By Brian Johnson
Dolan Media Newswires
Minneapolis — Preservationists in Minnesota have pushed for passage of a historic preservation tax credit for more than a decade.
They got their way this month when the governor signed a 48-page jobs bill that includes a state income tax credit equaling 20 percent of the cost of rehabbing a historic property.
“The first bill was introduced in 2000,” said Bonnie McDonald, executive director of the Preservation Alliance of Minnesota. “I understand from our friends at the National Trust for Historic Preservation that the average advocacy effort for a state tax credit is about six years.”
One of the tipping points this year was the alliance’s participation in the Building Jobs Coalition, a group of contractors, architects, union representatives and others who pushed for measures to stimulate vertical construction in the state.
Minnesota becomes the 31st state to adopt a historic tax credit program, which advocates say will create 1,500 to 3,000 construction jobs per year based on other states’ experiences. Other states with such programs include Wisconsin, Iowa and North Dakota.
Developers may use the credits themselves or sell them on the secondary market — typically to a financial institution — for a “cash infusion of equity in the project,” said Carolyn Sundquist, a Duluth resident and a board member of the Duluth Preservation Alliance.
Among potential candidates that could benefit from the tax credit is the Historic Duluth Armory. The 125th Infantry Unit prepared for service in World War II at the armory. In later years, as an entertainment venue, it hosted the likes of Buddy Holly, who performed there just days before he died in a 1959 plane crash.
The Armory Arts and Music Center, a Duluth nonprofit, wants to redevelop the armory into a music and art center with student housing on the adjacent property. The project is estimated to cost $15 million to $20 million.
“There has been a financing gap we have been struggling with over the last couple of years,” said Mark Poirier, a project architect at LHB Inc.’s Duluth office, who is involved in the reuse effort. “With the passage of the historic preservation tax credit, we think it fills most — if not all — of that gap, and that this project can proceed.”
McDonald said she is pleased that the program is uncapped. One version of the bill would have imposed a $5 million cap, but that would have limited the number of projects that could be done through the program, she said.
Yet the historic tax credit has some strings attached.
To be eligible, properties have to be income-producing and they must be listed on the National Register of Historic Places. (Minnesota has 1,600 National Register listings, which includes nearly 7,000 individual properties, according to the Preservation Alliance of Minnesota.)
Moreover, the project has to get approvals from Minnesota Historical Society and the U.S. National Park Service, and it has to uphold the historic integrity of the building.
Sundquist said there are some administrative “soft costs” associated with the tax-credit process, but she said the credits “have been used very successfully all over the country to support adaptive use redevelopment in many cities. In other words, it’s worth it.”
Historic rehab creates more jobs than new construction or highway work because it’s “inherently labor intensive,” according to the alliance. The group cites a recent Rutgers University study, which found that the federal tax credit has sparked $85 billion in rehab activity over 36 years.