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MacRostie Historic Advisors

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The Minnesota report clearly shows that historic tax credits are not just about saving buildings but about creating jobs, stimulating

Posted by MacRostie Historic Advisors on Saturday, November 22, 2014

the economy and creating real investment opportunities in core urban areas across the country.

Report on Minnesota State Historic RehabilitationTax Credit Just Released - Elizabeth Breiseth

University of Minnesota Extension

Yesterday, the University of Minnesota Extension, with funding from the Minnesota State Historic Preservation Office, released the first ever report on the Minnesota State Historic Rehabilitation Tax Credit, which was signed into law in April 2010, making Minnesota the 30th state to enact a state historic rehabilitation tax credit.

The program mirrors the federal rehabilitation tax credit, and projects are eligible to claim the state credit if they are allowed the federal credit. The Minnesota program allows a state income tax credit equal to 20% of the cost of rehabilitating a qualifying historic property. The Minnesota credit allows a developer to choose either a certificated or refundable credit or a grant (which will stimulate nonprofit use of the incentive). Since becoming law, the credit has stimulated green job growth, increased local tax bases, and helped to revitalize urban and main street communities through reinvestment in historic properties.

The report shows a bright spot in an otherwise challenging economic landscape. During the program's first year, 14 projects received preliminary approval for the credit and had begun construction. An estimated $343 million dollars will be spent on these projects, with $250 million on local, qualifying rehabilitation expenses. These projects will also support 2,948 jobs. The total economic impact of projects currently being leveraged by the Minnesota Historic Rehabilitation Tax Credit is $451 million, including $152 million in labor income. Click here to read the report.

Our own experience at MacRostie Historic Advisors (MHA) has been a positive one, in that the new credit program has generated real rehab interest. We have seen an up-tick in the number of projects happening, particularly in urban areas such as Saint Paul and Minneapolis. The projects are taking many different forms. In Minneapolis, Dominium Development is creating affordable housing in the Buzza Company Building and artist housing in the Pillsbury A Mill. Another Minneapolis project is being undertaken by the Village Green Companies, which is creating 250 units of market rate housing with ground floor retail in the Soo Line Building. The Chittenden & Eastman Building in St. Paul is being undertaken by Ironton Asset Fund and will house 104 apartments while the Jacob Schmidt Brewery Complex has been subdivided and is being developed by Dominium Development and Fort Road Federation for commercial and residential uses. Combined, these projects represent more than $170 million in total development costs.

The success of the Minnesota historic credit as quantified in the report is just another great example of how the rehab of historic buildings continues to be one of the best economic development tools during one of the worst economic downturn. Like several other states, the Minnesota program is directly tied to the federal program, making the urgency of preserving the federal program even greater. The Minnesota report clearly shows that historic tax credits are not just about saving buildings, but about creating jobs, stimulating the economy and creating real investment opportunities in core urban areas across the country.

About the blogger: Elizabeth Breiseth is an Associate in the Midwest Office of MacRostie Historic Advisors.

Without all of these sources, great projects like those highlighted in the Timmy Awards would not exist.

Posted by MacRostie Historic Advisors on Tuesday, November 18, 2014

The National Housing & Rehabilitation Association celebrated the winners of the 7th Annual J. Timothy Anderson Awards for Excellence in Historic Rehabilitation - Albert Rex

The National Housing & Rehabilitation Association (NH & RA)

The National Housing & Rehabilitation Association (NH & RA) was back in Boston this week for its annual fall meeting. This is the 35th year they have been here and many things have changed in the affordable housing and historic rehabilitation fields during that time – one major issue being the complexity of the financing it takes to make these projects work.

This was apparent during the annual Timmy Awards presentation. The Timmys, as they are affectionately known, are in honor of J. Timothy Anderson. Tim was an architect and an early leader in the preservation movement especially in the adaptive reuse of historic buildings. As a practicing architect and adjunct professor at Boston University, Tim had a major impact on many still working in the field and if you had the opportunity to meet him, you would remember the experience fondly.

The awards are given in many different categories and represent a wide range of building types and uses. As you would imagine from NH & RA’s name, many of the awards go to buildings that twin the use of the historic and low-income housing tax credits, but they also cover market rate and commercial projects as well. A complete list of the award winners can be found here.

