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Credit Worthy News

Richard Sidebottom named Director of MHA Southeast

Posted by Katherine Ferguson on Wednesday, February 3, 2016

MHA announces the promotion of Richard Sidebottom from Senior Associate to Director of MHA Southeast in Charleston, South Carolina.

Richard Sidebottom joined MHA in 2010 as an Associate in the MHA Northeast office in Boston. He began the Charleston based branch of MHA in 2014 and has managed historic tax credit projects across the Southeast including the Cigar Factory in Charleston and the Pizitz Building in Birmingham. Sidebottom directs consulting services for federal and state historic tax credit certification, National Register nominations, the South Carolina Textile Community Tax Incentives, Section 106 reviews and has extensive knowledge of local incentive and regulatory programs in the region.

MHA_Southeast.jpg
| MHA Southeast team (L to R): 
Caroline Wilson (Associate), Richard Sidebottom (Director),
Katherine Ferguson (MHA Marketing Manager)

Prior to joining MHA, Sidebottom operated a private historic preservation practice in South Carolina and was supervisor of compliance, tax incentive and outreach programs with the South Carolina State Historic Preservation Office (SHPO). Sidebottom earned a Bachelor of Arts in History and Classical Studies from Emory University and a Master of Architectural History and Historic Preservation degree from the University of Virginia. He is an active member of the Rotary Club of Charleston, has served on the South Carolina National Review Board (2009-2012), and is a former teacher of graduate and undergraduate historic preservation courses at Clemson University, the College of Charleston, and the University of South Carolina.

The MHA Southeast office is located at 3 Broad Street in the Charleston Historic District, a National Historic Landmark District in Charleston, South Carolina. 

Topics: MHA Southeast

North Carolina Rehabilitates Historic Tax Credit

Posted by Richard Sidebottom on Friday, October 2, 2015

NODA Mills | Charlotte, NC
NODA Mills | Charlotte, NC

For many years, North Carolina was the poster child for healthy historic tax credit programs (HTCs). It was a shining example of how a state program can spur private real estate and economic development. Numerous historic rehabilitations testify to the success of the former HTC and North Carolina Mill Tax Credit programs. Some impressive examples are Wake Forest Biotech Place in Winston-Salem, a master-planned development that transformed the former R. J. Reynolds Tobacco Company complex into offices and research laboratories, and the many abandoned mills around Charlotte brought back to life as affordable housing, breweries and mixed use developments. With a user-friendly state tax credit program and the outspoken support of a strong statewide preservation organization, Preservation North Carolina, the state was a hotbed for historic rehabilitations, with the sixth highest number of projects in the country just prior to. In 2014, 44 rehabilitation projects received Part 3 approvals with a total of more than $56 million spent by the private sector on qualified rehabilitation expenditures (QREs).

That is why it was so disappointing that the state HTC and the state Mill Tax Credit programs were allowed to sunset at the end of 2014. Even before the HTC was gone, a campaign driven by Governor Pat McCrory and Secretary Susan Kluttz of the Department of Natural and Cultural Resources was underway to reinstate some form of these instrumental revitalization programs for the Tar Heel State. According to the 2014 report, Decades of Success: The Economic Impact of Main Street in North Carolina, sponsored by the North Carolina Department of Commerce and North Carolina Main Street Communities, nearly 300 projects in Main Street districts alone used the historic tax incentive between its inception in 1998 and 2013, with private investment totaling over $190 million in rehabilitation costs.

Good news came in the last few weeks from the North Carolina legislature! A revised tax credit program combining the HTC and Mill Tax Credit programs was included in the budget bill recently passed by the legislature and signed by Governor McCrory. While final details of the program are subject to change, the program should begin on January 1, 2016 and will include the following:

RATES 

  • Income-Producing (combines Commercial & Mill)
    • Reduces base credit rate to 15%
    • +5% for mill ($3M spending requirement has been eliminated)
    • +5% for economically distressed counties
  • Home-owner Residential
    • Reduces to 15% credit
    • Applies a cap per project QRE @ flat project ceiling ($150K)
    • $10,000 minimum over 24 months

CAPS

  • Income-Producing (combines Commercial & Mill)
    • $0 to $10M base rate
    • $10M to $20M base rate reduced by 5%
    • Hard cap at $20M
  • Home-owner Residential
    • $150,000 cap

INSTALLMENTS
Can now be claimed all in one year. All credits claimable once building is placed into service with a 10-year carry forward.

TAXES CLAIMABLE AGAINST
Combined credits claimable against income taxes, grow premium taxes and corporate franchise taxes. 

