Missouri lawmakers were told in 1997 that Historic Preservation Tax Credits (HPTC) would cost the state about $14.3 million a year.
But last year, State Auditor Tom Schweich reported Tuesday, the program had "approximately $79 million in redemptions" and - with some years having over $100 million in redemptions - has cost the state more than $1.1 billion over the last decade.
"While the goals of the program are laudable in some respects," the 27-page audit reports on its Citizens Summary page, "the state's HPTC program is an inefficient use of state resources.
"Only 49 cents to 85 cents of every tax credit dollar issued actually goes toward rehabilitation costs."
Missouri created its state program as a supplement to the federal program created in 1976, to provide incentives for redeveloping - rather than demolishing - residential and commercial historic structures throughout the state.
"There is no dispute the Historic Preservation Tax Credit has been a significant factor in helping rehabilitate hundreds of the state's historic properties," Schweich's audit begins. "However, Missouri's historic preservation program is the largest in the nation (and) has a statutory annual limit that is so high that it does not contain actual spending."
Last year, the HPTC was Missouri's third most expensive tax credit program, behind low income housing and property tax credits.
But, the audit said, the $140 million per year cap lawmakers put on the program in 2009 could be cut almost in half - to $75 million a year - and still be the nation's most expensive.
"It is very difficult to measure the value of a retained historic structure," Deputy Auditor Harry Otto told the News Tribune Tuesday afternoon. "How do you put a value on that?
"What's it worth to you to be able to go down Main Street and see buildings that would, otherwise, have been destroyed?"
He acknowledged the tax credit has been helpful in preserving business districts in a number of Missouri communities, and in helping residential neighborhoods maintain a historic flair rather than becoming a hodge-podge of different building styles.
But, Otto noted, the auditor's staff found several examples of well-to-do people using the tax credit as a small part of an expensive residential rehabilitation that likely would have occurred anyway.
"The saving grace of the residential program is there's a per-unit limit of $250,000," he said. "So, it can't get so far out of whack that it all becomes single-family residential, as opposed to a commercial building that has a lot of historical significance to it."
The report encourages lawmakers to review the suggestions Gov. Jay Nixon's Tax Credits Commission made in 2010 and again in December 2012.
"They really drilled into this," Otto explained.
As with the low income housing tax credits report Schweich released a couple weeks ago, the historic preservation report said the program would be more efficient if its credits were refundable, or if the program were done by direct appropriation rather than tax credits which must be reported as taxable income.
"That eats away from the benefit," Otto said, adding the direct appropriation idea "would have more net benefit to the state" because the developer would have more money to invest in the project.
Although they're not violating any laws or rules, the audit also suggested that the Economic Development department do more site visits rather than relying only on photographs to see how a project is going after tax credits have been awarded.
And, as with other recent audits, Schweich and his staff encouraged lawmakers to make sure the historic credits program has a "sunset," so the Legislature can review it from time to time and decide if the program still is needed.
The current law is ongoing, with no legislative review process.