The new tax reform proposal submitted by Republican lawmakers earlier this month would cut a program that has been an engine for urban renewal and economic revival, sparking strong opposition from city developers, planners, and preservationists across the country. The federal Historic Tax Credit program (HTC) encourages the redevelopment of historic and abandoned buildings by providing a 20 percent tax credit, which is paid out over five years, once the project is complete. According to analysis from the National Trust for Historic Preservation, it has been used to renovate more than 40,000 structures and channel $117 billion in private investment since being enacted by the Reagan administration in 1981.
Developers are increasingly looking for adaptive reuse projects as a way to differentiate their hotels from the industry’s ‘sea of sameness.’ Although converting an existing building to a hotel can be more costly and complicated than building from the ground up, these projects appeal to guests’ desire for unique experiences and are often a good entry into high-barrier urban markets. Many adaptive-reuse projects involve historic buildings, allowing developers to take advantage of the structure’s charm and character not found in big box hotels. In addition, historic tax credits can help alleviate the added cost of renovation projects.
After letting the historic preservation tax credit program expire last year, North Carolina legislators restored the credits in its budget last month, and developers around the state will begin moving forward with dormant renovation projects. Without the incentives, many historic preservationists said the renovations weren't financially feasible. Restoring the program was a big priority for Gov. Pat McCrory and Susan Klutz, N.C. secretary of natural and cultural resources, who acknowledged the grassroots effort from local officials and historic preservation groups to help restore the credits.
This week, the Tax Increment Financing (TIF) Commission of Kansas City approved TIF assistance for the $138 million Commerce Tower mix-use redevelopment project. The approval was a major relief for the developers, as they lost out on roughly $5 million for hard costs they had anticipated in state brownfield tax credits. While state offices did offer an explanation why that would no be receiving the assistance, some sources assume it is due Missouri's effort to support the new $1 billion riverfront football stadium in St. Louis in hopes of keeping Rams owner Stan Kroenke from moving the NFL team to Los Angeles.
The North Carolina House voted to bring back the state's Historic Property Tax Credit program, which aided rehabilitation of designated historic buildings and homes and mill and warehouse buildings by lowering the tax bills of the developers based on their development costs. The program expired Jan. 1, and developers banned together to stress how important the program is to North Carolina, arguing that the credits make are a tool that preserve history, promote economic development, generate jobs and often spur development in economically depressed areas of the state where developers would otherwise avoid. In addition, supporters say the tax credit is needed to make the projects financially viable, as it it generally costs significantly more to rehab an old building than to build a new one.
The Historic Property Tax Credit, a state income tax credit intended to help developers raise money to restore historic properties, was granted bipartisan approval by the North Carolina House and now moves to the state Senate. The bill, which passed with a 98-15 vote, would offer a 15 percent income tax credit for up to $10 million of the costs of rehabilitating designated historic buildings. It would allow a 10 percent credit on costs between $10 million and $20 million. Additional credits would be available in certain circumstances.
Wisconsin developers are wondering what's in store for the state's historic restoration tax credit program, as there was a large spike in demand for the credits over the past year. Developers are concerned the state may limit the program's future, while state officials remain quiet on the subject. The program, which offers a tax credit worth 20 percent of their cost of restoring a historic building, was put on month-long moratorium last year after developers claimed $35 million in tax credit awards, even though legislators were told to expect only a $4 million budget impact. The program's uncertainty will not only affect developers who want the credits for future projects, but also the investors the developers sell those credits to in order to raise money for the developments.
California's recently passed Assembly Bill 1999, authored by Assembly Speaker Toni Atkins (D-San Diego), would offer a a 20% state tax credit to developers restoring structures listed on the National Register of Historic Places or the California Register of Historical Resources. AB 1999 was designed to advance the preservation and renovation of historic buildings and stimulate local economies and awaits approval from Governor Jerry Brown.
Since North Carolina introduced the Historic Preservation Tax Credit program in 1998, the credits have been renewed every budget season. This year, however, a recent version of the state budget that went before the N.C. General Assembly did not include the tax credits. According to the Triad Business Journal, developers banned together to stress the importance of the historic preservation tax credits has to the state of North Carolina, arguing that the credits are a tool that promote economic development and generate jobs and spur infill development — often in economically depressed areas of the state — where developers would otherwise not consider development. North Carolina’s historic tax credits have generated $1.4 billion in private investment and created 23,000 jobs. In fact, North Carolina is tied for fourth in the nation for the most historic properties renovated in the past 20 years, giving the state a competitive advantage in attracting new businesses and workers. Thanks to the development community's efforts, the budget that will go before the North Carolina House will include a new provision with the historic preservation tax credits — which provide a 30 percent credit. It would also need to receive approval from the N.C. Senate.
The Baltimore City Council passed a bill last week that will make 10 years of property tax credits available citywide for developers of apartments. The bill expanded the current apartment tax credit program to include both developers who renovate apartments and those who build new structures. The legislation was backed by Mayor Stephanie Rawlings-Blake, who believes the expansion will encourage investment that supports neighborhoods, promote historic preservation and generate millions of additional dollars for the city.