Tax credits fuel $100 million in historic building rehabilitation since 2008

The Bangor-based House Revivers rehabilitated the block encompassing 84-116 Hammond St. in a project made financially possible by federal tax credits for rehabilitating historic buildings. The buildings involved in the project were the tan wood-frame structure (left) and the bright red building (center). The block once housed the Bangor Furniture Co.
BDN Brian Swartz
The Bangor-based House Revivers rehabilitated the block encompassing 84-116 Hammond St. in a project made financially possible by federal tax credits for rehabilitating historic buildings. The buildings involved in the project were the tan wood-frame structure (left) and the bright red building (center). The block once housed the Bangor Furniture Co.
Posted June 05, 2013, at 8:59 a.m.

By Brian Swartz

Of the Weekly Staff

 

Historical Maine never looked better as the state’s housing market went south in 2008.

According to Michael Johnson, an architectural historian with the Maine Historic Preservation Commission in Augusta, federal and state tax credits have spurred at least $100 million in construction activity in Maine in the last five years ago. That activity targeted a specific market: rehabilitating older historic buildings.

“You know [that] 2008 was right when the downturn in the economy got started,” Johnson said. While new housing construction slowed in Maine, the renovation of historic buildings did not, he pointed out.

“It’s over a hundred million dollars since 2008 that has been invested in these rehabs. I can say that for sure,” he said.

“This seems to be one of the few bright lights in the construction industry during the downturn,” said Earle Shettleworth Jr., the Maine state historian and the MHPC director.

In 1976, Congress established the Federal Historic Preservation Tax Credit Program to encourage developers to restore older historic buildings that might otherwise be abandoned or demolished.

The program created a 20-percent federal tax credit based on a developer’s “rehabilitation investment in the property,” said Shettleworth.

“The concept was to … create a level playing field between new construction and the rehabilitation of historic buildings around the county,” he explained. The federal tax credit encourages “people to invest money in old downtowns as a balance” to “the widespread new construction that’s occurring on the outskirts of communities.”

In 2008 the Maine Legislature revamped the state’s anemic historic preservation tax credit. The program now “provides a [state tax] credit of 25 percent on qualified rehab expenses,” Johnson said. “I think that really stirred more work on these rehab projects.”

Scattered across Maine — and concentrated particularly in urban areas — are buildings dating from the mid-1600s to the early 2000s. The Maine climate, changing economic activity and societal indifference adversely impact many such buildings; property owners may abandon or neglect them, leaving the elements to wreak havoc and speed decay.

But these buildings often present unique cultural and economic opportunities.

“I think there are several reasons to preserve older buildings,” Shettleworth said.

Describing Maine as “a very old New England state,” he said that “we are fortunate to have inherited in the present generation many beautiful villages, towns, and cities that are still largely intact, particularly from the 19th century.”

The historical architecture found in such places creates “environments that are very distinctive, that have a great deal of character, environments that people want to live and work in,” Shettleworth said.

“These historic environments” also spur economic activity, he indicated. “Towns and villages that have historic character are very attractive” to tourists, Shettleworth explained. “Tourism is a large factor in our economy.

“Having attractive and historic communities attracts not only tourists, but also people from out of state who wish to live and work in Maine” or retire here, he said.

Shettleworth cited Blue Hill, “where you have a beautifully preserved downtown village” and the nearby Parker Ridge Retirement Community. The latter project provided local jobs and attracted residents who find “Blue Hill is a very attractive place to live.”

According to Shettleworth, “the economic offset” of historic rehabilitation “is very powerful in that it creates jobs … in the design community” for “the architects and the engineers” and “in the construction industry.

“It creates investment in local businesses that are [project] suppliers,” he said. “We are finding … that because of the local nature of these projects, they are often resulting in direct investments into the community or the region in which the project is taking place. That’s a very valuable offset.”

Properties rehabilitated with government tax credits range from houses — Shettleworth cited the Edith Patch House in Orono — and older commercial buildings — such as those restored in Portland’s Old Port — to large mills and abandoned schools.

“Only of the early tax-credit projects” involved “a huge, 1844 cotton mill … right literally in the middle of downtown” Hallowell, Shettleworth said. “It was a vacant, derelict building.”

Able to claim federal tax credits, “a developer bought that building and rehabbed it for elderly housing,” he said. “It has been a successful project now for over 30 years.

“It has created a substantial population of people in the downtown,” people who “patronize the local businesses” and belong to local churches and social groups, he said.

With the federal and state tax credits, developers find many older buildings financially feasible to rehabilitate. To qualify for such credits, a particular building must qualify for inclusion on the National Register of Historic Places.

The Maine Historic Preservation Commission oversees the National Register for the National Park Service. “A direct outgrowth of the passage of the National Historic Preservation Act in 1966,” the National Register currently lists more than 1,500 individual properties and 150-plus historic districts in Maine, Shettleworth said.

To qualify for inclusion on the National Register, a property must be at least 50 years old, “unless it is of overriding national significance,” Shettleworth said. “A property can have architectural significance. It can have historic significance.”

The National Register also encompasses “historic and prehistoric archeological sites as well,” such as a portion of the Penobscot River between Bangor and Brewer “where the [American] ships were sunk” during the Revolution, he said.

Even if it meets National Register eligibility, a building still might not qualify for tax credits. A developer undergoes “a pretty rigorous process” when applying for them, Shettleworth said.

“It’s a three-part review” involving the MHPC and the National Park Service, Johnson said. A developer must provide extensive documentation (including photographs) to detail the proposed rehabilitation and its cost.

“It’s complicated. There are overlapping tax regulations and rules as well as National Park Service regulations and rules. You have to do your homework on the program,” Johnson said.

Once the Park Service has approved a particular project, the developer must complete it and document the work. “Once they do that, and everything is found to be as it should be, the owners are then certified for the tax credit,” he said.

If a property qualifies for federal tax credits, the National Park Service will notify the IRS; if the property qualifies for state tax credits, the Maine Historic Preservation Commission will notify Maine Revenue Services.

“The application-and-certification process has high standards in order to ensure that the public’s investment in this process is looked after and is satisfied,” Shettleworth said. “We’re doing our very best to guarantee that the developer is receiving a credit” and “that he is giving value for that credit” by “properly rehabilitating the building.”

The Maine Historic Preservation Commission, which administers the Federal Historic Preservation Tax Credit Program for the Park Service, has experienced no decrease in interest in the program, Johnson indicated.

He believes that had the Legislature not restructured Maine’s tax credit in 2008, rehabilitation efforts would have slackened. “We may have seen very little activity at all with regard to historic rehab without the state credit,” Johnson said. “In talking to developers, I don’t think they generally feel the federal credit alone is quite enough of an incentive for them to take on these massive projects.”

“We didn’t know it at the time” in 2008, “but the timing of the state credit, coupled with the federal credit,” left historic rehabilitation “one of the few attractive areas for people to invest in” during the housing downtown, Shettleworth said.

http://bangordailynews.com/2013/06/05/news/bangor/tax-credits-fuel-100-million-in-historic-building-rehabilitation-since-2008/ printed on December 20, 2014