Regular readers of Buffalo Rising will remember our coverage of the summit meeting held in January to kick off a statewide lobbying effort for enhanced preservation tax credits. An intense period of effort has followed, in which Buffalo preservation advocates and lawmakers have played a significant and catalytic role. In a sign that the hard work is paying off, this effort took a significant step forward last week as Buffalo Assemblyman Sam Hoyt introduced a bill in the State Assembly to establish a new--and significantly strengthened--5-year program of enhanced state-level preservation tax credits for both commercial and residential properties.
"The Historic Preservation Tax credit can be a tool to restart development in Upstate cities, and we are committed to working with the governor's office and the Senate to ensure that this bill passes this year. We need this bill to close the gap in financing for historic properties," said Assemblyman Sam Hoyt of the legislation, which is being cosponsored by legislators from Western New York to New York City to Long Island, including every major Upstate urban area.
Preservationists view this bill, A6471, as substantially better than the one approved by the legislature last year--but vetoed by the governor amid the state's darkening fiscal outlook. Whereas last year's bill provided a maximum 10 percent credit for eligible projects, payable by the state immediately, and retroactive to the beginning of 2008, this bill doubles the maximum credit to 20 percent, while delaying and diluting the fiscal impact on the state budget. For eligible projects, the State will pay the credits over a five-year period, and the credits can be combined with existing Federal preservation credits, which can also be up to 20%. Also, the program will sunset in five years, after which time the state, developers, and the preservation community should have ample metrics of its impact, to make a case for reauthorization. Daniel Mackay, Director of Public Policy for the Preservation League of New York State, said, "this is a more aggressive program, with particular value to Upstate, filling the need to close the funding gap to make preservation projects economically viable."
Preservation architect Clint Brown, a specialist in preservation tax credit projects, has been an organizer of, and advisor to the League on, the lobbying effort. "We're getting a better bill," Brown told me, in comparison to the one approved by the legislature last year. This program, combined with the existing Federal tax credits, will essentially double the available incentives, resulting in a much more substantial impact. The smaller credits passed last year "would have more rewarded projects that would have happened anyway," Brown said. "The new legislation will really get the attention of developers to move forward with projects which they wouldn't have considered viable before." And Brown expects a significant level of near-term economic stimulus. "It will provide immediate income not just for architects, but also for construction workers and material suppliers. It will also generate immediate income for cash-strapped governments in payroll taxes, building permits, sales taxes, etc."
But if the state won't be paying out upfront under this program, how can it provide economic stimulus within months? Simple: syndication. Buffalo attorney Steven Weiss, a specialist in tax credit syndication, described the process at the Syracuse tax credit summit. When tax credits are approved for an eligible project, they can be sold immediately to investors for a substantial portion of their value, so that the funding can flow to a project right away. The investors then recoup the full value of the credits from the government over the payout period. This is a common practice with government incentive tax credits of all kinds, such as New Market, brownfield, and low-income housing credits. In fact, Weiss told me that out-of-state investors--including from the sun belt--attended the summit in Syracuse, and are ready and willing to invest in Upstate New York projects through tax credit syndication. Now that's a noteworthy development.
Beyond that, Weiss told me that tax credit syndication is shaping up to be an unexpected--and innovative--way for Western New York to take advantage of its years of experience struggling to rehabilitate its older building stock in the face of stagnant economic returns. His firm, Cannon, Heyman, and Weiss, is developing a strong niche specialty in advising clients on tax credits. Increasingly, they have been advising clients from all over the country, and even partnering with other law firms. As a result, Weiss told me proudly, his firm has been adding staff right here in Buffalo to handle this work, at their offices in the Larkin at Exchange Building. They see this as an intelligent and entrepreneurial approach to leveraging Buffalo's geographic advantages in an entirely new way. Enhanced state-level preservation tax credits would boost this effort to make Buffalo a national player in the business of tax credit syndication.
Further
good news about Hoyt's bill is that it won't be a "one house." An identical companion bill,
S2960 was introduced Friday in
the State Senate by Senator David Valesky of Syrcause, a city which has faced
similar challenges to Buffalo in rehabbing older
buildings,
but also a place where people have recognized the value of the city's past to
the city's future. "This bill is important for rebuilding
our cities and developing our urban cores," said Senator Valesky,
Vice President Pro-Tempore of the New York State Senate. "Upstate cities have a lot of beautiful
historic buildings that are in need of renovation. Providing the tax credit will make it easier for people to
invest in these renovations, improving our neighborhoods and property values." Sam Hoyt and his staff had nothing but
praise for Valesky and his staff (such as Policy Director Troy Waffner) as strong
partners in the new Senate majority on Upstate issues like the tax credits. "Since taking office, Senator Valesky
has really emerged as a policy-oriented Upstate advocate and from what I have
seen, he really shares my passion for improving Upstate cities. We are excited to be working with him on
the Historic Preservation Tax Credits," said Hoyt.
