State lifts tax credit moratorium (UPDATE)

Wisconsin officials have resumed awarding tax credits to developers who preserve historic buildings, but the moratorium on the incentives could return in the next 12 months.

Gov. Scott Walker announced Monday the end to a moratorium under which the state ceased granting the credits for about the past three weeks. The Wisconsin Economic Development Corp., which manages the incentives, adopted the moratorium June 23 after finding that the credit had cost the state $35 million in the current budget period, far exceeding an original projection of $4 million.

Yet, despite the incentives’ unexpected popularity, WEDC spokesman Mark Maley said, state officials are confident the state can afford to approve more projects. But if signs re-emerge that the spending still is out of control, he said, the credits might have to be cut off again.

“We don’t know what’s coming down the pike,” Maley said, “although there are some projects that we are aware of.”

One of them is a proposed renovation of Green Bay’s Hotel Northland, where Gov. Scott Walker traveled in December to sign into law a bill that doubled, for the second time in a year, the rate of the state’s historic preservation tax credit. The credit now lets developers reduce their state income taxes by an amount equal to 20 percent of their expenditures on buildings on the National Register of Historic Places.

The state credit often is added to a separate federal tax credit for a combined reduction of 40 percent. But the steps involved in getting buildings on the national register are numerous and complex, which is why even some long-planned projects did not receive approval for the incentives before the state imposed the moratorium.

Such was the case for the Hotel Northland, said Greg Flisram, Green Bay economic development director. Flisram and other Green Bay officials traveled to Madison several times in 2013 to lobby in favor of increasing the historic preservation credit from 5 percent to 20 percent and helped get the hotel added to the national register in October.

Yet, despite the preparation, the Hotel Northland was not on a WEDC list showing which projects had received the credit by the time the moratorium took effect. Flisram said design plans laying out in detail the proposed $35 million renovation of the 90-year-old hotel in downtown Green Bay are still awaiting final federal approval.

The project would not have been affordable to developers were it not for the tax reduction offered by the state and federal credits combined, Flisram said. The need to get the full 40 percent break, he said, is why he and others chose to have the building listed on the national register even though there was an easier route.

When raising the historic preservation credit to 20 percent, state lawmakers also offered a separate 20 percent credit for “nonhistoric” buildings that were brought into service before 1936. That second type of credit is easier to obtain because it does not require being added to the national register.

Largely because of that ease, state officials have decided to keep in place the moratorium on the credit for pre-1936 buildings. Maley said requiring national register inclusion will help prevent the state from being inundated with applications for tax breaks and help officials manage the budgetary consequences.

Flisram said the decision also will force developers to go through a process that they probably should have been going through all along. When lobbying for increases to the credits, he said, he argued that only projects that were rejected for the national register should be allowed to apply for the pre-1936 credits.

His intention, Flisram said, was to prevent the most important projects, which he said are those meeting the federal government’s criteria for historical buildings, from being bumped by buildings that merely are old. Without such a requirement, he said, developers would be tempted to apply for the pre-1936 credit simply because doing so entails fewer hassles.

“Designers saw this as an easy road,” Flisram said. “And it was never intended to be an easy road.”

A representative of one group that obtained approval for the pre-1936 credit said he chose to go that route because getting on the national register would have taken too much time. Jeff Mirkes, president of the board of directors for Green Bay’s Meyer Theatre, said he and his fellow board members never bothered to find out if a proposed $1 million renovation of a two-story building attached to the Meyer Theatre would qualify for the national register.

“It was mainly based on timing,” he said. “We see this as a project that should be under construction this summer.”

The credits awarded to the proposed renovation are worth about $200,000. That’s barely more than one percent of the $15 million in pre-1936 credits the state had approved by the start of the moratorium.

The remaining $20 million awarded by the state before the moratorium went to projects on the national register. And those are the sorts of credits developers can vie for until lawmakers figure out what they want to do with the credits in the next state budget period, which will start July 1, 2015.

At least, Maley said, those developers can vie for the credits until there is reason to impose another moratorium.

“It’s something,” he said, “we are going to have to keep watching.”