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From Small Towns to Major Legislators, Keys to Getting a State Credit

Published by Brad Stanhope on Sunday, November 1, 2015

Journal cover November 2015   Download PDF

A meeting in early January convinced Susan Kluttz that the North Carolina state historic tax credit (HTC) could be brought back. All it took was an eight-month tour by the state’s secretary of the Department of Cultural Resources to more than 50 cities that prompted more than 1,700 newspaper, radio and TV stories and myriad letters from constituents to their legislators. The result: North Carolina’s HTC was reinstated as part of a budget bill in September.

The efforts in North Carolina are an example of one way to create or bring back a state tax credit: directly address the people of the state. However, that’s not the only way to do it. Whether it’s a low-income housing tax credit (LIHTC), new markets tax credit (NMTC), renewable energy tax credit (RETC) or HTC, there are some key strategies that have brought success.

Different approaches work in different places, but there are some common threads.

Working with the Legislature

Colorado passed a LIHTC in 2014 that came with broad legislative support–largely because the state had a LIHTC in 2001 and 2002. Jerilynn Martinez, manager of marketing and communications for the Colorado Housing and Finance Authority, helped lead the effort to bring it back by reminding legislators of the success. “We could talk about the success of the federal program and how the state program mirrors it,” Martinez said. “We could show the types of households served by the state credit and federal credit.”

Albert Rex, a partner for MacRostie Historic Advisors LLC and the firm’s director of the northeast region, said it’s important to focus on key legislative leaders, something echoed by the experience of Vaughn Aldredge, the government relations specialist for the Texas Historical Commission. He said the passage of the state HTC there was relatively simple. “It had the support of [Harvey Hilderbran] the chairman of the ways and means committee of the [Texas] House of Representatives. He was a veteran member who was retiring, so it was a gift to historic preservation and downtown redevelopment,” Aldredge said.

Whether it’s compiling information, influencing key legislators or conducting a marathon tour of the state, it’s rarely easy to pass a state tax credit. It takes creativity and elbow grease.

An Epic Tour of North Carolina

In North Carolina, a statewide tour was not always part of the plan. Kluttz said some key legislators told her not to waste her time campaigning for a new HTC, because it couldn’t pass. Gov. Pat McCrory directed her to look for alternatives, including grants or rebates, but nothing worked. Detractors said the state HTC was too costly and lacked predictability, so Kluttz and McCrory proposed an alternative that lowered the percentage, instituted caps on larger projects and drastically reduced residential credits.

As the HTC reached its sunset date, Kluttz met with the Metropolitan Mayors Coalition (which consists of large-city mayors) and also partnered with the North Carolina League of Municipalities and the North Carolina Association of County Commissioners. Then came the fateful January meeting.

“At the end of the year, we put out a call to the professional groups and asked who was interested in meeting [and we scheduled one],” Kluttz said. “On the first day after the holiday break, I got to the office and it was overwhelming how many groups were there. There were architects, bankers, contractors, chambers of commerce, developers, people in economic development, Realtors, mortgage brokers, planners … a huge group of statewide organizations that believed in [the state HTC], but were lobbying separately, including the nonprofit Preservation NC. We thought if we could bring everyone together and meet regularly, it would be more effective. The tour came out of those meetings–we decided to partner to have greater impact.”

Kluttz–with McCrory along on 10 occasions–traveled to cities and towns of all sizes beginning in January and trumpeted the success of the state HTC. She highlighted successful projects and toured potential ones. She met with local newspapers and television stations. It was seemingly endless and it was successful.

“Secretary Kluttz and Cary [Cox, the assistant secretary for marketing and communications for the Department of Natural and Cultural Resources] were tremendous troopers,” said Ramona Bartos, administrator and deputy state historic preservation officer at the North Carolina State Historic Preservation Office. “The amount of hours they spent, from the snow and ice in January to the heat of summer, showed so much stamina and effort.”

Kluttz, a former mayor, knew that civic leaders love to have a state official come to their town and celebrate, so as they visited each town, they were joined by local representatives of all the groups in the coalition to celebrate and lobby for the state HTC.

