GOP-led tax reform could drastically reduce the incentive to renovate historic buildings in Augusta’s urban core, possibly prolonging the period vacant or dilapidated structures sit idle, local officials and developers say.
The reform passed by the U.S. House of Representatives would eliminate, among other things, the Federal Historic Tax Credit program, which developers use to offset the cost of rehabilitating historic structures. The Senate version keeps the program but requires the 20 percent credit be claimed over a five-year period instead of one.
A compromise bill must be hammered out before reaching President Trump’s desk for his signature.
Eliminating the credit would severely reduce investors’ incentive to renovate historic buildings.
“It would have a devastating impact,” said Erick Montgomery, director of Historic Augusta Inc., an organization that helps local property owners apply for federal and state historic preservation tax credits.
Created in 1986, the federal program gives a 20 percent tax credit to those who rehabilitate historic structures into income-producing properties. A 10 percent credit is available for non-historic buildings built before 1936. Georgia offers a separate 25 percent state tax credit on historic building renovation.
Downtown Augusta is a designated historic district, as is the Summerville and Laney-Walker neighborhoods.
“Just about every project we’re involved in involves a historic tax credit,” said Margaret Woodard, executive director of the Downtown Development Authority.
Developers specializing in renovating historic structures say revitalization efforts would grind to a halt if the credit was repealed or reduced because restoration projects cost more than new construction. Older buildings often have environmental issues and can be a challenge to bring up to code while maintaining stringent preservation standards.
“Downtown would be a wreck up to this point if it weren’t for the tax credit,” said Bryan Haltermann of Haltermann Partners, who has used the credit to help fund numerous downtown renovations, most recently 901 Broad St., a three-story corner property he’s converted into 6,000-square-feet of storefront space and nine loft apartments. “We’re getting new buildings now, but over the past 30 years the majority of downtown revitalization has been on the back of existing buildings.”
The National Trust for Historic Preservation says the program has helped rehabilitate 42,000 buildings, representing $130 billion in investments over the law’s history, a return of $1.20 to the treasury for every credit dollar issued. The trust says roughly 75 percent of the $29.8 billion in revenue has remained in the states.
Credits aren’t paid out until a project is completed, which puts up-front financial responsibilities on developers. Cameron Nixon, a senior vice president with State Bank & Trust and president of Historic Augusta, said credits can help make or break the financing of a project.
“As a banker, I see where the credits can make a deal “bankable,” Nixon, who also is a member of the Downtown Development Authority, wrote in a column for The Augusta Chronicle in November. “Without these credits, some of the proposed rehabs may not take place.
Montgomery said the credit has helped spur more than $35 million in private investment in Augusta since 2012 alone, the bulk of which is for the $22 million renovation of the historic Miller Theater, which will reopen on Jan. 6 with a sold-out gala event. The renovation of the historic YMCA building into offices for software company TaxSlayer is a $4 million project.
Steve Rothschild, a partner with Atlanta-based PREF LLC, who specializes in brokering tax credits, said a repeal will cause investors to abandon historic restoration projects in favor of less-costly suburban development.
“What the tax credit has done is incentivize developers to come in and look at these structures and say, ‘don’t tear them down,’ ” he said. “In our opinion, it’s been a blessing for the country. You can go to New Orleans, Cleveland, Augusta and Atlanta to see what it’s done to keep the fabric of our history and these wonderful buildings (alive).”
Chris Martiner of CayCap Advisors, a tax credit consultant said outright elimination of the program would have more impact in mid-size cities such as Augusta than large cities such as Chicago and New York, where developers are incentivized by high rents.
The threat of repeal has already slowed projects down, Martiner said.
“It’s come to a crawl,” he said. “Almost every deal in the works between now and the first half of next year has been put on hold.”
Reach Damon Cline at (706) 823-3352 or firstname.lastname@example.org.