JEFFERSON CITY, Mo. — Just days after a widely-reported audit from Missouri State Auditor Tom Schweich listed the program as “fair,” but called for changes, an association supporting the state’s Low Income Housing Tax Credit program held its lobby day in the Capitol.
The Missouri Workforce Housing Association came to Jefferson City today to encourage support of the state’s tax credit program and respond to what they call “misinformation” in Schweich’s audit.
Jeff Smith, former state senator and executive director of MWHA, said the audit came up in several conversations he had during the day, but that his association was equipped to respond.
“We’ve had some accountants here with us to respond to some of the specific claims in that audit,” Smith said. “Mostly we’re trying to explain to people the time-value of money and trying to emphasize the very positive impact this program has.”
Schweich’s audit said that LIHTC projects typically only spend about 42 cents of every dollar on the actual construction of a unit. Smith says this is because of the “time-value” of money.
“A dollar today is more valuable than a dollar in 10 years,” Smith said. “And if you’re not collecting on any of those credits in the first three years, you need that equity up front in order to start these projects, so you’re going to see a depreciation of that dollar over time.”
Smith also took issue with the audit and resulting media coverage that lambasted so-called middlemen known as “syndicators.” Typically a syndicator is hired by a developer to monitor a project, ensure compliance with state and federal requirements for LIHTC funds and oversee the disbursement of funds. Both Schweich’s audit and several news reports criticized syndicators as a waste of funds, but Smith says they are, in fact, extremely valuable.
“A typical syndicator gets about 5 cents of every dollar spent on LIHTC projects,” Smith said. “But they are doing a job that someone is going to have to do. Ensuring that compliance and managing that project is a cost and it will be done by someone, it’s a part of the process that has to exist to keep these projects running smoothly. I don’t think that ‘middlemen’ is really an appropriate designation.”
Smith also took issue with the complaints about stacking — a process in which a developer collects multiple tax credits for a single program — saying that most projects do not “double dip.”
If a project qualifies for both LITHC and Historic Preservation Tax Credits, the amount awarded in LIHTC credits by the state is typically reduced by the amount a developer is gaining through HPTC. In other words, Smith says developers aren’t doubling-up on taxpayer dollars.
“If you want to make money in housing, you don’t do LIHTC projects,” Smith said. “Because the profit margin is regulated, a developer fee cannot be more than 10 percent. That has to also cover costs. When you consider that most of these developers are non-profits who simply put that fee back in operating costs, it’s pretty hard to make an argument that people are getting rich off of Missouri’s program.”
Smith’s primary argument against abolishing or drastically reducing the program is that there is no other effective avenue to provide housing for the poor and that the “social good” which comes from LIHTC projects can’t always be measured through traditional means.
“Some savings we can measure,” Smith said. “It’s about one-quarter cheaper for a senior citizen to be placed in a LIHTC project than in a Medicaid-funded facility and that’s a taxpayer saving. But, how do you measure the positive impact of giving poor school children a secure home to live in?”
Smith said that LIHTC projects reduce instances of crime — and therefore prison costs to taxpayers — and that LIHTC children are less likely in their lives to collect TANF or other welfare funds. These savings are difficult to traditionally calculate, in part because the program hasn’t existed long enough for multi-year studies to be conducted.
“There’s an extremely important social good that is done here that can’t be done with any other policy,” Smith said. “The market doesn’t always provide affordable housing for the poor, people with special needs or senior citizens, but there’s an understanding that this program actually works pretty well toward that end.”
Collin Reischman was the Managing Editor for The Missouri Times, and a graduate of Webster University with a Bachelor of Arts in Journalism.