“One thing that was very important in North Carolina is that they had a coalition of mayors,” said Robert Naylor, the program manager at national preservation advocacy organization Preservation Action. “That has a positive impact. It’s not just the big cities–they had mayors of small towns and it had a broad impact across the state. You could show the broad benefit.”

Staying on Message

Bartos and her fellow staffers in the North Carolina State Historic Preservation Office tailored an information sheet that listed HTC properties in each town, as well as the area’s HTC potential.

“I think the most important thing is to stay on message,” said Cox. “Our fact sheet, along with the area’s HTC properties sheet, were so important. The secretary was really good about knowing the top three bullet points and repeating them over and over. We were also very inclusive–we drew all kinds of people to the tour, including young people, who want to live in newly vibrant downtowns.”

As the tour continued, Kluttz urged voters to contact their local legislators and push for the tax credit. “I always felt optimistic about it,” Kluttz said. “Everywhere we went, people were so positive. I never gave up hope, but we didn’t know until the end that it cleared.”

Kluttz called North Carolina’s media “an important partner” in getting the word out. During the tour, she often met with reporters or editorial boards at local newspapers and TV stations to share the information. Often, those meetings were held before the public tour stop, which allowed the media to be informed on the issue. There was also a social media effort. Kluttz got on Twitter for the first time and used it, frequently posting pictures from each stop.

Back to the Legislature

Although a public tour was crucial in North Carolina, advocates there kept up communication with the legislature. That’s something that Texas HTC advocate Aldredge endorses.

Aldredge, a retired lobbyist, said it’s crucial to have key legislators on board. “Generally, you want to do a run-up to the legislative debate with influential people,” Aldredge said. “You want to set up as much support as you can.” He said advocates should find influential legislators who are inclined to support economic incentive packages. “You help them see that a tax credit can work to revitalize towns of all sizes–you have to get urban Democrats and rural Republicans and suburban representatives on board,” he said. “You have to say, ‘this can help your town with redevelopment.’ It doesn’t matter the size of the town.”

In most states, the governor is critical. Naylor said the North Carolina HTC was aided greatly by the fact that Gov. McCrory was so supportive. He compared it to California, where the legislature unanimously passed the HTC in 2014– and the bill was vetoed by Gov. Jerry Brown.

In Colorado, Martinez said that there was a lot of work by legislative members between when the state LIHTC expired and it was brought back. “There was a task force that met for several years and looked at a variety of issues, including housing,” she said. “Fortunately, we had strong legislative leadership and stakeholders who were committed to bringing back the former state LIHTC.”

Rex said that in Massachusetts, where he helped pass a state HTC, the key was economic opportunity. “It helps if you have a neighboring state that has the credit,” he said. “North Carolina could point to South Carolina. We did the same in Massachusetts. We looked at what was being done in Rhode Island.”

Peter Lawrence, the director of public policy and government relations in Washington, D.C., for Novogradac & Company LLP, said that showing off successful developments is crucial. “Seeing is believing,” Lawrence said. “The best way you can advance tax credit proposals is to invite key legislators to tour properties financed by tax credits.”

Building a Coalition

Aldredge said working with citizens–particularly those already inclined to support your credit–is crucial. “Those heritage society people are the key to get an HTC off the ground,” Aldredge said. “That’s where your grass roots come from–you go to the heritage societies and the preservation organizations and get them on board with the idea. It’s a natural group.” He said the Texas Downtown Association brings together the state’s 89 Main Street communities with the urban downtown associations, offering HTC education to interested groups. That ranges from city economic development and preservation offices to such groups as real estate agents, accountants, attorneys, developers, investors and more.

Martinez agreed. “We had a broad-based coalition of stakeholders,” Martinez said. “We had people in market-rate housing, social services side, whose people had needs, community leaders, the Denver Chamber of Commerce. We had a lot of diverse views, which helped us tell our story of need.”

Rex said that combining nonprofits with developers is crucial and Naylor echoed those thoughts. “A lot of it is to present it with a broad coalition,” Naylor said. “I think a lot is showing how it’s not only helps redevelopment and economic benefits, but it’s a good investment for the state.”

For Kluttz, the experience was positive–and would have been regardless of whether the HTC was brought back or not. “We saw the best of the best of North Carolina,” Kluttz said. “It was an incredible experience. It was so exciting to see people so enthusiastic. It was a joy for us.”

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