Serving 'the first master' – Tax incentives under legislative microscope

At the state Capitol in Oklahoma City, a legislative task force is just beginning analysis of billions of dollars in tax incentives, credits and exemptions given to varied interests each year.

Task force chairman Rep. David Dank, an Oklahoma City Republican, opened the first meeting Friday morning saying, “This is not a witch hunt.” He also referred to opposition to eliminating some incentives. “You would have thought we were down at the river drowning puppies.”

State Treasurer Ken Miller’s opening remarks referred to a long history of tax credits and economic incentives being created without asking important questions about the purpose of projects, expectations of accomplishments, service to public interest, and whether a specific project has outlived its intended purpose.

“As a result, we have a hodgepodge of credits, deductions and exemptions that have grown like ivy over the years – some poisonous, some beneficial,” Miller said.

About $5 billion in credits and exemptions are given each year. Lawmakers believe state budget cuts over the past few years might have been eased, had some credits and exemptions not been awarded.

Friday morning (July 15), the first tax credit under the task force microscope was for historic building rehabilitation. That meeting drew an overflow crowd of lobbyists, Historical Society officials, developers, economists, public policy groups and reporters. The meeting had to be moved to a larger room to accommodate about 100 participants and observers.

Dr. Bob Blackburn, Director of the Oklahoma Historical Society told the task force of the need to understand the state’s history for context in dealing with historic rehabilitation.

He cited rehabilitation of the Skirvin Hotel in Oklahoma City and the Mayo Hotel in Tulsa as prime examples for reasons the tax credit should be kept in place. He argued those and other projects created jobs and major economic boosts.

“This encourages private investment in the economy where it would not occur otherwise,” Dr. Blackburn said.

The Skirvin and Mayo hotel examples prompted some criticism from Chairman Dank and other members of the task force. New hotels built recently in close proximity to the Skirvin, for example, also created construction jobs, full-time jobs upon opening, property taxes and other economic development without the almost $7 million in tax credits.

Dank stressed to task force members that “We are talking about historic significance … not compare with economic impact also generated by commercial hotels.” Because of declining revenue and budget cuts to state agencies in recent years, the historic rehabilitation tax credit is just one of many deferred from July 1, 2010 through July 1, 2012.

State Finance Director Preston Doerflinger recently announced a major “Rainy Day” fund deposit. Treasurer Ken Miller said major increases to state coffers are a direct result of great economic improvements.

Rep. Dank mused during the Friday meeting that he wondered if the deferral for some tax credits affected those revenue increases.

Through the first hearing, at least, there seemed to be some common ground.

After hearings Friday afternoon that focused on insurance industry credits, Rep. Scott Inman of Del City, House Democratic leader, reflected, “For a tax credit to be justified, it must demonstrate that these taxpayer dollars are creating jobs and providing a benefit to our residents.”

“We need to be competitive but not to the detriment of our citizens. Senator Coburn has targeted these tax expenditures at the federal level, and we must do the same here. When we are cutting the state’s budget to the tune of $500 million, but doling out nearly $5 billion in exemptions, credits and subsidies, something is askew.”

Inman credited Dank for the focus of the hearings. “I want to thank Chairman Dank for helping to bring this important issue to the forefront, I take heart in his statement that ‘the taxpayer will always come first in deliberations' and that we should be ‘good stewards of the public money…and now is the chance to prove it.'”

Others who addressed the tax force included Tori Snyder, who led the rehabilitation of the Mayo Hotel. Historical Society records indicate that project received about $7 million is state tax credits.

Historical preservation and rehabilitation can create emotion and Dr. Blackburn admitted he is subjective in arguments to preserve the tax credits: There is “impact on ‘sense of community’ … incentive to improve education, infrastructure and taps shared memory.”

Chairman Dank indicates he hopes the Task Force for the Study of State Tax Credits and Economic Incentives will meet twice a month through November, with at least two issues on the agenda each meeting. Dank, addressing members of the task force. said “The first master we all serve is the taxpayers.”

Note: Capitol Editor Patrick B. McGuigan contributed to this report.