JEFFERSON CITY • Although a Senate proposal to cap spending on low-income housing tax credits could save the state as much as $600 million over the next decade, a key budget writer says he is not counting on that money as he crafts Missouri’s next spending plan.
Sen. Dan Hegeman, who chairs the Senate Appropriations Committee, said the potential savings could eventually be spent on any number of programs, including offsetting the rising cost of health care for the poor or boosting funds for education.
The savings also could make it more palatable for lawmakers to move forward with Gov. Mike Parson’s plan to take out a $350 million loan to rebuild or replace 250 bridges across the state, but Hegeman and Senate Majority Floor Leader Caleb Rowden, R-Columbia, said they aren’t connecting the two issues.
“I don’t see the two tied together,” said Hegeman, R-Cosby. “It really just puts money in the general revenue fund.”
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On Wednesday, after more than three hours of negotiations, the Senate gave preliminary approval to a plan to limit the amount of money the state spends to give tax credits to developers to build low-income housing.
Funding for the tax credits would be capped at 72.5 percent of what the state receives in federal tax credits. That amounts to a savings of about $600 million over 10 years.
The action came after Parson had urged the Legislature to reform the oft-criticized program, which was shut down by former Gov. Eric Greitens in 2017. The former governor claimed the money was being sent to wealthy developers with little oversight, forcing the state to cut spending on other programs.
Parson was heavily involved in the talks, sending his chief of staff, Aaron Willard, and his legislative liaison, former Rep. Justin Alferman, R-Hermann, to the Senate corridors to help shepherd a deal across the finish line.
Lobbyists for the powerful industry also patrolled the hallways, hoping to keep the deal alive.
Hegeman had started negotiations by offering a cut of 50 percent. As the talks wore on, the developers were able to get as high as 77 percent, before the number was brought to its current level.
Both Republicans and Democrats believed Hegeman’s starting point was too low.
Sen. Paul Wieland, R-Imperial, for example, voted “no” when the measure was moving through a committee, saying he wanted more for the program.
Democratic Sen. Jill Schupp of Creve Coeur, said she also wanted the program funded at a higher level because of the benefits the tax credits provide to low-income people, as well as the creation of construction jobs.
“I’m not sure the intention was ever to land at 50 percent,” Schupp told the Post-Dispatch. “To me, 100 percent was the number.”
Sam Licklider, who represents the Missouri Association of Realtors, also was pushing for a higher funding level. But, the organization is satisfied with the end result.
“Given the current climate, given the fact that Governor Parson says you’ve got to do something about this, I think it is a reasonable approach to the issue,” Licklider said. “I think every project that I am familiar with has an extensive waiting list. The need is clearly there.”
Jeff Smith of the Missouri Workforce Housing Association said the program is an effective, efficient way to build affordable housing, save taxpayer money by keeping seniors out of nursing homes and create good-paying construction jobs.
“So, we hate seeing its funding cut. However, Gov. Parson stated that he wanted the Legislature to act before his administration would reverse the current funding freeze. Accordingly, we worked closely with Sen. Hegeman and other senators to find a reasonable compromise that can restart this critical program to help the 100,000 Missourians sitting on housing wait-lists,” Smith said.
While critics say the program benefits wealthy developers, the Missouri Housing Development Commission, which administers program, said there are wider economic benefits.
According to a December report from MHDC, the 206 projects awarded between 2011 and 2016 had an economic impact of more than $5.2 billion, created 35,600 jobs and resulted in 11,761 housing units.
One piece of the deal could bump up the amount that developers can extract from the state.
The agreement allows unused dollars set aside for nonprofit projects to be rolled over to the part of the program reserved for for-profit projects.
That, analysts say, could increase the amount available to the industry by as much as $22 million.
The measure could be taken up by the Senate next week for final approval. It would then move to the House for further negotiations.
House Speaker Elijah Haahr, R-Springfield, said he is pleased the issue is being addressed.
“What I am heartened about is that — at least cautiously optimistic about — there’s a path to once and for all putting this measure, putting this issue to rest. Since I’ve been here in 2013, we’ve discussed low-income housing tax credits every year without much movement on the issue,” Haahr said.
Licklider said he has already begun working on members of the House on behalf of the realtors. He said there is no telling what might transpire in the lower chamber.
“I don’t know if there is anything easy about this issue,” Licklider said.
Craig Porter, a housing developer from Kearney, was disappointed by the Senate vote. He had been appointed to a commission by Greitens that voted to end the program.
“To me, I think there are better things to do with the money,” Porter said.
In addition, he said the presence of rental units subsidized by tax dollars alter the market price for housing.
“To me, it just doesn’t make any sense,” Porter said.
Jason Crowell, a former Republican senator from Cape Girardeau, was placed on a board by Greitens to help stop the program in 2017. He said the changes still don’t address the fact that only 42 percent of the money actually goes to low-income housing.
“You would be better off giving all of the money to Habitat for Humanity and letting them build the homes,” Crowell said.
Hegeman said both sides were not thrilled about the final version, a sign that the compromise is probably a good one.
“It was quite a negotiation between those who wanted to cut back on these tax credit programs and the developers who utilize the programs,” Hegeman said.
“We were happy about the compromise we were able to reach,” Rowden said.
The legislation is Senate Bill 28.
