Did you know?
32 new jobs are created for every $1 million spent on preservation.
Historic Denver Supports New State Tax Credit for Preservation- 2014
On March 7, 2014 State Representative Leroy Garcia, State Representative Tim Dore, State Senator Pat Steadman, and State Senator Larry Crowder introduced important updates to the Colorado State Historic Preservation Tax Credit that will generate new jobs, stimulate local economies, revitalize rural and neighborhood main streets, and provide a more robust incentive for the preservation of our unique historic assets.
Historic Denver began collaborating with a group of stakeholders to improve our state tax credit for the rehabilitation of historic structures in August 2013. This group harkens back to a cohort formed more than 20 years ago when Colorado became the second state to adopt a tax credit program for historic preservation. The program went into effect in 1991 and has supported more than 981 projects on historic properties across the state, ranging from large-scale commercial rehabilitations to small-scale residential projects.
While the program has produced great economic benefit for the state, the legislation has not been substantially modified since first passed, and so has not kept pace with programs in our neighboring states. As currently in place, the credit is equal to 20% of the rehabilitation costs of projects exceeding $5,000, with a maximum credit of $50,000. The current credit is non-transferable, and can only be used once on any qualified property. Updating these parameters to better match neighboring states can once again make the credit a powerful tool for economic development and help Colorado attract significant reinvestment, rehabilitation and revitalization on main streets and in neighborhood centers across the state.
Key stakeholders at the table include Historic Denver, Colorado Preservation, Inc., Downtown Colorado, Inc., the National Trust for Historic Preservation and Historicorps., as well as several local developers with experience rehabilitating historic properties. In September, a representative of Commerce Bank joined the conversation, bringing experience from similar efforts across the country and making it possible for the group to hire a lobbyist to help navigate the legislative process.
The proposed new legislation, House Bill 1311- the Colorado Job Creation and Main Street Revitalization Act- is modeled after successful bipartisan legislation in other states that has spurred tremendous economic growth, job creation and historic preservation in rural and metro areas. The bill improves Colorado’s current preservation tax credit in several ways.
The most significant changes will be made to the commercial portion of the program, which has been underutilized over the last decade. First, the size of the credit will be modified according to the size of the project, with additional incentives dedicated to smaller projects that are most likely located in rural communities, along main streets, or in neighborhood business strips. For projects under $500,000 the credit will equal 30% of the qualified rehabilitation expenses, for projects between $500,000 and $1,000,000 the credit will equal 25% of the qualified rehabilitation expenses, and for projects that exceed $1,000,000 the credit will equal 20% of the qualified rehabilitation expenses. Instead of the $50,000 per project cap, these projects will only be capped through a small-cap pool and large-cap pool, although no single project can earn more than $2,000,000 in credits.
Because the legislation is intended to get vacant or underutilized buildings back into service, or to ensure a deteriorating building can continue to be viable in the community for another generation, in order to qualify for the commercial credit a project much constitute a “substantial rehabilitation” and represent an investment of 25% of the purchase price minus the land value.
Another critical change, credits for commercial projects, which include multi-family residential projects, will be transferable. This means owners and developers can use the credit to generate much-needed equity. This also has the potential to attract investors from outside the state who can use the credits, bringing new dollars into our local economies.
Changes to the program for single-family residential projects are more modest. The total amount of credits that can be earned will remain $50,000. The residential credit is not-transferable, and the minimum investment requirement is $5,000, rather than the more complex formula for commercial properties. Amendments are being made to clarify the types of projects that qualify for the credit, which will create greater predictability for owners. Projects that currently qualify and will continue to qualify include exterior rehabilitation from roofs, to siding and masonry, to foundations, trim, windows, and beyond. Qualifying interior projects will include repairs to existing original floors and walls, improvements to plumbing, electrical or HVAC systems, or energy-efficiency upgrades such as improved insulation. Unlike the current program, residential owners can use the credit once every ten years, or upon change of ownership.
For both the commercial and residential projects, those located in state and/or federal disaster designations will qualify for an additional 5% in credits. This should help structures affected by our recent floods and fires.
The proposed legislation is a win-win because the rehabilitation of historic buildings creates more jobs than new construction and the skilled labor that is needed for a rehabilitation project is often found locally. In Colorado it’s estimated that 32 new full-time jobs are created for every $1 million spent on preservation. Between 1981-2010 historic preservation projects generated over 34,000 full-time jobs resulting in $843 million in household income and $2.5 billion in total economic impact. Rehabilitated buildings are job creators during construction, but post-rehabilitation also become economic centers for small businesses, senior housing, and start-up incubators.
Additionally, investing in a robust state tax credit program is a wise use of state funds in a year when legislators hope to spur job growth. The skilled labor that is needed for a rehabilitation projects is often found locally. When jobs are created for contractors, local electricians, carpenters, painters, etc., they, in turn, will be spending their earnings locally. Local stores will see the benefits as well as the county government, which will benefit from the increased tax revenue. For commercial projects, a recent state study in Maryland found that for every $1 paid out by the State, $0.34 was returned prior to any credit being paid out, $1.02 was returned in the first year, and $3.31 in the fifth year after the project’s completion. A recent study by the University of Illinois found that state historic preservation tax credits are expected to return up to $7 for every $1 invested.
Furthermore, historic preservation has been a driving force in Colorado’s Heritage Tourism industry, which now has more than a $3 billion impact across the state each year and which will only grow with the completion of additional preservation projects in Colorado’s unique communities.
Historic Denver is hopeful that our state representatives and senators will see the great value and opportunity represented by the Colorado Job Creation and Main Street Revitalization Act, and we encourage all our supporters to contact their own representatives and urge them to support this legislation so that we can both retain the historic character that makes our communities unique and spur economic revitalization here in Denver and across the state.