Developers hoping to use state tax credits to help finance projects will have to wait another year before the credits can be redeemed, under an amendment to legislation that could bring additional changes to the program that regulates the housing incentive program.
The delay could result in extra financing expenses for the projects, and there is concern that investors who buy the tax credits will become leery of participating because of lack of confidence in the program, said Rita Conner, a planner for the city of Des Moines.
Furthermore, momentum that has built across Des Moines in recent years in the construction of affordable housing and other development projects could come to a halt. At the least, developers will be forced to find bridge loans and could face additional financing costs, Conner said.
Conner said the tax credits available under the state's Enterprise Zone development incentives have resulted in an investment of $925 million on 87 housing projects since the program was launched in the 1990s.
"The thought of changes to the Enterprise Zone program have been something we're concerned about and have monitored closely," Conner said. "The type of projects that we've seen in Des Moines are very expensive to build, whether they are historic rehabilitations or new construction. It's a delicate balance to find developers who are willing to invest millions of dollars on these projects. ... If this balance can't be achieved, we will continue to see a lot of empty and deteriorating buildings, vacant lots and declining population as people leave for areas that provide more housing options."
Greater Des Moines developers and city officials were told late last year the tax credit program had reached its $3 million annual cap on the ability to transfer the credits, a key element in financing the projects.
As a result, more than $7.4 million in credits for 11 signature developments in Des Moines, primarily in the downtown area, were put on hold and the projects were placed on a waiting list. Their place on the list was based on the date city officials sent a letter to the Iowa Economic Development Authority certifying that the projects were located in blighted or brownfield areas.
Also at that time, legislation was being drafted to make changes in the program, including lowering the maximum amount of tax credits available per project to $1 million from $1.5 million, as well as administrative changes.
That legislation has been approved by the Iowa House and recommended for approval by an Iowa Senate committee. The bill is scheduled for debate today in the Senate, where the amendment was offered Wednesday to push the redemption period out another year.
The bulk of the financing shortfall late last year was in Des Moines. A list compiled by the IEDA contained a total of $11.2 million in pending requests as of Dec. 13. Developers in Davenport, Dubuque, Fort Dodge and Clayton County account for $3.8 million.
Other changes in the legislation include eliminating the ability of communities to designate Enterprise Zones, allowing the transfer of all unused tax credits and tying the program to the state's high-quality jobs development incentive.