The Historic Advisor Winter 2018
MacRostie Historic Advisors LLC
The Historic Rehabilitation Tax Credit:
Past, Present, and Future
Plus • What We Are Working On • HTC Watch • Project Honors • Team News
MacRostieHistoric.com The Pizitz | Birmingham, AL
| What We Are Working On
Eagle & Phenix Powerhouses
Grand Warner Theatre
Columbus, GA | Hospitality
Milwaukee, WI | Arts
Houston, TX | Hospitality
Constructed in 1899 to power the three Eagle and Phenix mills, these powerhouses now sit above the Chattahoochee River following removal of the dam in 2012. The buildings, rehabilitated by Columbus-based W.C. Bradley and Co., will be used as rental event space that retains the large open interiors. MHA is consulting with the owner and Historic Columbus to secure federal and state historic tax credits for the project.
The Grand Warner Theatre, completed in 1931, is one of Milwaukee’s Art Deco gems. The 2400-seat movie palace operated for six decades but has been shuttered since 1995. MHA is serving as historic tax credit consultant for the Milwaukee Symphony Orchestra which plans to rehabilitate the theater and its 13-story office tower for the organization’s new performance and administrative home.
The 1926 Post-Dispatch building is indicative of Houston’s explosive growth in the early twentieth century as it ushered in the new oil economy. The 22-story former office building, rehabilitated utilizing the federal historic tax credits, has served as a hotel since 2003. Stout Street Hospitality is using the 25 percent Texas state historic tax credit for lobby and room updates.
Completed Projects October - December 2017
John Howland Jr. House
Bentonville, AR | Mixed Use
New Bedford, MA | Senior Housing
Southwest4&A is rehabilitating this 1910 Hotel, which most recently served as the town library and a bike shop. MHA is preparing the state and federal historic tax credit applications which will continue the property’s historic retail and commercial use.
The John Howland Jr. House was constructed in 1834 for a prominent New Bedford resident. The Federal style building was later converted to multi-family use. A 2005 fire left the building was damaged and vacant. In 2013, the Waterfront Historic Area League and The Resource, Inc. began rehabilitation. MHA is serving as the historic consultant for the project.
1819 N. Humboldt | Chicago, IL
5 & 15 Apartments | Moline, IL
92-94 Esmond St and 50-52 Lorne St/ 2 Wilson St. | Boston, MA
Carling Hotel Apartments | Chicago, IL
Highland Park Senior Apartments | Richmond, VA
Historic Garfield Apartments | Milwaukee, WI
Mechanics Mill (Phase 2) | Fall River, MA
Mystic Water Works | Somerville, MA
Old Market House | Newburyport, MA
The Plymouth | Chicago, IL
Washington School Apartments | Sheboygan, WI
The Historic Rehabilitation Tax Credit: Past, Present, and Future The Presidio | San Francisco, CA The modern preservation movement started in the 1960s and 70s. This was the time of Jane Jacobs’ The Death and Life of Great American Cities and Lady Bird Johnson’s patronage of national beauty. It was a time of public discourse over urban renewal and the country’s energy crisis. It was a time when the country celebrated its bicentennial and reflected sentimentally over its 200-year heritage.
to devastate the future of historic rehabilitation around the country. Key members like Senators Bill Cassidy (R-LA) and Tim Scott (R-SC) were able to persuade their peers to keep the 20 percent credit, but the 10 percent credit was eliminated. Compromise also came in the form of requiring the credit to be taken over five years instead of fully in year one.
Despite these celebratory and patriotic feelings, tax codes in the mid-twentieth century largely disadvantaged historic properties. In particular, the Revenue Act of 1954 and its declining balance depreciation method encouraged new development over rehabilitating aging buildings. The Revenue Act of 1969 set about even greater disparity that tipped the scales in favor of new buildings by eliminating accelerated depreciation for “used” commercial properties and favorable treatment for demolition expenses. Efforts by many in Washington - including politicians, the National Trust for Historic Preservation, and the newly formed Preservation Action lobbying group, - pushed for better incentives for old buildings. The first historic preservation tax credit made its way into the Tax Reform Act of 1976.
The effect of the change on the value of the credit in historic rehabilitation projects is yet to be determined. However, communities and real estate developers should see the retention of the program as a win. There is no doubt that the federal historic tax credit does and will continue to incentivize historic rehabilitations and stimulate economic growth in American cities large and small.
