JAMES W. IGOE
Latest vote ‘is huge’
A state tax credit program that is helping to transform vacant mills and other underutilized historic properties into apartments and offices has received a significant funding boost – a move that preservationists hope will encourage more developers to take on restoration projects.
State lawmakers have voted to expand the Massachusetts Historic Rehabilitation Tax Credit program – which provides a tax credit of up to 20 percent of renovation costs to developers who rehabilitate old buildings into income-producing property – to $50 million a year through 2010.
Started just two years ago, the program was originally funded at $10 million and increased to $15 million last year. The Legislature voted earlier this month to extend the program and increase funding retroactively to 2005.
About 15 projects in cities like Worcester, New Bedford, Lawrence and Fitchburg have been awarded some level of tax credit funding since May 2004, according to Preservation Massachusetts, a nonprofit organization that pushed state leaders to create and expand the program.
Twenty-eight projects, at least half of which have a housing component, are currently waiting for funding.
James W. Igoe, president of Preservation Massachusetts, said one of the main concerns that developers have expressed about the tax credit in the past is that it has been under-funded, making it very competitive to obtain money through the program. Requests for tax credit money have outstripped the available funding.
According to Igoe, a total of 56 projects have sought tax credit funding, yet only about a quarter of those received awards.
“The problem that’s been dogging the state tax credit is that there has not been enough money available for the projects that have applied,” said Igoe.
With the extension and expansion of the program, Igoe hopes that all 28 projects that are seeking funding will receive some money.
“We just see the momentum building for this,” said Igoe. “This is huge for us.”
Preservation groups initially saw the historic tax credit program as a good way to save and re-use historic properties. But preservationists – along with policymakers and local officials – have seen that the tax credit also can help stimulate the economy in struggling urban communities by providing jobs and creating income-producing tax-generating properties.
“I think what we came to realize as we progressed with this is that it became a huge tool for economic development, and the economic stimulus in various communities became more apparent,” Igoe said.
‘A Terrific Program’
In Lawrence, a Boston-based nonprofit developer is using the program to help with a $24 million project that will convert an old downtown mill building into market-rate apartments. Architectural Heritage Foundation, which broke ground on the project last month, is creating 155 apartments in a 240,000-square-foot building that was once part of the American Woolen Co.
The apartments, expected to be finished in September 2007, will be available for sale five years after construction is completed upon the request of the city, according to Architectural Heritage Foundation President Sean McDonnell.
McDonnell said Architectural Heritage Foundation originally sought nearly $7 million in tax credit money, but was only awarded $900,000 – less than 4 percent of the total construction costs of the project. Architectural Heritage Foundation is now seeking another allocation.
“This is a terrific program which has the capacity for Â… allowing for significant investment in second- and third-tier cities,” said McDonnell.
But McDonnell said that the state tax credit program has been “cumbersome” and “unpredictable” because developers are unsure how much money they will receive through it and when they will receive it – making it difficult for them to build a development budget and seek other types of financing.
That’s because unlike the federal historic tax credit program – which provides a fixed tax credit of 20 percent of renovation costs – the state program provides credits of up to 20 percent.
With the funding boost, McDonnell expects the program to become “significantly more predictable” and “function the way it’s intended to.”
Modeled after the federal tax credit program – which has existed for 30 years – the state program is administered by the Massachusetts Historic Commission. The measure to expand the tax credit program, which is part of the state’s economic stimulus bill, has been sent to Gov. Mitt Romney for his consideration.
Igoe said he is optimistic that Romney will sign off on the increase because the governor supported the creation of the program two years ago and also approved the increased funding last year.
Tax credits have been awarded for projects in various cities that are turning under-used buildings into housing and commercial space.
In Boston, the Jamaica Plain Neighborhood Development Corp., a nonprofit community development group, is using $500,000 in credits to redevelop an old brewery into space for 50 small businesses, along with the construction of 79 new homes.
Also in Boston, Cambridge-based Carpenter & Co. is using tax credits to make the Charles Street Jail near Massachusetts General Hospital into a four-star hotel.
South of Boston, HallKeen, a Norwood-based real estate investment and property management firm, and the Waterfront Historic Area League, a local nonprofit preservation group, teamed up to renovate six vacant buildings in the central historic district of New Bedford. As part of the project, new artist lofts and commercial space were created in the old Coffin Press Buildings.
In the central part of the state, tax credit money has been used to revitalize parts of Worcester. A city-owned mansion on Pearl Street was restored as a restaurant called TiNovo that features upscale cuisine and an extensive wine list. Currently, the former Showcase Cinemas in the city’s Federal Square is being rehabilitated into a performing arts center using tax credits.
