NJ State Planning Commission assessment of state plan suggests need for tax credit

Revitalizing cities and town centers by attracting development investment through a historic tax credit will create jobs and support smart development principles.

The New Jersey State Planning Commission has released its Impact Assessment of the proposed State Plan, and its findings give us another strong argument for a state historic preservation tax credit.  The Impact Assessment quantifies the savings, in both land and money, that the state would likely see by managing future growth according to the “existing centers-based” strategies of the State Plan.  It shows that revitalizing existing communities means significant reductions in road building, water and sewer and other infrastructure and municipal services costs.

The New Jersey State Planning Act requires the State Planning Commission to revise and re-adopt the State Development and Redevelopment Plan every three years (although it’s now six years overdue!). The act further requires that an Impact Assessment be prepared prior to each revision and re-adoption.  The 60,000 acres of land saved by adhering to the State Plan, according the just-published Assessment, would include 17,000 acres of agricultural land.   At the recent rate of 15,000 acres of new development per year, the total savings translate to a 20 percent reduction in land consumption over the next 20 years.  Now that’s Smart Growth!

Also conforming to the NJ Heritage Development Coalition’s positions on job creation, the report estimates that a State Plan-influenced, existing communities development scenario would increase jobs by at least 10 percent in urban and inner-suburban communities that are presently suffering a variety of problems stemming from growth policies that favor greenfield development over redevelopment.

As NJ Future has reminded us this week: “Governor Christie is on record in support of a strengthened state planning process, pledging to improve interagency coordination, discourage suburban sprawl and provide incentives for redevelopment and urban revitalization.”  And he’s also on record as supporting a state historic rehab tax credit as one of those powerful revitalization incentives.

Interesting times.

 

NJ Historic Tax Credit bill reintroduced in 2010 legislature

The Historic Property Revitalization Act, to make New Jersey the 31st state to offer a powerful historic rehabilitation tax credit to spur job creation and desperately needed economic growth, has been re-introduced in the 2010 New Jersey Legislature.

Lead sponsors Sen. Barbara Buono (Middlesex) and Asym. Reed Gusciora (Mercer), long champions of the Historic Property Revitalization Act (HPRA), are heading efforts to get the legislation enacted, after several years of opposition from former NJ Governors.  Now, with the need for private investment, skilled jobs and community revitalization greater than ever, and a new Governor who supported HPRA during the fall election campaign, the historic tax credit legislation is poised for success!

To learn more and get involved, visit Preservation New Jersey’s “Take Action” webpage.  Ask NJ Assembly members and Senators to co-sponsor the bill (S659, A1851)

 

Updates from the states that HAVE historic tax credits (NJ doesn’t)

We spent a couple of very informative hours yesterday on a national conference call, hearing updates from several of the states that have (1) recently enacted new historic tax credit legislation, (2) fended off legislative and/or executive attacks on existing, always very effective, tax credit programs, or (3) expanded exsiting tax credit programs, even in the current dreadful economic climate.

Ohio and Arkansas recently established new historic tax credits programs, and the advocates –  statewide nonprofit heritage preservation organizations, chambers of commerce, developers, neighborhood and Main Street groups and affordable housing providers  – organized effective lobbying campaigns with similar themes.  Jobs creation and new economic activity were, in every state, the key to gaining political support for tax credit programs.  New York State’s recent expansion and improvement of their credit (see previous blog posts) occurred thanks to the Preservation League of NY State’s efforts to map the communities where development/rehabilitation projects would occur (National Register listed or eligible places in mostly distressed census tracts).

A major loft project in the bio-technology corridor in St. Louis, MO that used state and federal tax credits

Michigan has seen an improved and expanded tax credit program, thanks to the Michigan Historic Preservation Network’s “Economic Benefit Report Cards” that have demonstrated the job creation and economic expansion that has been a direct result of tax credit-driven projects across that high-unemployment state.

Strong and broad coalitions in Rhode Island, Iowa, Minnesota, Missouri and many other states helped to push legislation through that created, defended or expanded tax credit programs.  Active and involved leadership from smart growth groups, sustainability and environmental advocacy organizations, labor and real estate development entities and economic development interests was key to the effective results in each state.

New Jersey has a lot to learn, but many mentors to emulate!  It’s time for a “Heritage Development & Stimulus Summit,” with our partners in NJ and from nearby states with interests in development in our state coming together with opinion and policy leaders and makers to see a historic tax credit passed in 2010. With a Governor-elect on public record as being in favor of a historic tax credit, there is no better time than now!

Contact the NJ Heritage Development Coalition to be a part of a tax credit summit:  info@NJheritagedevelopment.org.