President Ronald Reagan and his administration were great believers in the historic rehabilitation tax credit, including it both the Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986. Until 2017, the 1986 version of the credit – a 20 percent credit for income-producing properties and a 10 percent credit for non-historic buildings built before 1936 – remained largely unchanged. Over those 30 years, the 20 percent credit helped to attract $131 billion in private investment for over 42,000 projects, create 2.4 million jobs, and generated $1.20 in tax revenue for every $1 in credit. And yet, sweeping tax reform in 2017 threatened to do away with this program. First a House bill proposed repealing it entirely; then a Senate bill reducing the 20 percent credit to 10 percent and repealing the 10 percent credit seemed set
MacRostie Historic Advisors and countless industry leaders are already looking to the future to ensure that rehabilitations continue to be a viable investment. Our involvement with the Historic Tax Credit Coalition, the National Trust for Historic Preservation, and state and federal government offices is helping to shape historic rehabilitation tax incentive programs that work for our clients and our communities. We hope that you will continue to speak up for this valuable program, engaging with your state and local legislators and sharing your stories of success in historic preservation. Learn more from the Historic Tax Credit Coalition or contact us to join us in our continued efforts. MHA
Charles H. Shaw Technology and Learning Center | Chicago, IL
Cottage Square Apartments | Easthampton, MA
| HTC Watch Missouri and Iowa State Historic Tax Credits in Danger As states gear up for a new year of legislative sessions, historic tax credit advocates are carefully watching the news out of Missouri and Iowa. Budget considerations and the momentum of federal reform have lawmakers in these states considering drastic cuts to economic incentives. The details of Iowa plans are unclear, yet Governor Kim Reynolds has gone on the record saying that “virtually everything is on the table” in her campaign to cut and simplify state taxes.
Blair School | St. Louis, MO
In Missouri, a bill to cut spending on the historic tax credit has already been introduced in Jefferson City. S.B. 590 proposes to reduce the aggregate cap of the program from $140 million to $50 million per fiscal year. St. Louis is considered to be one of the most active cities in the country for historic rehabilitations, and limiting the benefit to a third of the current level could have similar effects on the development activity for these types of projects. Additionally, a similar bill has been introduce to create a $50 million cap for the Missouri low-income housing credit which will also have negative impacts on historic structures where both credits are critical.
2018 Could See Passage of HTCs in Michigan and Tennessee Michigan State Senator Wayne Schmidt introduced a bill in the summer of 2017 that would restore a long-gone historic tax credit program that was successful for the state from 1999-2011. The 2017 version of the bill proposed a 25 percent credit on qualified rehabilitation expenditures for certified historic buildings with no aggregate cap. In December, the bill passed the Michigan State Senate and is now in the State House where it has been referred to the Tax Policy Committee. The Tennessee legislature has introduced bills (HB 1468 and SB 1685) to provide for a rebate on state sales and uses taxes associated with the rehabilitation of a certified historic structure. The rebate is available for the full value of sales and use taxes for all reasonable expenses related to the rehabilitation and must be taken by the owner of the property. The bills are currently in sub-committees.
| Project Honors
October - December 2017
Blue Ribbon Management | Milwaukee, WI WCREW Showcase Awards, Judges’ Choice: Impact
• Lofts on Arthington
Mercy Housing Lakefront | Chicago, IL Affordable Housing Finance, Reader’s Choice: Historic Rehab
Lofts on Arthington | Chicago, IL
| Team News
• Anna Mod | Director, MHA Southwest
Congratulations to Anna for being appointed to the Docomomo US Board of Directors.
• Amanda Barry | Associate, MHA Southwest
MHA is pleased to welcome of Amanda to our MHA Southwest office. She comes to us from the City of Houston with five years of historic preservation experience.
MHA DC Washington, DC | 202.567.6055 MHA Midwest Chicago, IL | 312.878.1246 MHA Northeast Boston, MA | 617.531.7161
MHA Southeast Charleston, SC | 843.203.5405 MHA Southwest Houston, TX | 713.470.0057 MHA West San Jose, CA | 408.490.2069
The Historic Advisor Editor | Katherine Ferguson, Marketing Manager | email@example.com | 843.779.3630 MacRostieHistoric.com
Feature | The Historic Rehabilitation Tax Credit: Past, Present, and Future