March 26, 2007

Message to GBC Members:

House passes bill to adjust caps, ease historic rehab tax credit rules

The House of Delegates passed legislation on Friday, March 23, that would make needed adjustments to the state's rules for awarding tax credits for commercial rehabilitation of historic buildings.

The House passed HB 598, sponsored by House Ways and Means Committee Chair Sheila Hixson, D-Montgomery, and 29 other delegates. The bill addresses snags in the rules governing caps on tax credit awards that have kept many qualified Baltimore City projects from using available credits during the last two years.

Among other things, the bill would raise to 75 percent the amount of tax credits that could be awarded in any single jurisdiction. The bill's provisions would also waive the cap requirements for qualified projects if excess funding remains after all awards have been made in accordance with cap rules. The bill extends the historic rehabilitation tax credit through FY 2010.

Senator Verna L. Jones, D-Baltimore City, has also proposed similar legislation in SB 613, which was heard by the Senate Budget and Taxation Committee on March 9.

The GBC strongly supports changing the rules for awarding heritage tax credits to ensure that revitalization projects in Baltimore City and other jurisdictions with many historic buildings will have reasonable access to this highly effective economic development incentive.

Existing cap regulations have effectively denied millions of dollars in available tax credits to otherwise qualified redevelopment projects in Baltimore City over the last several years, while virtually all other eligible projects in the state received the credits.

We urge members of the Senate to support HB 598 and allow this proven economic development tool to realize its full potential as a driver of commercial redevelopment in Baltimore City and across the state.

Budget bill passes both chambers, conference panel to reconcile differences

The Senate's passage of HB 50, the budget bill, on March 21 gives lawmakers more than a week to reconcile a relative handful of differences between the budgets passed by each chamber.

Following are a few of the three dozen reductions to the Governor's $30 billion budget on which the House and Senate versions differ:

• Funding for stem cell research. The Senate cut $10 million in stem cell research funding, reducing it to $15 million. The House budget calls for $25 million. Governor Martin O'Malley is advocating for restoration of the Senate cuts.
• Higher education funding. The House cut $7.1 million from Governor O'Malley's funding request for the University System of Maryland. The Senate budget retains the funding. Under either scenario, tuitions will not be increased.
• Filming in Maryland. The House cut $2.9 million of a requested $4 million in tax credits for film making in Maryland. The Senate retains the full amount.
• Heritage tax credit funding. The House cut $15 million from this tax credit funding, leaving $25 million available for FY 2008 tax credits. The Senate cut $10 million, which would make $30 million available for the coming year.
• Tourism. The House cut $600,000 from the Maryland Tourism Board to fund a budget amendment granting that amount to the Maryland Zoo to address operational challenges. The Senate retained the Tourism Board funding.

Statehouse observers expect the final budget to pass on Friday. Links to the House and Senate budget reports are posted below.

Structural deficit projections could trigger special session

Budget summaries produced by the House Appropriations Committee and the Senate Budget and Taxation Committee included forecasts that the state's structural deficit will exceed $1.5 billion in FY 2009. The FY 2009 budget will be addressed in the 2008 General Assembly session.

Deficit projections, combined with the realization that this General Assembly session is not likely to address major funding challenges facing the state, are triggering talk among lawmakers of the potential need for a special session later this year.

Some reason that, if the state's revenue reports are not encouraging in the next four months, a special session could give lawmakers a head start in passing revenue-enhancing measures that could take effect in January to capture some new revenue in FY 2008. This would also provide Governor O'Malley's administration with the opportunity to identify potential cost savings through StateStat, the Governor's government accountability program.

Revenue-raising options could range from a slots bill to measures increasing various taxes. In addition to the structural deficit, lawmakers will be faced with other key funding challenges that include expanding health care access, increasing transportation funding, and paying for other infrastructure to accommodate BRAC-related growth in central Maryland.

Next week, we'll provide a status report on GBC priority issues going into the final week of the session.

Best wishes,