The Augusta Chronicle’s recent editorial acknowledging the benefit that the preservation of historic buildings contributes to Augusta’s economic growth is timely, correct, and appreciated by the champions of historic preservation.
In a quirk of political timing, the editorial may also be a lament for a financial instrument that has driven the preservation movement across the country and in downtown Augusta. The preservation movement has succeeded in part from the benefits of historic tax credits, and there is real danger this tool will be eliminated by Congress.
The renaissance of downtown Augusta has come from many sides, starting with entrepreneurial developers and investors who took the initial risks in transforming downtown to a residential hub. While the retail and office markets have been slower to develop, there is no doubt that downtown Augusta is now a more viable place to do business, becoming more feasible by the day.
The burgeoning entertainment districts (theatres and restaurants) and the growing residential base is clearly driving business decisions about locations. The Chronicle editorial captures that economic sentiment: “it’s become a popular option for businesses in urban cores to retrofit old or historic buildings for more modern missions.”
The retrofit of old or historic buildings is not just a popular option; in many cases it’s a calculated decision to take advantage of the demands and desires of the workforce and to locate in an urban, increasingly green, environment.
The redevelopment is typically accomplished by developer capital, and in many cases is augmented by traditional bank financing. In a number of cases in downtown Augusta and in numerous projects in historic districts across America, the redevelopment of historic buildings has also been facilitated by the awards to, and subsequent sales by, the developer/owner of historic tax credits.
These federal tax credits can represent up to 20 percent of the project cost and thereby reduce the amount of equity required for the project. This simple math lowering the overall cost, and potentially the amount of debt, can be the difference between a rehabilitation project succeeding economically and the developer not willing to make the investment in rehabilitation.
It is not unreasonable to say the resurrection of many heretofore downtrodden downtowns is due in large part to the economic advantages and benefits of federal and state tax credits.
Quoting Stephanie Meeks, president of the National Trust for Historic Preservation: Since the program was established in 1986 in its present form, 42,000 buildings have been rehabbed using the credits with $130 billion invested in private capital. In these projects, 2.5 million jobs have been created and an average of $1.20 has been returned to the Treasury for every dollar invested.
Locally, historic tax credits are largely responsible for the revitalization of historic buildings. There are currently 17 historic tax credit projects under way or just getting started in Augusta alone. Examples: Miller Theater ($23 million); TaxSlayer (old downtown YMCA); Lowrey Wagon Works (9th and Ellis Streets, 19 market rate apartments).
Since 2007 there have been an additional 29 projects that have used the tax credits in Augusta, representing millions in local investment for properties that qualified for this program, and just since 2012 approximately $35 million has been committed in private capital in Augusta alone.
The U.S. House of Representatives is currently debating its tax bill, the Tax Cuts and Jobs Act, and buried in the proposed legislation is a proposal to eliminate the tax credit. In the Senate, a tax bill proposes to reduce the credit from 20 percent to 10 percent of the qualified costs. The elimination or reduction of the federal tax credit will have a highly detrimental impact on future developments in historic districts.
Currently, much investment in historic real estate in downtown Augusta is under way, most of which has been incentivized due to the availability of the tax credit program. As a banker, I see where the credits can make a deal “bankable”; without these credits, some of the proposed rehabs may not take place.
Just as important, with fewer economic incentives for developers to rehabilitate, there may be tougher battles to fight in order to keep our historic building stock from being demolished or neglected.
If you support finding a way to keep this important tool for historic preservation, now would be the time to contact your senators and congressmen and let them know how important it has been and will continue to be. This program deserves to remain in place because it helps revitalize historic communities, and is revenue positive for the Treasury.
The writer is president of Historic Augusta Inc. and a board member of the Downtown Development Authority.