The final award of the event was the Most Advanced Financial Structure. Larry Curtis of Winn Development, NH & RA's most recent past president, presented this award. During his remarks Larry noted that any of the project that were nominated or won could have easily been in this category. He went on to note the complexity of these transactions and how it takes every bit of real estate knowledge gleaned over the past decades to make them work. Development is not getting easier, and even before the 2008 downturn, projects were using multiple sources of tax credit equity to make the financing work. Now the projects are even more complex relying on multiple tax credits and other sources of soft funds in order to provide high quality affordable housing or rehabilitate significant historic buildings.

There was not one project in the Timmys that did not combine multiple tax credits either utilizing the federal low-income housing tax credit, the federal historic investment tax credit or the new market tax credit. In addition, many of these projects had corresponding state tax credits. If one of these sources goes away, either at the federal or state level, then most likely these award-winning projects go away as well. Credit Worthy is a blog about the historic tax credit industry, but all the tax credit programs that foster development are important.

As we in the historic tax credit industry do things like reach out to our legislators, you can read more about that on the National Trust website, in support of the historic tax credit, we should also support the new market and low income credits as well. Without all of these sources, great projects like those highlighted in the Timmy Awards would not exist.

About the Blogger – Albert Rex is the Director of the Northeast Office of MacRostie Historic Advisors.
Albert has been active in preservation and real estate in New England for the past 17 years. Read more about Albert here.

 

For the gold standard in historic rehabilitation tax credits, look no further than America's heartland

Posted by MacRostie Historic Advisors on Sunday, November 9, 2014

Missouri: Preservation’s Gold Standard - Mary Nastasi

Preservation’s Gold Standard - Mary Nastasi

For the gold standard in historic rehabilitation tax credits, look no further than America's heartland. Missouri's state tax credit program, one of the oldest and most influential in the country, offers a 25% credit on income-producing historic rehabilitations. Yet despite its incredible impact, legislation introduced in 2010 meant to bolster the state’s flagging economy threatened to cap and ultimately sunset out the credit. After weeks of debate in a special session, the bill was tabled, leaving the current $140 million cap in place and preserving one of the state's most important economic development tools.

The rehabilitation of the Hamilton Hotel is a good example of the program's impact. Opened in Saint Louis in 1903, the Hamilton was speculatively built in anticipation of the 1904 World's Fair. Over the course of the twentieth century, the building's function transitioned from a hotel to a medical facility to affordable housing. Rehabilitation work will restore and preserve the building's historic character while updating the property and allowing it to continue serving the community's need for affordable housing. In addition to the jobs created by the rehabilitation process, the project will create at least three permanent positions.

The historic tax credit has been a great economic development tool for Missouri. A 2002 Missouri Department of Natural Resources study found that, since its introduction in 1998, the state historic tax credit has created 6,871 jobs, $121 million in income, $283 million in gross state product, $60 million in total taxes, and $249 million in in-state wealth all at little net cost to Missouri taxpayers. Worth 25% of a projects QRE's, Missouri has one of the largest state credits in the country. Results of the 2002 study also indicate that $500 million in state tax credit allocation generated $2 billion in investment. The credit serves large and small developers alike, with approximately 2/3 of the completed projects valued at less than $500,000 each.

The state tax credit program is also valuable for its ability to create jobs. Building materials can come from anywhere, but the actual restoration work, the installation and eventual maintenance of those materials, that's all local. Donovan Rypkema, principal of PlaceEconomics, estimates that the Missouri state tax credit has created over 40,000 full-time equivalent jobs since its implementation, adding $673 million directly and $700 million indirectly to Missourians. Similarly, a 2010 Missouri Growth Association study found that the credit is associated with higher-than-expected rates of annual job growth and higher-than-expected increases in high-paying sustainable jobs, among other great economic benefits.

It's clear that the credit has become a major force in Missouri's economy, and its loss would have been a huge blow. Many projects, the Hamilton Hotel included, could not happen without state tax credit financing. Missouri's close call is a clear reminder of the importance of vigilance and advocacy; the credit is too valuable to lose.

About the Blogger: Mary Nastasi is a Junior Associate in the Northeast Office of MacRostie Historic Advisors.
Read more about Mary here.