The combination of the above results in a maximum per project cap of $4.5 million. This may not be as generous as the combination of the previous programs, but it will have a positive impact on a majority of the potential projects in the state and spur continued economic development. 

The North Carolina SHPO will be promulgating new regulations in the coming months and we will make sure to provide updates.

Contact us if you would like to know how these or other state HTCs can bring equity to your historic rehabilitation project. 

Topics: policy, North Carolina, HTC, MHA Southeast

Historic Tax Credits Preserve Affordable Housing

Posted by MacRostie Historic Advisors on Tuesday, July 21, 2015
Briarcliff Summit Apartments Atlanta, GA
Briarcliff Summit Apartments
Atlanta, GA

The term preservation means different things to different people. To colleagues in our firm, it can mean historic buildings, tax credits or advocacy. To many of our clients, it relates to keeping affordable apartments affordable at the end of their original financing or subsidy period. Many of these housing subsidy programs, like Section 8, have been around for decades and are managed by HUD.

Not surprisingly, when the term of earlier subsidies end is aligned with the need for significant capital investment in the building. The owner often has to make a choice to preserve the existing affordable housing and reinvest, convert the property to market rate or owner occupied units, or to sell it to a third party. Fortunately, many current and new owners of these properties choose to preserve their affordability and they seek additional forms of financing. This often leads to incorporating state and federal historic tax credits (HTCs) as a component of their capital stack.

According to the Annual Report on the Economic Impact of the Federal Historic Tax Credit FY 2013, between 1978 and 2013 the historic tax credit program helped create over 135,000 units of affordable housing. HTC programs align well with housing preservation projects, as many of these units were created utilizing historic credits and the proposed work on the property will exceed the owner’s adjusted basis allowing for access to the historic credit again. In some cases, the buildings may have never had a historic designation when the units were developed as affordable, but are eligible for National Register listing today.

A good example of the positive impact the historic credits can have is a recent MHA project, the Briarcliff Summit Apartments in Atlanta, Georgia. Originally constructed in 1924 as a residential hotel by Asa G. Candler Jr., the building was converted to affordable housing in the 1980s. It had fallen into significant disrepair when our client Evergreen Partners, who specialize in affordable housing and are active members of the Institute for Responsible Housing Preservation (IRHP), purchased it. Evergreen utilized a variety of sources for the project, including state and federal historic and low income housing tax credits (LIHTCs) as well financing from HUD.

Institute for Responsible Housing Preservation (IRHP) “The physical needs and renovation challenges a developer encounters on a standard preservation project are always amplified when dealing with a historic structure,” says Evergreen Development Associate Nick Bouquet. “Briarcliff Summit had substantial deferred physical needs and was one of the most transformational projects Evergreen Partners has had the opportunity to participate in. The level of renovation needed to both revitalize the property and renew the building’s distinct historic features would have not been feasible without the availability of the historic tax credit resource”

The capital stack for Briarcliff included state and federal LIHTCs. Combining these with HTCs provided additional funding sources and lead to many positive design aspects for the historic building. Project architects TAT (The Architectural Team) preserved the important decorative features originally designed by architect G. Lloyd Preacher including terracotta roof tiles, iron railings and floral glazed terracotta paneling. Perhaps most importantly for the preservation of the building, the incompatible 1970s era windows were replaced with new energy efficient units that match the windows shown in historic photographs.

Briarcliff Summit Apartments is an excellent example of how state and federal HTCs can be paired with a variety of housing subsidies to create a successful community preservation project. These projects preserve the physical fabric of the neighborhood by rehabilitating important historic resource, but also preserve the social fabric of community by providing high quality affordable housing for the residents who need it the most.

We recently outlined the increase in the Georgia state historic tax credit program in a previous blog. Learn more about these changes here.

Post by Richard Sidebottom |  Senior Associate, MHA Southeast

Topics: Georgia, historic tax credit, HTC, LIHTC, low income housing tax credit, MHA Southeast

Historic Tax Credit Programs Make States Economically Competitive

Posted by MacRostie Historic Advisors on Friday, July 10, 2015
Historic Lincoln School Apartments | Shawano, WI
Historic Lincoln School Apartments | Shawano, WI
Completed in October 2014, this former high school was converted to a 24-unit affordable housing apartment building. 

State tax credit programs come in many shapes and sizes, but one commonality is the economic impact they have of bringing investment to historic cities throughout a state. Many of these cities have historic resources related to a period of industry that certainly once shaped the community but now sit abandoned. Repurposing these buildings is a viable and important path to reinvestment. 

Another commonality is that state historic tax credit programs are often threatened from the beginning, as there is inevitably a debate between the dollars coming in as investment versus the dollars going out as tax credits.

