g in St. Paul?s Midway district into market-rate apartments. Jim Stolpestad, a principal with developer Exeter Realty, believes that project probably would have failed to meet the 2015 credit deadline if it was just starting today. (File photo: Bill Klotz)
Although it doesn?t expire for two years, real estate pros and historic preservationists are already targeting an extension of the Minnesota historic preservation tax credit during this year?s legislative session.
But they?re gearing up for a struggle as they join a budget debate that will focus on adding ? not reducing ? tax revenue.
Proponents of the credits say they?ve prepared a strong case, pointing to jobs, housing and private investment the credits have generated since being adopted in 2010.
In late 2011, the Minnesota Historical Society and the University of Minnesota Extension Service said the program supported about 3,000 full-time jobs during its first year and $152 million in salaries. They estimated that each $1 credit induced another $9 in private investment. The two groups are updating that survey this winter.
Credit advocates are also going to stress the importance of acting now to continue the credit beyond its scheduled 2015 sunset ? or shut out projects that are just entering the development pipeline.
?Historical renovations take a long time to get off the ground, and we?re concerned that projects that are being contemplated now won?t take place without the extension,? said Doug Gasek, recently appointed executive director of the Preservation Alliance of Minnesota.
Developers who?ve used the credits second that.
Jim Stolpestad, a principal with Exeter Realty, used the state credits combined with federal historic credits to finance the $12.5 million conversion of the Chittenden & Eastman building in St. Paul?s Midway district into 104 market-rate apartments.
That project probably would have failed to meet the 2015 credit deadline if it was just starting today, Stolpestad said.
?From the time we first looked at that until it was leasing was three years. ?Real estate projects have a long gestation and that?s especially true in historic renovations. And if we were looking at a project and thought there was a chance we wouldn?t be eligible for the credit we?d just move onto something else,? he said.
The extension proposal will occur in the midst of debates about how to erase an anticipated $1 billion state budget deficit. Lawmakers have signaled that they will pursue tax reforms that add revenue, which could affect existing tax credits.
?When you?re setting up a budget, taxes and tax credits are in the mix and I?m sure there will be debate,? surrounding the value of the historic credit, said Ann Voda, an architect with Benz Thomsen Rietow Inc., and president of the Minnesota chapter of the American Institute of Architects. Voda lobbied for the credit during the 10 years in which it was debated at the Legislature before finally passing in 2010.
Voda said there were also legislators who thought that real estate developments should stand on their own as commercial projects without a tax subsidy.? ?I suppose all those issues will come up again,? she said.
Proponents of the credit came close to passing the extension last year. It was included in the omnibus tax bill that was vetoed by Gov. Mark Dayton and was dropped in the final budget compromise.
This year the credit is once again a priority for the Building Jobs Coalition, the broad alliance of labor, real estate, and housing organizations that led the successful initial passage in 2010.
?[Extension of the credit] is a key part of our platform and we?ll be pursuing that this year,? said Tom Murphy, a lobbyist with the Associated General Contractors, a coalition member.
This year, along with supporting data, the coalition can show lawmakers a portfolio of major projects made possible by the state credits, which added thousands of jobs and restored landmark properties to impressive new uses.
?It?s not a coincidence that some of these buildings sat around untouched for decades and then suddenly things started to happen? after the state tax credits were adopted, said Stolpestad.
One of the most conspicuous participants in the credit program is Plymouth-based multifamily developer Dominium, which is using $6 million in state credits to finance its $120 million redevelopment of the Schmidt Brewery into affordable housing. It expects to obtain $25 million in credits as a cornerstone in its $135 million Pillsbury A Mill affordable housing redevelopment.
Those projects wouldn?t have occurred without the state historic subsidy, said Dominium?s Owen Metz.
?To say these would have been difficult financially is an understatement. These would have been no-goes,? because of the high construction costs that go into historic reuses, he said.
A report on tax credit economic impact is available here.
This entry was posted on Tuesday, January 22nd, 2013 at 4:29 pm and is filed under Economic Development, Finance & Banking. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.
Source: http://finance-commerce.com/2013/01/preservationists-push-to-extend-historic-tax-credit/
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