 

The Road to “Historic” Investment is Paved with Good Intentions: Fixing the New York State Historic Tax Credit

More than thirty states across the nation continue to reap a bonanza of surging economic activity by providing state historic tax credits to taxpayers undertaking qualified renovations of historic structures. The most successful state programs have been intentionally designed to compliment the existing federal historic tax credit program, creating significant efficiencies for already overburdened developers and spurring more private/public investment than would otherwise occur.

Recognizing this economic upside and the “green” nature of historic preservation, New York State just amended its state historic tax credit program. The previous incarnation had several limitations, especially related to transferring the credit and its modest dollar ceiling of $100,000, which had negligible real world impact on projects costing tens of millions. While the amended legislation is to be cheered as a step in the right direction – greater symmetry with the federal tax credit program and raising the credit ceiling to $5 million per project – the practical effects are not quite so rosy.

As a result of income and other regulations in the U.S. Internal Revenue Code, the majority of owners and developers of historic structures find that they cannot efficiently utilize the earned historic tax credits. Under the federal program, this problem is solved by taking on an investment partner and/or long term lessee for the project who can use the credits in accordance with law. This investment partner and/or long term lessee will provide equity funds to the deal in return for the credits and other financial benefits. In effect, a transfer of the credit occurs to optimize the value of the credits and to stimulate projects that might have otherwise had a gap in their financing sources. Herein lies the Achilles’ Heel of New York’s amended historic tax credit legislation.

 

Still more investment to go to NY, not New Jersey?

Well, another neighboring state has ramped up its historic rehabilitation tax credit, leaving New Jersey still further in the dust!  Recent changes to New York’s historic preservation tax credit program increases the availability of incentives to spur community revitalization, historic preservation and job creation.

According to the Preservation League of New York State, “An economic impact study recently conducted by HR&A Advisors of New York predicts that the enhanced rehabilitation tax credit will spur over $500 million dollars of economic activity in New York State and create some 2,000 jobs over its initial five-year lifespan.”

And Commissioner Deborah VanAmerongen of the New York Division of Housing and Community Renewal said, “The Rehabilitation Tax Credits will foster new private and federal investment where it is most needed: our economically distressed downtowns and commercial districts, main streets, and older residential neighborhoods. Further, these incentives will encourage the use or reuse of existing affordable housing resources. I’m delighted that we now have a more powerful tool for revitalizing communities across New York State.”

The act takes effect on January 1, 2010.  There’s still time to keep those investment dollars in New Jersey.  Attention Governor, Treasurer, NJ Economic Development Authority, et al!

 

Missouri Legislature passes tax credit program extension, largely intact

In the early hours of  May 15th, the Missouri Senate crafted a compromise bill that struck middle ground among  Senators who had spent months gridlocked over the historic tax credit issue and economic development. Missouri’s historic rehab tax credit has had immense economic benefits.  According to the Missouri Department of Economic Development, the credit generated nearly 5,000 jobs in fiscal year 2007 and, as stated by Donovan Rypkema, leading preservation economist, has produced over 40,000 jobs throughout the life of the program.

Senator Brad Lager , who pushed for a cap and other limitations on the historic tax credit, agrees that the compromise language achieves the necessary budget certainty which he sought throughout session. According to Senator Jeff Smith, a persistent tax credit advocate from St. Louis, “now that the critics have gotten the ‘budget certainty’ they sought, the program will have the stability to flourish in the years ahead.”

Provisions of the bill include:

• A per-project residential cap of $1,000,000 in qualified rehabilitation expenditures (QREs) for owner occupied single family homes;
• A small project exemption for projects with $1.1 million in qualified rehabilitation expenditures (QREs) (these do not count toward a cap);
• $140 million cap on historic tax credits (existing projects do not fall under the cap); and
• An effective date of January 1, 2010.

The small project exemption will allow smaller-scale projects to continue redevelopment without the cap. Based on historical data, it will allow around 75 percent of all deals to be unaffected by the cap, toward which their dollars will not count. Jacob Sanders, a Springfield, Missouri CPA, believes that “the small deal exemption is key. It’s those small developers right now that are having such a hard time. Plus, the large percentage of projects we have, especially outside of Saint Louis and Kansas City, will fall into that category.” And, the $140 million cap allows room for large projects while providing the restriction sought by some lawmakers.

See the Missouri Coalition for Historic Preservation & Economic Development for more.

 

Tax credit bill passes Assembly Environment; developers note loss of development investment in NJ

The Assembly Environment Committee passed the proposed New Jersey historic rehabilitation tax incentive bill, the Historic Property Reinvestment Act (A791) this afternoon.  The vote was unanimous; many thanks to prime sponsor and committee vice-chair Asm. Reed Gusciora.

Compelling testimony and/or support from PNJ president and preservation architect John Hatch, Trenton developer and Trenton Downtown Association president David Henderson, Joe Simonetta representing NJ-AIA and City Scape Capital Group CEO Bill Hoffman outlined the importance of the tax credit to the stimulation of NJ’s nearly dormant development market.

