Trying to preserve more buildings and jobs
Building owners and developers now have more of an incentive to historically renovate their older structures.
Recent state legislation signed into law by Gov. Jennifer Granholm upped the tax-credit ante to cover close to half of an investment made into such a project.
“A project could actually be receiving up to 45 percent of their expenditures in tax credits between the federal and the state tax credit programs,” said Nancy Finegood, executive director of the Lansing-based Michigan Historic Preservation Network.
The new law, which emerged from Senate Bill 973 and House Bill 6496, lets developers take the full 20 percent state tax credit when they also accept a 25 percent credit from the federal program. Previously, developers who took a full federal credit could only qualify for a 5 percent tax credit from Michigan.
“If they used the federal, under normal circumstances they could only use 5 percent of the state (credit). With this additional bonus, they can receive an additional 10 to 15 percent,” said Finegood.
In addition to the potentially larger tax credit, more buildings now qualify for consideration as a historical project. Under the new statute, a building doesn’t have to be in a designated local historic district to be eligible. But a structure does need a historical easement to meet the state’s tax credit criteria.
Getting an easement is a separate and simpler procedure than gaining access into a historical district. Finegood said her organization recently helped Flat Iron Holdings LLC get one for the Flat Iron, a four-story, 12,000-square-foot structure at 102 Monroe Center in Grand Rapids that opened in 1860. The firm plans to historically renovate that building and two adjacent structures into retail and office space. Work should start this summer.
Buildings do have to be in the National Register of Historic Places or in a National Register historic district to qualify for an easement.
Finegood said the legislation also offers a 25 percent credit for smaller historic projects, like those of $1 million or less. She liked that aspect of the new law because it should make renovations more affordable in smaller communities, and for the smaller buildings that dot many neighborhood and urban business districts.
“So it doesn’t all go to big projects,” she said of the dollars set aside for credits.
The legislation also increases those dollars over time. Finegood said the state will make a total of $8 million available for credits this year and crank up that number by $1 million each year to $12 million in 2013. Twenty-five percent of those credit dollars will be set aside for smaller historic projects each year, a figure that will range from $2 million this year to $3 million in four years.
“But there is also what I call a ‘mega project’ that is outside those boundaries. So if we have one huge project, like the GM Tech Center, it wouldn’t eat up the whole thing,” said Finegood.
The General Motors Technical Center in Warren has 25 main buildings and 9.9 million square feet of space. The center was added to the National Register of Historic Places in 2000, and the American Institute of Architects honored it in 1986 as the most outstanding architectural project of its era.
Finegood said developers of projects of that magnitude would contact the Michigan Economic Growth Authority for information on tax credits.
Another facet of the legislation is that developers can get a state tax refund if they have less than $250,000 in tax credits owed them and their tax liability with the state is less than the amount of their credit figure.
“That is brand new,” said Finegood.
The legislation also lets a qualified taxpayer assign all or part of a tax credit to another entity that has either a state income or business tax liability. In addition, new rehabilitation projects can enter into agreements with the state that allow for a sale of a renovated building and still avoid a recapture of the tax credit. This feature may make it easier and more feasible to do residential renovations.
Finegood said MHPN and others, like Grubb & Ellis|Paramount Commerce Investment Advisor George Larimore, spent four or five years pushing for the legislation. Lawmakers saw their bills as a way to create jobs in the state during a time of growing unemployment across Michigan.
“In addition to placing good public policy on the books, our accomplishment will help spur new job growth through renovation and redevelopment of our historic buildings and structures. There is no more urgent or pressing issue in our state right now than the need for new job creation. We killed two birds with one stone,” said State Sen. Cameron Brown, R-Sturgis, sponsor of SB 973.
“These bills will produce hundreds of construction jobs across the state, create vibrant, diverse places to live, and help Michigan attract and retain talented young professionals to Michigan’s cities, towns and villages,” said State Rep. Steve Tobocman, D-Lansing, sponsor of HB 6496.
MHPN released a report a few years back that showed the economic impact preservation efforts have had for the state. The report revealed that developers and building owners have invested $1.7 billion statewide in historic renovations since 1971, projects that have resulted in a boost of $3.6 billion to the state’s economy and more than 44,000 jobs.
“These changes will have a remarkable improvement on the tax credit’s ability to encourage property owners and developers to invest in the rehabilitation of their historic buildings,” said Finegood of the new law.
“This investment promotes the stabilization of neighborhoods and urban centers, protection of valuable historic resources and contributes to Michigan residents’ sense of place.”