Constant vigilance has long been a part of the ethos of the preservation community and is really needed in creating and

Posted by MacRostie Historic Advisors on Friday, November 7, 2014

sustaining a historic tax credit programConstant Vigilance - Albert Rex

Constant Vigilance - Albert Rex

Constant Vigilance

A few weeks ago I had the opportunity to once again testify at the State House on behalf of the Massachusetts Historic Rehabilitation Tax Credit. I've done this numerous times since the credit was first submitted as a component of an economic stimulus bill in 2003 and passed into law later that year. From the beginning, Jim Igoe and his staff at Preservation Massachusetts has organized these efforts along with their lobbyist Paul Pezzella. It seems like each trip to the Statehouse to testify or meet with a legislator does not immediately bear fruit, but over the eight years since the legislation was passed the credit has had its sunset date extended by a decade and the credit has been increased five fold.

Constant vigilance has long been a part of the ethos of the preservation community, and is really needed in creating and sustaining a historic tax credit program. Many statewide preservation organizations have brought this level of commitment to advocating for these programs. They have funded or undertaken studies that show the impact of these credits on their state's economy from job creation to increases in tax revenue and their state’s gross domestic product. They have developed relationships with their legislators and other stakeholders and educated them about the importance of the credit. They have spent hours upon hours testifying and working for the retention and increase of these credits. Finally, they have developed relationships with the development community, who has also come out in support of these programs.

This same level of vigilance has not taken place at the federal level – because it really hasn't needed to. There have been no significant threats to the credit in the 30-plus years it has been around, with the biggest changes happening during the Reagan tax changes in 1986 and the reduction of the credit from 25% to 20% . There were efforts to create a homeowners historic credit, led by the late Rhode Island Senator John Chafee, but until the last two years, there has been little effort in trying to have any impact on the federal historic credit. With tax reform at the federal level now a reality, it is time to look at the successful track record in many states of creating and maintaining their credits. Over the past year or so the Historic Tax Credit Coalition (HTCC) has made important headway on expanding advocacy on behalf of the federal credit and its constituents. A good- and necessary- first step, but the effort must continue.

The success of advocacy at the state level, at a time when state budgets are being slashed, should provide a course of action in addressing the federal program. The historic credit has been the most affective tool for historic preservation and has led to the rehabilitation of thousands of buildings. The same level of commitment and constant vigilance that is seen at the state level must be applied at the federal level, or the preservation community risks losing a most valuable asset.

About the Blogger – Albert Rex is the Director of the Northeast Office of MacRostie Historic Advisors.

Albert has been active in preservation and real estate in New England for the past 17 years. Read more about Albert here.

Advocacy around tax reform should not only be seen as a time to play defense, but also a chance for us to highlight job creation.Welcome to Credit Worthy

Posted by MacRostie Historic Advisors on Tuesday, October 28, 2014

Welcome to Credit Worthy - Bill MacRostie

Credit Worthy - Bill MacRostie

Welcome to Credit Worthy, a blog about the historic tax credit industry. With the specter of tax reform looming on the horizon and what seems like daily changes in state historic credits, we felt this was an opportune time to launch the blog. Credit Worthy is being developed in conjunction with MacRostie Historic Advisors’ new web site, which will be coming in October.

Our goal in launching the blog is to provide a forum for news and discussion about all aspects of the historic tax credit industry. Having a national practice, headquartered in DC, we have an opportunity to experience firsthand what is happening across the country and want to share this experience. We will keep you up to date on the latest lobbying efforts on the federal credit front and on changes with NPS guidance. We will also be calling on many of our colleagues to guest blog about their areas of expertise, ranging from accounting to tax law to syndication of federal and state historic credits.

In addition to providing information about all aspects of historic tax credits, we hope we can help promote efforts by organizations like the Historic Tax Credit Coalition and National Housing & Rehabilitation Association to lobby on behalf of our community. Advocacy around tax reform should not only be seen as a time to play defense, but also as a chance for our industry to highlight job creation, and other positive impacts the credits have at the local, state and federal levels. We plan to blog a couple of times a week, so if there is anything you think we should be discussing…let us know and look for our next post.

About the Blogger - Bill MacRostie is the Principal of MacRostie Historic Advisors, a firm which he founded in 2004. He has been in the private sector consulting on historic tax credit projects for over 27 years.

Read more about Bill here.