By Shelia Byrd
JACKSON - Mississippi's county supervisors and municipal leaders are asking legislators to rethink a 2005 law that gives a break to federally subsidized housing developments, saying schools and local governments are losing millions in tax dollars.
The law applies to so-called Section 42 developers who use federal tax credits to build rental complexes for people who qualify for work force housing. Under the law, the developers are assessed by the income generated from the rental units rather than the cost of the real property.
Hancock County Tax Assessor/Collector Jimmie Ladner Jr. said this was done in an attempt to find an equitable way to tax those properties that served people on low or fixed incomes.
Ladner said the apartment owners are paying about one-third of what they would pay in taxes if the law wasn't in effect.
"There's no such thing as a tax exemption," Ladner told members of the House Ways and Means Committee last week. "The guy down the street picks up the tax burden. All we're doing is passing the buck."
Marty Milstead, executive vice president of the Homebuilders Association of Mississippi, said the change in the law was needed because the properties were rent-controlled, meaning the owners could not raise rental rates if there was an increase in local taxes.
"If you go and raise taxes on people and they're not able to recoup that expense, you can't operate," Milstead said. "Our people are paying taxes. It's brought new revenue in the county because there were properties built that might not otherwise have been built."
Milstead said the assessors initially agreed with the law, "but now they want more money, and this is not the place to get it."
Milstead said his organization was meeting with municipal leaders in hopes of finding a solution to the lost revenue. Another hearing on the issue was scheduled for Thursday before the committee.
House Ways and Means Committee chairman Percy Watson, D- Hattiesburg, said his committee would continue to investigate the issue. At least three bills have been filed to change the law.
"It's definitely something that should come before the full committee," Watson said. "They're using it as a means to get around paying local taxes."
Ladner said the law took effect just before Hurricane Katrina struck the Gulf Coast and wiped out much of the housing stock in the region. He said before Katrina, his county only had about 300 of the rental units, compared to about 1,300 that are currently in some phase of development.
He said the greatest impact has been on local school districts because in some counties, the loss of revenue has been passed along to the schools, meaning residents in those areas will have to pay higher taxes.
Harrison County Supervisor Connie Rocko gave this example: unit dwellers in neighboring Jackson County pay about $85 a year toward the local schools, compared to an average property owner's tab of about $334.
L.M. Bonds, a supervisor in Newton County, said the developers are reaping a large profit.
Under Section 42 of the federal code, the developers who build or rehabilitate housing for low-income residents can get part of the construction costs supplemented by the sale of tax credits.
Bonds said the counties often approve developments because "it sounds good when they say they're going to have low-income housing in our community."
Rocko said the Section 42 housing also has resulted in other developments losing value since the rental charges have to be adjusted to market value.
"They come into our office and say, 'You've got to take a few million off our property because we can't compete with the other developments,' " she said.
Rep. Ferr Smith, D-Carthage, said lawmakers should revisit the law.
"We were led to believe this law wouldn't affect the income of the local entities. We need to protect those entities," Smith said.
Originally published by Shelia Byrd Associated Press .
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