Just such a debate has been ongoing in Wisconsin for the past year. Governor Walker proposed to cap the state tax credit program, which was just raised to an uncapped 20% program in January 2014, while the legislature has been working to preserve it in its current form. Since the program change, just 18 months ago, 25 projects have utilized the 20% credit resulting in an estimate of $480 million in construction spending and $88.7 million in annual operations according to a study done by Baker Tilly.

As consultants on historic rehabilitation projects, we often see immediate results on these state programs once they are signed into law. “Our Midwest Office noticed a surge in the volume of Wisconsin rehabilitation projects in 2014 and 2015 due to the new state credit, including more small and medium sized projects which may not have been viable without the added bump from the increased state credit,” notes MHA partner and Midwest director, Allen Johnson. “We are also seeing projects being undertaken in small towns and cities where previously our work was wholly in Milwaukee.”

The good news is that the Wisconsin legislature prevailed and the program will not change in the coming year.

Meanwhile another scenario is playing out in North Carolina where several tax credit programs, mostly targeted at the state’s large resource pool of historic mills, have been allowed to sunset despite showing a strong economic impact since their creation in the late ‘90s. Myrick Howard, President of Preservation North Carolina, noted in his recent op-ed piece for the News & Observer that “the revival of downtown Durham, Raleigh, Winston-Salem, Asheville, Salisbury, Mount Airy, New Bern and Edenton, to name a few, hasn’t been coincidental. Nearly $2 billion have been spent by the private sector, stimulated by this statewide incentive.”

NODA Mills | Charlotte, NC
NODA Mills | Charlotte, NC

Wisconsin is fortunate to have preserved its credit and will certainly have a competitive advantage when it comes to attracting developers, especially from another state in its region, Michigan, which lost its state historic credit several years ago. Developers that are experienced in using the historic tax credit programs are expanding beyond their home states in order to take advantage of these benefits elsewhere.

In a time of shrinking state budgets and less federal support, legislatures often look to “grow” their state budgets by eliminating historic tax credit programs despite several studies that show there is a positive return on investment from these programs. In addition to the construction dollars and jobs generated by rehabilitation projects, there is a long-term affect at the local level of taking a building that may have been completely off the tax roles and returning it to use, which generates increased real estate taxes that often funds schools or other local infrastructure.

Hopefully North Carolina and other states will follow Wisconsin’s lead in supporting programs that can have a significant economic at the local level while knitting back together the architectural fabric that makes these cities and towns whole.

Written by Albert Rex, Partner and Director of MHANortheast

Topics: historic tax credit, North Carolina, Wisconsin, MHA Southeast, MHA Midwest, state policy

South Carolina Improves Historic Rehabilitation Tax Credit

Posted by MacRostie Historic Advisors on Wednesday, July 1, 2015
The Westendorff | Charleston, SC
The Westendorff | Charleston, SC

On June 9, South Carolina Governor Nikki Haley signed legislation that improves the state historic tax credit for rehabilitated income-producing properties and abandoned buildings. The most notable change is the new election for a 25 percent tax credit on rehabilitation costs for income-producing preservation projects.

Benefits of Historic Rehabilitation Tax Credit Increase

The 25 percent tax credit is an improvement for those projects that have rehabilitation costs up to $10 million. With a project cap of $1 million, rehabilitations over $10 million should seek the uncapped 10 percent tax credit.

One provision of the legislation that remains the same is that the credit must be taken in installments starting in the year in which the property is placed in service. However, the term for those installments has been reduced from five years to three years, which is good news for investors.

The final adjustment made to this tax credit legislation enables an ownership group to assign the tax credit to another entity through a pass-through tenant structure.

Changes to Abandoned Building Rehabilitation Tax Credit

South Carolina’s Abandoned Building Tax Credit also received changes in the 2015 round of amendments that includes a new definition for a ‘state-owned abandoned building’, the inclusion of insurance premium taxes as one of the taxes against which a credit can be claimed, the reduction of the credit term from five to three years, and the removal of a limitation related to the amount a taxpayer’s tax liability may be reduced.  An additional section was added to outline the manner in which a taxpayer can receive certification of an abandoned building site.

These revisions, that were effective immediately on the governor’s signing, signify an acknowledgement by state lawmakers that the rehabilitation of historic buildings is a powerful economic development tool in historic communities across the Palmetto state.

Written by Richard Sidebottom, Senior Associate

MHA associates are well versed in state programs across the country. Contact us if you have questions about these South Carolina programs or other historic rehabilitation tax credits.

Topics: historic tax credit, South Carolina, MHA Southeast, state policy