OP/ED: Preservationist's view
Preservation tax credits create local jobs
Posted March 30, 2010 | Contact pr@nthp.org or 202-588-6141
By Richard Moe | March 29, 2010
Washington, D.C. Published in the Duluth News Tribune.
As legislators consider adding a 20 percent historic rehabilitation tax credit program in Minnesota, one question is uppermost in their minds: Will the program create jobs? In a time of economic turmoil and mounting budget deficits, that threshold question is the starting point for most legislative debates in St. Paul this year.
In this case, the question is easy to answer. Thirty states now offer a historic tax credit program and numerous studies in recent years demonstrate that historic rehab tax credit programs are job-creators that also offer taxpayers one of the best dollar-for-dollar returns on investment of any state program. In short, a historic tax credit program provides the kind of economic incentive that is critical to the revitalization of Minnesota communities, whether large or small, urban or rural.
Nationally, there is overwhelming evidence that rehab tax credits are job-creators. A comprehensive study conducted by Rutgers University this year analyzed the economic impact of the federal Historic Tax Credit since its inception in 1976. The study concluded that the Historic Tax Credit was a highly efficient job creator, accounting for the creation of
1.8 million new jobs since 1976, or more than
58,000 new jobs per year. Economist Donovan D. Rypkema studied the effects of Missouri's state-rehab tax credit and found that 6.3 more jobs were created through rehabilitation than through manufacturing. 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 came from the long-term increase in employment and property taxes on rehabilitated buildings.
How does a tax incentive for rehabbing historic properties help create jobs? And how can it spur economic growth? Start by thinking about your own home. As many homeowners know from personal experience, rehabbing an older house is more labor-
intensive than building a new one and 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 revenue is 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 revenue flows into state coffers faster.
In Duluth, the first projects that come to mind are the St. Louis County Jail and the Duluth Armory. Both represent the types of highly visible, large-scale redevelopment projects that could benefit from the use of historic tax credits. But thanks to the historic district encompassing much of Duluth's downtown, historic tax credits also could be utilized for more modest rehab projects at literally dozens of smaller businesses throughout the downtown. Those include the historic Board of Trade building on West First Street, the NorShor Theater, and the YWCA, which could use tax credits to help convert the building into approximately 50 affordable, multifamily housing units.
Minnesota's proposed historic tax credit would parallel the federal historic preservation 20 percent tax credit, creating additional development opportunities and leveraging millions of federal dollars not currently flowing into the state. Having a state program increases the use — and the economic impact — of the federal rehabilitation tax credit program. Rhode Island saw more than
$78 million in federal historic tax credits once a state tax credit was in place — an increase of more than 700 percent. In Missouri, the number of projects using federal rehabilitation tax credits doubled after the introduction of the state credit.
State tax credits not only spark jobs and spur additional investment; they do it in a way that supports sustainable, "green" development practices. The revitalization of 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.
Minnesotans all across the state should urge their legislators in the House and Senate to pass — and Gov. Tim Pawlenty to sign — the historic preservation tax credit.
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.
Richard Moe is a native Duluthian and president of the National Trust for Historic Preservation. He wrote this exclusively for the News Tribune.
The National Trust for Historic Preservation is a non-profit membership organization bringing people together to protect, enhance and enjoy the places that matter to them. By saving the places where great moments from history – and the important moments of everyday life – took place, the National Trust for Historic Preservation helps revitalize neighborhoods and communities, spark economic development and promote environmental sustainability. With headquarters in Washington, DC, nine regional and field offices, 29 historic sites, and partner organizations in all 50 states, the National Trust for Historic Preservation provides leadership, education, advocacy and resources to a national network of people, organizations and local communities committed to saving places, connecting us to our history and collectively shaping the future of America’s stories. For more information visit www.PreservationNation.org.
