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ZAPP: Study finds historic preservation pays off

Subheadline: 
Home values, businesses benefit from Savannah’s historict districts

Donovan Rypkema is a principal of PlaceEconomics, a Washington, D.C.-based real estate and economic development consulting firm that specializes in services to public and nonprofit-sector clients who are dealing with downtown and neighborhood commercial district revitalization and the reuse of historic structures.

He also teaches a graduate course in preservation economics at the University of Pennsylvania.

Rypkema has performed real estate and economic development consulting services throughout the United States for state and local governments and nonprofit organizations with interests in a broad range of properties, from national historic landmark structures to Main Street commercial centers.

Today, Mr. Rypkema is recognized as an industry leader in the economics of preserving historic structures. In 2012, the National Trust for Historic Preservation presented him with the Louise du Pont Crowninshield Award, the organization’s highest honor, for his work in the preservation field.

He was educated at Columbia University, where he received a master of science degree in historic preservation.

Recently, the Historic Savannah Foundation hired Rypkema to do a study of the economic impact of Savannah’s historic districts. In the following question-and-answer session, he discusses his findings.

Q: What are the key findings of your report?

A: There is significant impact economically on the city of Savannah and Chatham County that has little if anything to do with tourism:

• The measurements of what makes a city a good place to live — walkability, character, proximity of home and work and others — while true of the city as a whole, are even more true in the historic districts.

• The investments by both the Savannah College of Art and Design and the Historic Savannah Foundation have first stabilized and then enhanced the neighborhoods within which they were made.

• The arts, cultural, culinary and knowledge industries in Savannah are intimately linked with the historic resources.

• The 18th-century Oglethorpe Plan has not only stood the test of time, but provides 21st-century qualities to an evolving, growing, dynamic city.

Q:. Did anything in the results surprise you?

A: The extraordinary attractiveness of the historic districts to both small businesses and start-up businesses was at a magnitude that was quite surprising.

The historic districts in Savannah are not museums, frozen in time, but rather dynamic neighborhoods, evidenced by the fact that over the last 15 years there has been more money invested in new construction in the neighborhoods than in rehabilitation.

Q: What can Savannah and Georgia do to encourage more investment in historical preservation?

A: The state tax credits and the local property-tax incentives clearly encourage private investment in historic resources. Maintaining both should be a priority. Then there are areas in Savannah that have the characteristics of a historic district but aren’t designated either as local districts or National Register districts. Discussions should be held to see if other neighborhoods should be added to one, the other or both.

Q: Some people think there is a conflict between preservation and local business development in a downtown neighborhood.

A: If the report does nothing else, it should push that argument aside. Savannah is an international example of local business development through preservation rather than instead of preservation. It’s time to permanently eliminate the false choice of “we have to choose either to have economic development or historic preservation.” In Savannah you’re doing the former by using the latter.

Q: Preservation usually means gentrification with new middle class folks moving in and lower income people forced to leave as rents increase. Can this be avoided?

A: “Gentrification” can happen, and there is certainly some evidence of that in Savannah. But a couple of things should be noted:

• While there are some very wealthy historic districts, there are also some populated with people of modest resources.

• As your question suggests, the biggest potential negative impact is on renters rather than owners, who are major beneficiaries from property appreciation. So home ownership, while not a panacea, needs to be part of the strategy.

• There should be early intervention in areas likely to see significant appreciation in the future for property acquisition by both the private and nonprofit housing entities to acquire properties that can house people of modest resources years into the future.

• The “preservation premium” that is being seen in these neighborhoods should be used as a way to at least partially fund a mitigation of any negative impacts.

Each of the three local levels of government that collect property taxes — the city of Savannah, Chatham County, the Savannah-Chatham County school district — receive in excess of $3 million each year from property taxes generated because values in the historic districts increase more than the rate in the rest of the city. If there were the political will to do so, there’s no reason these dollars couldn’t go to address potential negative consequences.

• Finally, “gentrification” and “displacement” are often used as synonyms, and they are not. Not every decision to move is driven by “I can’t afford to live here any more.”

Particularly for home owners of modest means, receiving an offer on a house at a price they never remotely imagined they could get is a once-in-a-lifetime opportunity.

That doesn’t mean displacement and gentrification aren’t important issues to be addressed. But it does mean that there are often significant beneficiaries other than just the “gentrifiers.”

Q: HSF and local politicians supported efforts to eliminate the state cap of $300,000 on tax credit for a preservation project. This was done in favor of a local hotel owner who sought a $10 million tax credit to renovate a former power plant on River Street. Should such credits be used to encourage development or reward something that would have been done anyway?

A: That’s a fair question. But “would have been done anyway” is a speculative query. A survey a few years ago of developers who used the historic tax credit in Virginia indicated the majority of projects would not have happened without the credit.

Further and often forgotten is that with the “carrot” of the tax credits there is also the “stick” of having to follow standards in the way properties are rehabilitated. These standards are what assure that the significant architectural features are maintained and the methods of rehabilitating the buildings are such that the life and sustainability of the structure is extended. That “stick” disappears if the “carrot” disappears.

Q: A state leader said that if this passed there should be a limit on the total tax credit allocated to all preservation projects. Will this be an issue?

A: It probably will be. I understand the short-term perspective saying “we have to have an annual limit on the tax expenditures created by the historic tax credits.” But a few things about that:

• The decision of who gets the credit and who doesn’t then becomes a serious and complex issue because, particularly in development, time really is money. Projects that can’t get their credit until next year or the year after simply won’t be done.

• The short-term tax expenditure should be measured against the long-term tax inflow. The extra jobs, wages and ultimate taxes that these projects generate mean the state receives over time a significant share of that tax expenditure back.

Q: What should local leaders understand better about historical preservation?

A: Heritage tourism is an important and vital industry in Savannah. But there are multiple impacts — economic, social, cultural, urbanistic and quality of life — that accrue to the city in addition to tourism.

Instead of asking the question, “what should we do with those historic buildings?” the entire concept should be reversed and the question should be, “how can our historic resources be used to enhance education, environmental policy, transportation, public safety, public health, affordable housing, economic development, downtown revitalization, job training, etc., etc?”

In Savannah, rather than historic preservation being a policy silo, it should be the base upon which a wide range of public policy decisions are made.

 

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