ANNAPOLIS — The number of historic buildings that were commercially rehabilitated in Baltimore City and towns across Maryland has dropped “precipitously” since 2002, when the state began cutting back a popular and highly effective tax credit incentive for redeveloping older buildings, according to a new report commissioned by the Abell Foundation.
The number of completed historic structure commercial rehabilitation projects in the state dropped from 75 projects totaling $303.9 million in private investment in 2001 to 20 projects totaling $32.8 million in investment in 2005, notes the report released today.
Prior to 2002, Maryland’s 20-percent historic structure rehabilitation tax credit “was a leader nationally in the number and scale of commercial projects it enabled,” states the Abell report. “The success of the program, however, led to legitimate concerns about the unpredictability of annual tax credit outlays and, then, to legislative restrictions, which curtailed its productivity.”
Maryland Governor Martin O’Malley is proposing legislation to extend and greatly strengthen Maryland’s historic structure rehabilitation tax credit program and to make needed adjustments to the key statewide economic development incentive.
The administration bill, SB258/HB309 — The Maryland Heritage Structure Tax Credit Rehabilitation Program — will be heard on March 4 in the Senate Budget and Taxation Committee and on March 5 in the House Ways and Means Committee.
“Passage of this legislation would be a significant step forward for revitalization advocates and for developers,” said Donald C. Fry, president and CEO of the Greater Baltimore Committee, which is a strong supporter of the tax credit.
“The GBC, developers, and preservation advocates know first-hand that this program has been a major factor in commercial revitalization projects in Baltimore City and in towns from Snow Hill to Cumberland,” Fry said at a news briefing to release the Abell report. “The governor’s bill would restore this rehabilitation incentive to its best and highest use as a straightforward tax-credit.”
The proposed legislation would make available up to $100 million in historic rehabilitation tax credits over the next five years. It would reauthorize the tax credit, which is set to expire this July 1, and would include an added incentive for “green” building projects. In addition to a 20 percent tax credit for historic building rehabilitation, it would provide a 5 percent “bonus” credit for commercial projects that meet LEED certification of Gold rating or higher.
The Abell report confirms the value of the tax credit, which it says is “one of the most successful economic development programs ever designed by Maryland state government.” Though both commercial and owner-occupied residential historic properties are eligible for the tax credit, the bulk of its use and the private investment it generated has involved commercial buildings, according to the report.
Since 1996, $213 million in state tax credits for commercial rehabilitation have facilitated total private investment of $923 million in the redevelopment of 407 properties across the state. These projects ultimately generated more than $1.7 billion in total economic activity and the employment of more than 15,000 people, the report calculates.
Although not usually thought of as a jobs program, commercial historic preservation is labor intensive and generates 20 percent more jobs than new construction, the Abell report notes. The construction periods alone for the 407 commercial redevelopment projects generated almost $84 million in state and local taxes. But the greatest return on state investment comes from the long-term increase in employment, property values and property taxes generated by these projects.
Each tax-credit dollar invested by the state generates $8.53 of total economic output, the Abell report concludes. Meanwhile, the tax program “has provided a powerful incentive for recycling older, underutilized and economically obsolete buildings into new uses.”
The value of the tax credit isn’t just that it nurtures jobs and growth. It’s that it brings jobs and growth “to the right places,” said Joseph Cronyn, principal author of the Abell report. Cronyn, a partner in Lipman Frizzell & Mitchell, is a nationally-recognized authority on the fiscal impacts of historic preservation.
The report was co-authored by Evans Paull of the Northeast-Midwest Institute. Paull has done extensive research into sustainable development and environmental issues.