Tax plan threatens GE, other projects
By Brian Francisco | The Journal Gazette
Advocates for the New Markets Tax Credit will gather this week in Washington, D.C., while Congress is trying to decide whether to preserve or eliminate the tax break.
Sharon Feasel will split her time between the New Markets Tax Credit Coalition's annual conference and meetings with the staffs of federal lawmakers representing northeast Indiana, urging them to retain the economic development tax credit that has been used in Fort Wayne.
She expects many other conference-goers will visit their congressional delegations, too.
“They have the conference at the same time every year, but this year it just happened to be perfect timing to get in and talk with (lawmakers) right when they're definitely thinking about what needs to stay and what needs to go” in a massive revamp of the federal income tax code, she said.
Feasel is director of the Fort Wayne New Markets Revitalization Fund, a community development entity that in the past decade has sold $48 million worth of tax credits to private investors involved with local development projects, including construction of The Harrison and the Ash Skyline Plaza residential tower downtown and the expansion of Turnstone Center for Children and Adults with Disabilities.
Feasel said other local candidates for the tax credit include the renovation of the former General Electric campus into a residential, commercial and entertainment complex, the relocation of the Rescue Mission and the replacement of the headquarters of the Boys & Girls Clubs of Fort Wayne.
The House has approved legislation that would, among many other changes to the tax code, end the New Markets Tax Credit, and the Senate passed a bill that would extend the credit through 2019. Negotiators must soon reach compromises on this and other differences between the two bills if they hope to beat a self-imposed deadline and send a final version to President Donald Trump by year's end.
Enacted in 2000, the New Markets Tax Credit is a 39 percent tax break for individual and corporate investments in qualifying community development projects in distressed areas. According to the Treasury Department, which administers the program, more than $50 billion in tax credits had been approved nationwide through November 2016, including more than $300 million in Indiana.
The possible elimination of the tax incentive could endanger various Fort Wayne projects, Feasel said – notably the $300 million renovation of the GE campus along Broadway into what's being called Electric Works.
“It's not going to happen without New Market Tax Credits and Historic Tax Credits, because a project that big ... you need to cobble together some really creative ways to revitalize those buildings, and they are challenging, they are hard,” she said.
Like the New Markets Tax Credit, the Historic Tax Credit would be repealed in the House tax plan but preserved in Senate legislation.
Feasel will meet Wednesday with staffers for Sens. Joe Donnelly, D-Ind., and Todd Young, R-Ind., and Rep. Jim Banks, R-3rd. The senators already are on board with her.
Donnelly “has a long record of supporting the New Markets Tax Credit, which has been vital in Indiana to spurring economic development,” his office said in an email.
Amy Graham, communications director for Young, said in an email, “The New Market Tax Credit has the potential to help many Indiana communities and Senator Young is going to continue to advocate for Hoosiers.”
Banks is noncommittal. His press secretary, Andrea Palermo, said in an email that Banks “has not taken a position on that specific issue, but he strongly supports efforts to pass tax reform and lower tax rates.”
Jason Arp, a Republican member of the Fort Wayne City Council, was in Washington recently. He said he visited Banks and thanked him for voting in favor of the House tax plan.
“I thought it was a great bill,” Arp said in a telephone interview.
Arp's main purpose in Washington in November was to speak to the American Principles Project, a conservative think tank, about his opposition to tax incentives for economic development, including the New Markets Tax Credit. He said the think tank, not Fort Wayne government, paid his expenses.
Arp wrote an opinion column for The Journal Gazette last summer in which he argued that taxpayers are contributing too much money, and private investors too little, to redevelop The Landing along West Columbia Street into an entertainment and residential area. The $35 million project has received $7.5 million in New Markets Tax Credits.
“The New Markets Tax Credits were created to be a low-income housing tax credit to help build affordable housing for folks,” Arp said last week. “If you look at the average apartment price in The Landing, I think it came to just over $900, whereas the average rent in Fort Wayne is about $600.”
Arp said Fort Wayne is “misusing the New Markets Tax Credits. ... Skyline Tower and The Landing, I wouldn't think of them as being affordable housing options.”
Feasel said 20 percent of the apartments at Skyline Tower, which is under construction, would be affordable housing.
The Treasury Department's Community Development Financial Institutions Fund states on its website that the tax credit “incentivizes community development and economic growth through the use of tax credits that attract private investment to distressed communities.” It also states that the tax credit attracts “the private investment necessary to reinvigorate struggling local economies” at a rate of $8 of private investment for every $1 of federal assistance.
Arp said he favors “flatter, simpler, lower tax rates without all the credits,” as well as repealing taxes on business equipment, for spurring economic development.
If and when Congress passes tax overhaul legislation and Trump signs it, either Feasel or Arp, but probably not both, should be happy with what becomes of the New Markets Tax Credit. In the meantime, Feasel said not knowing the outcome is hindering her agency's efforts.
“We're plugging away at moving down the path of closing on financing (on projects) and yet we don't know what tax reform might do,” Feasel said. “It's disconcerting to try to work in that environment with that uncertainty hanging over you.”