As legislators consider lifting or raising the cap on Iowa's Historic Tax Credit Program, one question is uppermost in their minds: Does it create jobs?
In a time of economic turmoil, that threshold question is the starting point for most legislative debates. In this case, the question is easy to answer. Iowa's rehab tax credit program offers taxpayers one of the best dollar-for-dollar returns on investment of any state program -- and it's also an outstanding example of a state policy that promotes sustainable development.
In short, it provides the kind of economic incentive that is critical to the revitalization of Iowa's -- and America's -- communities.
How does a tax incentive for rehabbing historic properties help create jobs, and how can it make a dent in the recession? Start by thinking about your own home. As many homeowners know, rehabbing an older house is more labor-intensive than building a new one, and it requires more skilled labor than new construction. That means wages for this kind of work are usually higher -- as are income taxes paid by workers on rehabilitation projects. What's more, materials for rehab projects tend to be purchased locally, so sales tax revenues are kept in-state. On top of this, the tax credit is not awarded until the work is completed, so the state gains revenue from the taxes paid on materials and labor prior to the building's occupancy, meaning that revenues flow into state coffers faster.
Nationally, there is overwhelming evidence that rehab tax credits are job-creators. Studying projects in Missouri, economist Donovan D. Rypkema found that 6.3 more jobs are created through rehabilitation than through manufacturing. Rutgers University also examined the impact of Missouri's historic preservation tax credits and found that between 1998 and 2001, the state garnered 6,871 jobs and $60 million in tax revenues (including $25 million in state and local taxes) -- an astonishing four-to-one return on the state's investment in the tax-credit program.
In Maryland, a recent report by the Abell Foundation showed that over the past 12 years, completed rehabilitations of commercial properties generated $1.74 billion in total economic activity and employed an estimated 15,120 people. Construction labor alone totaled an estimated 9,248 workers. While this short-term impact is impressive, it's worth noting that the greatest return on the state's investment comes from the long-term increase in employment and property taxes on these rehabilitated buildings.
Having a state program increases the use -- and the economic impact -- of the federal rehabilitation tax credit program, which has given a powerful boost to this state's economy over the years. The State Historical Society of Iowa estimates that almost $300 million in federal historic preservation tax credits and $365 million in private investment have been leveraged through the state's program.
State tax credits not only spark jobs and spur additional investment, they do it in a way that supports sustainable, "green" development practices. At the recent Growing Sustainable Communities luncheon in Dubuque, I shared how the National Trust for Historic Preservation has been tracking these "green" tax incentives for the past 15 years. The revitalization of our historic neighborhoods, typically located in or adjacent to downtown areas, helps reduce sprawl and protects agricultural lands. By encouraging the reuse of existing buildings and maximizing the community's investment in infrastructure that is already in place, preservation tax credits also help decrease our dependence on fossil fuels, reduce the carbon emissions associated with demolition and new construction, and lessen the pressure on our landfills.
Iowans should urge their legislators in the House and Senate to support raising the annual cap on the historic tax credit, which has demonstrated its effectiveness in stimulating revitalization, sparking reinvestment in existing communities, and creating jobs. We've always known that preserving our heritage is good for the soul. In times like these, it's important to remember that preservation is good for the pocketbook, too.
Moe is president of the National Trust for Historic Preservation, whose Web site is www.PreservationNation.org.
