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State Officials Eye Historic Building Tax Break (Jul 15, 2011)

by Logan Layden for Oklahoma Watch

Oklahoma Watch is a non-profit, independent, government watchdog group made up of journalists from across the state.

A panel of state officials and legislators holds its first meeting Friday to scrutinize state tax breaks, including two insurance industry credits. The groups’ focus will also be on a subsidy that aids in the restoration of historic buildings across the state, like the Mayo Hotel in Tulsa and the Skirvin Hilton in Oklahoma City.

The echoes in the tall, art deco lobby of the historic Skirvin Hotel in downtown Oklahoma City conjure images of newly rich oil barons and monocled dignitaries. The Skirvin has been an Oklahoma landmark for 100 years, but in 1988 it was abandoned, mocking its former grandeur, until 2007, when it was restored and reopened as the Skirvin Hilton.

40 percent of the historic rehabilitation portion of the $56 million project was paid through state and federal tax credits for the restoration of buildings on the National Register of Historic Places. But that kind of assistance could be at risk as a new legislative task force examines state tax credits to decide if they’re worth their cost, or have outlived their usefulness.

State Rep. David Dank (R-Oklahoma City) co-chairs the 10-member task force that includes the minority leaders of both houses and other state officials. He says recipients will have to justify their tax breaks.

“There are people that say ‘Oh my God, you can’t possibly be thinking about taking away my tax credit,’” Dank said. “Well, prove to this task force; prove to these legislators out here that it’s a good expenditure on behalf of the taxpayers, and that’s all we ask.”

State insurance department and tax commission records show the historic building rehabilitation credit reduced state tax collections by about $27 million from 2006 to 2010. Dank questions its necessity.

“How does it benefit people in Oklahoma City or Tulsa if they renovate the Bijou Theater in Cordell?” Dank said. “Those are the question that they have to answer. I can’t answer them.”

The historic rehabilitation credit has its share of backers, including Oklahoma Historical Society Executive Director Dr. Bob Blackburn, who is expected to testify at Friday’s task force meeting.

“One person fixes up a building first class, it’s going to encourage others. And so it has a ripple effect,” Blackburn said. “We don’t know what the long-term economic impact will be. We know what it is now, with jobs created, with tax revenue supporting our schools and our highways and our services. Long-term, though, we think it can turn the corner on the deterioration of a lot of downtown business districts in this state.”

The beneficiaries of the credit aren’t confined to Oklahoma City and Tulsa. In Anadarko, in southwest Oklahoma, electricians are putting the finishing touches on the renovation of the DeVaughn Drug Store building. After being covered for decades, the elaborate patterns of the original 1904 paneled tin ceiling now stand out. Today, the building houses Dr. Kathleen Lacey’s psychology practice for Native American families.

“This had not been touched for probably 50 years,” Lacey said. “It was in horrible shape, but the structure was sound, the floor was relatively sound, and I just thought it would make wonderful offices.”

She says the renovation would not have happened without the rehabilitation credit, and its cancellation would put her in a difficult financial situation.

“I’ll be extremely upset, because it’s taken me two years to do this building in the manner that I could. I could have done a million things other than this,” Lacey said.

More than 20 state tax credits were put on hold two years ago to help fill the hole in Oklahoma’s budget, and state agencies continue to endure cuts. Despite the recent rebound in revenue collections, Dank maintains now is still the right time to reduce the number of tax credits.

“One has to wonder how much that’s contributing to the revenue increases that we’ve had in some of these areas, which is good news at any rate,” Dank said.“But keep in mind that there are a lot of tax credits: The venture capital taxes, the coal tax, the investment credit tax, all those are under moratorium right now. So, people aren’t being able to claim those, so they’re paying their full amount of taxes.”

Dank’s panel is expected to meet twice monthly through the end of the year and will report its findings to the legislature for possible action next session.

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