Successful commercial development requires capital, patience and a long-term view. That’s particularly true when the developer is breathing new life into long-dormant older buildings. These spaces, often standing vacant for decades, contribute to blight, depress property values and diminish tax revenues.
The solution takes one of two paths: tear down the properties or rehabilitate them. While demolition may be cheaper in some cases, rehabilitated properties can often command a premium post-renovation. The problem for owners and developers is that the rehabilitation investment – often in the many millions – represents a substantial hurdle that can be hard to cross.
The primary remedy for that hurdle is a tool that our state has used skillfully for many years: tax credits for the rehabilitation of historic properties. This tool has infused new life into communities, and it has served as a catalyst for revitalizing many stagnant downtowns across our state. Historic Tax Credits are a success story that shines bright across North Carolina. (They have been applied in 90 of the state’s 100 counties). The tax credits, which in the past have represented up to 40 percent of total qualified rehabilitation expenditures, also drive job creation and generate substantially more tax revenue than the credits themselves represent.
And it is important to understand that with Historic Tax Credit projects, developers/property owners are the ones taking significant initial risk.
No state money is used up front for Historic Tax Credits. Owners make the investment, improve the property to meet the standards established by the U.S. Department of the Interior and demonstrate preservation of the structure’s historic character while adapting the building for new uses – all before they get a penny of relief from property taxes.
Historic Tax Credits make sense for the private developer. And they also make sense for local and state governments.
Here’s one example. In Greenville, a recent CommunitySmith-driven historic redevelopment transformed a block near East Carolina University from a site of former nightclubs with vacant upper floors into a fully renovated complex that, via creative public-private-partnerships, is headquarters for the University Registrar, the Pitt-Greenville Convention and Visitors Bureau, other successful private enterprises and thriving retail. Before the renovation, the property had a daytime population of just one – a hair salon that’s still operating just around the corner.
Today, daytime population is nearing 60. The property value, and therefore additional tax revenue to the municipalities, has increased by 4 times the pre-renovation valuation. That makes a huge and positive difference to the local economy now and for the future.
This is the kind of project that absolutely could not have happened without Historic Tax Credits. It’s the kind of project that ought to be viable in every community across our state. With the reinstatement of Historic Tax Credits that possibility will be a reality once again. Legislation to that effect has passed the House and is now before the leaders of the Senate. Your senators need to hear that you support this law. It’s a win-win for everybody.
Holton Wilkerson is managing partner of CommunitySmith, a private development organization based in Raleigh.