The renovation and reuse of historic buildings in New York State may soon be made easier, thanks to recent changes to the state’s Historic Rehabilitation Tax Credit program.
Out-of-state banks and insurance companies are given more access to the program thanks to legislation passed late last month. Proponents say the move should increase the available pool of money for revitalization projects.
“Financing is always an issue,” said Larry Glazer, CEO of Buckingham Properties. “This opens the pool of opportunity.”
How much the changes counterbalance tax credit deferrals put in place by the state Legislature earlier in the summer remains to be seen, however.
“The franchise tax change will allow some projects to move forward, despite the deferral program,” Daniel Mackay, director of public policy for the Preservation League of New York State, said. “But this change would have far greater impacts without the deferral program, because it would allow these new investors to partner in a far larger number of projects.”
Legislation to allow out-of-state financiers more access to the tax credit program took effect as soon as it was was signed by Gov. David Paterson. Prior to the change, companies based outside of New York could apply the credit only to their general corporate income tax liability, Mackay said. Those companies now may apply the rehabilitation tax credit program against their state franchise tax liability as well, increasing their incentive to invest in rehabilitation projects here. The change is particularly important to banks and insurance companies, who are among the most active users of the rehabilitation tax credit, he said.
“I think that it is a positive development,” said Joe Rowley, president of the New York State Commercial Association of Realtors and works out of the Rochester office of CB/Richard Ellis. He said it’s simply too soon to tell how it will affect development in the Rochester market, however.
Also unknown is exactly how much of a positive impact the expansion will have in the wake of tax credit deferrals put in place earlier this summer, noted Heidi Zimmer-Meyer, president of the Rochester Downtown Development Corp.
“I don’t know how much one will mitigate the other,” she said, adding that a great deal depends on how the ongoing financial crunch plays out, as well as future state leadership.
While he believes it would prove far more effective without the deferrals in place, city Economic Development Commissioner Carlos Carballada also viewed the change as a positive one.
“We love to see our local institutions be involved in this, but sometimes they can’t be,” Carballada said. “Sometimes we need to explore other areas of support.”
Cheryl Stulpin, vice president of Winn Development, agreed. Over the long term, she said the change should give a real boost to the region’s future rehabilitation projects. Winn Development is involved in the $23 million renovation of the former Tent City building as well as the 1.1 million-sq. ft. Sibley Building.
While Glazer said Buckingham hasn’t been involved with Historic Tax Credit projects in the past, “we are starting to look at them.”
Increasing the number of financing options available would make the process more attractive.
“It’s not the huge reform the state needs, but it is helpful,” he said.
How does it work?
As it now stands, the tax credit only applies to projects involving the rehabilitation of historically significant buildings in distressed areas, including downtown Rochester, Buffalo and Syracuse and parts of New York City.
Under New York’s most recent state budget, rehabilitation tax credits exceeding $2 million in value earned between 2010 and 2012 will be deferred over a three-year period. In 2013, 50 percent of the balance of credit value over $2 million will be available. In 2014, 75 percent of the remaining balance of credit value will be available and in 2015, 100 percent. The measure doesn’t affect homeowner rehabilitation projects, which are capped at $50,000.
Critics charge that deferring incentives of the state’s Rehabilitation Tax Credit program will prevent some projects from securing financing, as backers no longer will be assured of a timely return on investment.
A number of Rochester-area rehabilitation projects have been complicated significantly due to the deferrals, Zimmer-Meyer said. Among them are Winn’s project at the Tent City building as well as the ongoing $6 million renovation of the Academy Building, the nearly $5 million renovation of the Josh Lofton Building and the $6.5 million renovation of 44 Exchange St.
“The Senate and Assembly will be returning to Albany in the coming weeks,” Mackay said, “and we will continue our advocacy in hopes of restoring the tax credit program to its intended format so that New York will finally begin to enjoy the long-sought economic and community redevelopment benefits.”
Eric Walter is a Rochester-based freelance writer.