support behind the tax-credit extension -- making it a key part of his legislative agenda. But as a gesture toward the General Assembly's concerns, Ehrlich's bill includes a limit of $30 million on the amount of credits that can be claimed in a single year for commercial projects.

At yesterday's hearing, three of Ehrlich's Cabinet secretaries told the Ways and Means panel why the governor's approach is right and Hixson's is wrong.

Aris Melissaratos, secretary of business and economic development, said the credit "may be the best economic development tool we have." He said the credit has played a vital role in the redevelopment of Baltimore's west side, financing projects designed to lure residents back to the city.

"The bottom line is, it does revitalize communities," said Victor Hoskins, secretary of housing and community development. Developers who testified argued that a grant program wouldn't be nearly as effective.