In the last 15 years, the Historic Tax Credit has helped save hundreds of buildings, contributed more than $7 million in labor income and created an average of 169 jobs per year in Savannah, according to a 2015 economic impact report by the Historic Savannah Foundation.
The current tax reform measures now in Congress put the preservation credit in jeopardy; it is not included in the U.S. House version of the bill.
“I think it’s been the backbone of revitalization in virtually every city in the country,” Daniel Carey, president and CEO of the Historic Savannah Foundation, said of the credit.
Created in 1976 and modified in 1986, the credit allows for a 20 percent tax credit off federal income taxes based on the amount of money spent on a certified rehabilitation project. Nationwide since its introduction, the credit has helped preserve more than 40,000 buildings and leveraged $131.8 billion in private investment, according to the National Trust for Historic Preservation.
There are some guidelines that must be met, including that the structure must be income producing and meet certain historic requirements, which in downtown Savannah is nearly every building.
“Part one in this town, that’s just checking a box,” Carey said of the historic requirements.
“Part two is where you work out the rehabilitation plan of the building per the Secretary of Interior’s standards. There are standards; it’s not just a free lunch. You certainly have to abide by a lot of guides and it’s not easy.”
For example, a developer who spends $1 million on the rehabilitation of a qualifying structure can claim $200,000 and it can be paid forward several years. Carey said the notion that the credit is revenue negative and costing the federal government money is a misconception.
“It is revenue positive because of the other investments, the other property taxes it creates, the jobs that it creates and the overall improvement of the community and all of those things actually trickle up to the federal government,” he said.
The federal credit is also complimented by a state tax credit, which allows a credit equal to 25 percent of the project’s Qualified Rehabilitation Expenditures and according to the National Parks Service, Savannah leads the state in the usage of the credit with at least 148 projects taking advantage from 2002 to 2016. Macon took the second spot with 64 projects.
Projects using the tax credit
In Savannah, some of the more notable projects that have benefited include The Kress Building on Broughton Street, Bryson Hall on Chippewa Square and The Atlantic Greyhound Bus Terminal, which was transformed into The Grey, an award winning restaurant that continues to rack up accolades for both food and design.
“It’s an exceptional incentive,” said Johno Morisano, owner of The Grey.
The project’s Qualified Rehabilitation Expenses of $2,536,097 generated $507,219 in federal historic tax credit equity for the transaction. Overall, the project cost just over $3 million and included the restoration of the distinctive marquee along with the remaining exterior and repurposing the ticket and lunch counters for kitchen and dining space.
Morisano said there was no doubt that the project would have been cheaper without using the historic tax credit guidelines, but he felt he had a moral obligation to return the building to its grandeur.
“I wasn’t a preservationist before, but what this did for me was it made me a preservationist,” he said, adding that it’s unlikely the project would have had the same look without the tax credit.
“It was one of the most fulfilling things I’ve done in my life.”
Brian Felder, principal at Felder and Associates, the architecture firm behind The Grey said that while projects following historic guidelines can often drive up cost, Savannah could be in jeopardy if buildings start being remodeled without being sensitive to historic standards.
“A lot of the projects in Savannah use the tax credit because there can be increased costs from making sure the building is stable and using methods and materials that are no longer in practice,” he said.
“All in all it’s very lucrative… It can help projects that are on the fence.”
Earlier this month when the Senate passed its version of the Tax Cuts and Jobs Act, the bill included a modified version of the credit payable over five years. During those five years, the developer must complete and abide by the modifications outlined in their rehabilitation plan.
The House version completely removed the credit and, speaking by phone from Washington on Thursday, U.S. Rep. Buddy Carter expressed his support for the credit but said he was uncertain of its future.
“Savannah is my home, and it’s where I’ve been all my life and intend to be the rest of my life and it’s the most beautiful place in America as far as I’m concerned and part of the reason for that is the historic district,” Carter said.
“The historic district is so important to us and all of us appreciate it and understand just how important it is. If the tax credit stays in and I hope it does, I think we’re going to be fine, but even if it doesn’t I don’t think it’s going to mean the demise of the historical district by any stretch of the imagination.”
Carter said many projects in Savannah won’t be impacted if the credit is repealed, calling it a ‘boondoggle’ for mega projects citing the restoration of Fenway Park in Boston and project on Millionaire’s Row in Miami.
“That’s mainly what the tax code writers are trying to overturn is the boondoggle for the mega projects,” he said.
Carey, however, disagrees and said the credit is accessible to any size project as long as the building qualifies. The credit incentivizes and insures a good product and often serves as a way for small developers or young entrepreneurs to get into the game, he said.
“It is a positive domino effect. One begets another and that’s been basically the forefront of Historic Savannah Foundation’s whole approach to revitalizing this city,” he said.
Carey said HSF isn’t completely pleased with the Senate version, but it’s better than repealing it completely. An abolishment will, “chill the development water,” Carey said and urban areas and blighted neighborhoods in need of rehabilitation will certainly take a hit.
“This is going to potentially be disastrous with respect to the investment in those areas. You’re taking the best incentive off the table or in the best case scenario you’re reducing it…,” he said.
Carey said he finds it curious that anyone regardless of political affiliation wouldn’t want to not only save, but enhance and expand the credit.
“… We’re not just a state leader, we’re a national leader. This city is recognized internationally as a leader in the preservation field and tax credits are one way we prove that,” he said.
While the final version of tax reform remains uncertain, Historic Savannah Foundation continues working with other state and national organizations on what Carey said is also an educational issue. They’ve also been encouraging residents to voice their concerns and Carter said the phones have been ringing.
“We’ve had quite a few calls to the office about the issue and we’ve done our best to explain that we’re still in conference and the final decision hasn’t been made and we should know something next week,” Carter said.
Carey recognizes the much larger complex issue of the entire tax reform bill, but in the case of the historic tax credit keeping it should be an easy decision.
“This is a momentous occasion and we really need it to not just survive, but thrive, so I do hope the House sees the wisdom,”Carey said.
“This thing is proven, it’s effective, it’s accessible and it works.”