REGIONAL — The executive director of Maine Preservation says a move to eliminate or reduce federal Historic Tax Credits would be “devastating” to the economic development of Maine.
The financially innovative preservation tool has allowed scores of historic buildings, including a dozen or more in the local area, to be redeveloped into tax-paying contributors in their communities.
The Historic Tax Credit (HTC) is not just about saving threatened historic buildings, Greg Paxton, executive director of Maine Preservation, headquartered in Yarmouth told the Advertiser Democrat recently. Rather, it has been a crucial economic development tool bringing new jobs, new housing and millions of dollars into towns and cities like Lewiston, Norway, Bethel, Livermore Falls and other areas throughout the state, he said.
The Historic Tax Credits include a 20 percent federal historic tax credit paired with 25 percent historic state credit for a total of 45 percent, said Paxton.
“That’s a key element to the financing for these projects,” he said.
Now, the continuation of the program and, in turn, the opportunity for increased economic development through redevelopment of the state’s historical building inventory, is in jeopardy, said Paxton.
“If the [Historic Tax] Credit is dropped the effect will be devastating to projects throughout the state,” he said.
Late last week on Nov. 10, the U.S. Senate Finance Committee released its version of the tax reform bill that cut the Historic Tax Credit in half, from 20 percent to 10 percent, as well as eliminated the 10 percent, pre-1936 non-historic building credit.
At the same time, the House Ways and Means Committee passed The Tax Cuts and Jobs Act (TCJA), or H.R. 1, with the HTC entirely eliminated, setting up full-House floor consideration this week.
The move has set the state up for failure, says Paxton and others. This includes Andrea Burns, who served as president of Norway Downtown, when the $1.4 million Norway Opera House renovation project, which used the HTC, was undertaken.
“The Legislature is short-sighted in not understanding the significant economic development impact that the historic tax credits have had in the state of Maine,” she told the Advertiser Democrat this week. “In addition, it is disturbing that our leaders do not take into account the value of historic preservation in the state of Maine. Our architectural history is in part of who we are.”
According to information from Maine Preservation, 83 Historic Tax Credit projects such as the Healy Asylum in Lewiston, part of Bates #2 Mill in Lewiston, the Norway Opera House in downtown Norway, the Lamb Block in Livermore Falls, the Gearing Clinic in Bethel and others have been undertaken since 2008.
The projects have created 5,180 new jobs, 1,440 housing units, generated $423.2 million in taxes and delivered more than $700 million in total economic impact across the state, according to that same information.
Earlier this year, Maine Senator Susan Collins, R-ME, with three other members of Congress introduced bipartisan legislation to encourage infrastructure development and job growth by making what she called “common-sense changes and enhancements” to the federal Historic Tax Credit.
The legislation was intended, in part, to make the federal historic tax credits easier to use.
“The Historic Tax Credit incentivizes the restoration and preservation of historic buildings. It is a proven tool for revitalizing communities and catalyzing economic development in Maine and across the nation,” Collins said in a statement at that time. “Since 2008, the Historic Tax Credit has leveraged approximately $350 million in private investment in Maine alone. Our bipartisan legislation will make the Historic Tax Credit easier to use, expanding its economic benefit and creating good-paying jobs for hardworking Americans.”
In Norway, the Historic Tax Credit was a significant factor in the successful $1.4 million restoration of the Norway Opera House in 2012, the anchor of the Norway Downtown Historic District.
A decade before, the 1894 brick building with its stately bell and clock tower sat vacant on Main Street on the verge of collapse after rain pooled on the roof, causing a partial collapse of the roof.
The 17,618-square-foot building, which then housed a restaurant and a beauty shop, was vacated after the collapse in September 2007, and resulted in the building being flooded. The upper floors, including the once stately Opera House stage, had been vacant for decades.
The town took the building by eminent domain in 2010 from a private owner after he failed to adequately stabilize the building, which was considered unsafe to the public and surrounding buildings.
Today, after a $1.4 million renovation that used $273,000 in federal historic tax credits and $340,000 in state credits, the first-floor commercial front is filled with vibrant businesses, bringing residents and tourists to the downtown Main Street, which in turn boosts other businesses.
It is contributing to the town’s tax base.
This fiscal year, NOH LLC, owners of the building, paid $5,058.52 in taxes. The previous year taxes paid amounted to $4,852.65, according to Norway Town Clerk Shirley Boyce. The LLC was created between Norway Opera House Corporation and the Norway Savings Bank, which worked to secure financing for the redevelopment. The creation of the LLC resulted in the building becoming part of the town’s tax base.
Now the Norway Opera House Corporation is looking at revitalizing the second floor of the building.
Dennis Gray of the Norway Opera House Corporation said a consultant has been hired to do a feasibility study on the rehab of the second floor and to look at what grants are available. The Historic Federal Tax Credit would undoubtedly be a part of that financing process, he said.
“It’s a worry,” Gray said of potential cuts to the HTC program. “When we did the first floor, they (the Historic Tax Credits) accounted for a third of the total cost.”
A move to rehab the Odd Fellows Hall would likely take advantage of those credits as well, he said.
“Part 1 resulted in all the store fronts being filled with active businesses revitalizing downtown. The group is now talking about part two,” said Paxton. “Without the [Historic Tax] Credit it will be very, very difficult to carry forward.”
“Clearly this [project] would not have happened without the credits,” Paxton said of the first-floor renovation.
“The great thing about these credits is they pay back the the government for the costs,” explained Paxton.
Paxton said the projects end up producing enough tax revenue to pay back the cost of the credit through things such as payroll taxes, sales and property taxes.
In addition to the taxes it pays the town, the revitalization of the building has generated new businesses, which in turn hires new employees and subsequently adds to the tax base through income tax and other taxes. Beyond that income, the new businesses have generated other growth in the downtown and the area by bringing in new shoppers to the area and thus stimulating the overall economic growth.
“It’s very unusual for these credits to work the way these do,” he said of the program in which the money gets approved at many levels and the work must be approved by various agencies including the National Park Service and Maine Preservation.
Only after the intensive review by all the agencies is tax credit issued. “This is exactly what a tax incentive should do,” he said.
Should the Historic Tax Credit be jeopardized, future projects such as buildings in Rumford and the Odd Fellows Hall in Norway, a privately owned building listed on Maine’s Most Endangered Historic Structures in 2013, will be jeopardized, Paxton said.