Missouri State Treasurer Scott Fitzpatrick said Missourians need to get more with less when — and if — the state ever reinstates the state’s low income housing tax credit.
In late 2017 members of the Missouri Housing Development Commission voted to stop issuing $140 million in state low-income housing tax credits. Since then, lawmakers have searched for a way to restart the program without success. At a Columbia Chamber of Commerce event Tuesday afternoon, Fitzpatrick spoke about the state of the tax credit and the Missouri Employees’ Retirement System, among other topics.
A Senate bill authored by state Sen. Dan Hegeman, R-Crosby, proposed to lower the cap on the number of credits the state may issue to 72.5 percent of the federal low-income housing tax credits issued to the state, or $123 million. In the House, a bill authored by state Rep. David Gregory, R-Sunset Hills, proposed making other changes, including restricting the state to issue 95 percent of the federal low-income housing tax credit and preventing the state from issuing more than $5 million in state tax credits for projects financed through tax-exempt bonds.
Fitzpatrick worked with Gregory to find a compromise the House and Senate could agree on, but ultimately both bills died on the final day of session. After the event, Fitzpatrick told the Tribune that whenever the General Assembly or Gov. Mike Parson re-authorize the issuance of the state’s low-income housing tax credit, the absence of the tax credit will help the state get more for its money initially.
“I think we’ll get more housing and do more projects with even a reduced number of credits,” Fitzpatrick said. “The long-term benefit of making some meaningful change to the program outweighs the short-term cost of there being a backlog of people wanting housing.”
An estimated 100,000 people sit on wait lists for low-income housing, Fitzpatrick said. A 2017 report by Democratic Missouri State Auditor Nicole Galloway showed that only 42 cents out of every dollar spent on the state’s low-income housing tax credit goes toward construction of low-income housing.
Like other state leaders, Fitzpatrick has stressed that the state’s low-income housing tax credit needs to become more efficient. One change the state could make to get more value out of the program would be to make credits more-easily transferable, Fitzpatrick said. Like last year, the state will also still issue the federal low income housing tax credit, Fitzpatrick, a member of the MHDC said.
During the Great Recession MOSERS, the state retirement system, adopted a policy of investing, which assumed a rate of return of 8.25 percent. This has led to an under performance of the program in recent years, Fitzpatrick said.
The assumption of high rates of return caused MOSERS to take too many risks, said Fitzpatrick, who sat on MOSERS’ board of trustees even before he Parson appointed him to his post as Treasurer in December.
Within the next 18 months the retirement system will ramp down its expected rate of return to 6.95 percent or so, Fitzpatrick said. As MOSERS ramps down its expected rate of return, the state will need to contribute more to the plan he said. Still, Fitzpatrick thought it will lead to a stronger system.