Philip Fierro, Executive Vice President of Manhattan developer Metrovest Equities, the firm currently developing the nation’s largest federal tax credit-driven paroject, The Beacon (former Jersey City Medical Center), also provided persuasive testimony about the value of the proposed historic preservation stimulus bill.  We thank him for his remarks, herewith in full:

“The benefits to commercial redevelopment in this current economic climate are in line with the stated governmental role to stimulate the economy, with the desired effect of creating job opportunities, both permanent and construction.  One of the key benefits to this legislation would be to create revenue streams to the state and local bodies through employment and future tax revenues.

The current turmoil in the capital markets, specifically the Bank Credit and Mezzanine tranches, make the capitalization of large commercial developments very challenging, if possibleat all.  The scarcity of money in the subordinate tranches is causing market participants to charge higher rates of interest in order to fund.  This has the effect of making the underwriting of these projects marginal at best.

New Jersey’s enactment of a tax credit, which could be syndicated for purposes of raising additional equity to replace the mezzanine tranche, would enable projects that are currently not moving ahead to come online quicker and generate much needed construction jobs, permanent jobs and local recurring property tax revenue. Numerous projects that are not being done would become viable.

By the restoration of historic structures that would be kick started by a 25% state historic tax credit the state would recapture the credit cost in numerous ways:

1)    Construction Jobs – Approximately 60% of all construction hard costs are labor related

 

NJ Assembly Environment Committee to hear HPRA

The Assembly Environment Committee has just published their hearing schedule for Mon., May 11, 2 p.m. in Cttee Room #9 of the Statehouse Annex and the long-sought historic preservation tax credit (HPRA – A791) is on the agenda!

Spread the word, and meantime PLEASE contact Assembly members Barnes (18), MIlam (1), Rooney (39), Huttle (37) and Van Pelt (9), members of the committee, especially if they are your representatives. Get contact info from the legislature website.

You can get plenty of information from this blog and the NJ Heritage Development Coalition website, including statistics on how the credits in other states actually generate positive tax revenue for their treasuries, create jobs and economic stimulus.

Most importantly tell legislators how valuable the tax credit would be to your community, economic development, job creation, quality of life, etc.  Would you please let us know the results of any conversation you have before Monday afternoon at 2?

 

Arkansas is 30th state to enact historic tax credit

In March 2009, Arkansas became the 30th state to offer a rehabilitation tax credit (25% for income-producing and owner-occupied properties) when Governor Mike Beebe signed Act 498. Introduced by Representative Robert Moore from Arkansas City, HB1953 received support from the Historic Preservation Alliance of Arkansas, the Arkansas Rural Heritage Development Initiative, and other preservation-minded individuals and organizations.

The Beacon, former Jersey City Medical Center, while a terrific adaptive use preservation project creating hundreds of new housing units, is one of only two federal historic tax credits-driven projects approved in NJ last year. Missouri, which offers a companion state tax credit program, approved more than 150 projects in 2008!

Meanwhile, we learn of recent studies that show that state tax credits increase the use of the federal rehabilitation tax credit. During the 5-year period preceding enactment of the state historic tax credit program (1996-2001), researchers found that Rhode Island attracted less than $10 million in federal historic tax credit investment. For the 5-year period since enactment (2002-2007), more than $78 million dollars in federal historic tax credits have been awarded to Rhode Island projects – an increase of more than 700 percent. This echoes Missouri’s experience when the number of projects using federal rehabilitation tax credits doubled after the introduction of the state credit. The Iowa State Historic Preservation Office found that the amount of federal tax credits issued increased by $3.7 million after the introduction of a state tax credit.  In 2008, New Jersey ranked 27th in the nation in the number of completed preservation projects leveraged with federal historic tax credits.

A recent report by the Abell Foundation examines the environmental impacts of Maryland’s Heritage Structure Rehabilitation Tax Credit and shows that there’s a $8.53 return on every state dollar invested.

 

Expanded NY State Rehab Tax Credit Proposed

News just in that the New York State Assembly and Senate have introduced new legislation to expand the existing NYS Rehabilitation Tax Credit programs for historic commercial properties.

A partnership of economic development, banking, municipal leaders and other organizations have formed the Reinvest NY Partnership to secure this rehabilitation stimulus program in the 2009-2010 NYS final budget agreement.

Existing Commercial Program
6% credit rate, $100,000 cap, no transferability (credit only allocated to entity claiming federal credit).
Proposed new Commercial Program
20% credit rate, $5 million cap; transferability within business partnerships, available in census tracts at or below 100% State Median Family Income, implementation date of 1/1/2010.

For further details, contact Daniel Mackay, Director of Public Policy, Preservation League of NYS @ dmackay@ preservenys.org

Join New Jersey’s Coalition seeking to enact a state rehabilitation tax credit:  info@njheritagedevelopment.org