But given the Governor's veto of enhanced tax credits last year, what are the prospects for passage of this program, as the fiscal picture for New York continues to darken? Surprisingly good, according to a number of sources, including positive signs within the Governor's administration. "We have seen clear support for the intention of the program from a number of agency heads," said Daniel Mackay of the Preservation League. There has been a great deal of effort to overcome some of the issues cited by the Governor in vetoing last year's tax credits bill, as well as boost the anticipated stimulus impact while minimizing the near-term fiscal impact to the state. Said Mackay, "with the effort behind the program, we have tried to limit costs and direct it to the areas of the state which most need it, to address the concerns the executive branch had last fall. We have prepped the governor's office staff and are continuing discussions. Clearly, we see this as an effective piece of economic stimulus--we're looking forward to the Governor and his staff seeing it the same way."
The next
step will be sheparding this program through the state budget process, to
assure its inclusion in the budget bill which will be taking shape this
month. The official State budget
deadline is April 1 (no fooling), and insiders tell me that there will be a
strong push this year for an on-time budget--both to instill confidence amid
economic crisis, and to make a good showing for single-party rule in Albany.
Stay tuned. And in the meantime, if you want to help assure the enactment of this program, make some noise and save some buildings by getting in touch with your State legislator, and/or the Governor's office. And if you haven't done so already, join a local, regional, and/or statewide preservation organization, and tell them you want your membership dollars to help them lobby for this program. You'll be able to see the results in action: the buildings you help save, and the jobs you help create, will be right around the corner.
Get Connected:
Preservation
League of New York State
Photos: West Coast Perspective
At the end where the author claims "You'll be able to see the results in action: ... the jobs you help create, ..." shows a misunderstanding of how the economy works.
Money to fund these tax credits (subsidies, handouts) won't grow on trees. It would have to eventually cause others to pay more taxes - middle class taxpayers, small business owners, many employers across the state - and would give that money to a relatively few developers.
Although preserving old buildings can have some benefits sometimes, the total number of jobs won't increase just because the government redirects money around like that. It would be Albany robbing a bunch of Peters to pay a few Pauls.
Argue for state spending on preservation if you want to, based on its societal merits or whatever. There's more to life than jobs, so try making that case. But this won't grow the number of jobs in any real way.
Yes others will pay at first, but this is not a tax abatement. Once that abandonded or underperforming building is rehabbed it will have a significantly increased tax liability which will then return money to the state and local coffers. This is not a preservation program, its a rehab program. I think that's one of the misconceptions, there is no preservation tax credit, its for rehabilitation, otherwise developers would never attempt to work with an old building, the requirements would be too severe to make profit.
nick, I get it, but first, your explanation doesn't say how it creates jobs either. That was my critique of this article - that he claims it will grow jobs. I realize your comment doesn't make that claim.
Second, whoever occupies a building (to generate payments of the increased tax liability) whould in almost all cases have been in the Buffalo area anyway in some other building.
Obviously it's the companies or residents who occupy a rehabbed building who give the building its financial (tax base) value by creating demand for it. So I'm not sure I agree with your contention that the city's total tax base always increases as a result of a rehab. Usually it gets moved around compared to where it would have been otherwise.
For example suppose the Larkin Exchange building hadn't been saved. The companies operating in it would be in other buildings in the area helping those other buildings to contribute more to the tax base. (I'm not saying it's bad that Larkin Exchange was saved - just saying it's the economic activity happening inside it that allows the tax payments to happen).
Whatever,
The only jobs a rehab can guarantee are those associated with the soft and hard costs of the rehabilitation. To the end that the credit will incentivize this work to be completed, there will be short term job growth per project. I agree, beyond that its what happens within the walls that matters, but this credit is not a fixture to all ills, just a piece to the urban design puzzle.
I also don't state that the city's tax liabilities will always increase, but that those on that particular building will. Of course the economy needs to grow to fill commercial buildings, but housing/office filtering will happen and cycle buildings into and out of supply.
That mere fact that Buffalo can enhance its status as a community that possesses neighborhood character is reason enough to go about this. Our older building stock is one of our greatest assests - regardless if they are technically historic or not. Intact streetscapes and neighborhoods from an era long past brings an appeal to our city that any new-build, cannot nor, will ever bring. From a fiscal perspective, these rehabilitation projects will function as an anchor to their surrounding neighborhood, and thus will enhance the over tax-generating performance of the neighborhood as a whole.