Massachusetts Historic Rehabilitation Tax Credit Program: Leveraging Funds to Stimulate Development and Economy

MASSACHUSETTS HISTORIC REHABILITATION TAX CREDIT

LEVERAGING FUNDS TO STIMULATE DEVELOPMENT

AND ECONOMY

Massachusetts State Historic Rehabilitation Tax Credit ProgramChapter 141, Section 22 of MGL

1 MASSACHUSETTS HISTORIC REHABILITATION TAX CREDIT

Introduction

Since April, 2004, the Massachusetts Historic Rehabilitation Tax Credit program has been catalyzing the rehabilitation, reuse and revitalization of historic properties across the Commonwealth. These historic structures have been rehabilitated to create quality affordable and market rate housing, community centers, commercial and office space, performing arts venues and restaurants and more, benefiting our communities in numerous ways.

In 2002, Preservation Massachusetts organized a statewide coalition of organizations to find an initiative that would have a resounding benefit for preservation efforts in our Commonwealth. The answer was unanimous: a state historic rehabilitation tax credit. Led by Preservation Massachusetts, the Coalition has seen success in drafting, lobbying and celebrating the benefits of the State Historic Tax Credit since the first application round in April of 2004.

Administered by the Massachusetts Historical Commission, this credit program has proven to be a critical tool for preservation projects and economic development across Massachusetts. From theatres in Worcester and Pittsfield, to hotels in Boston and Stockbridge, to new housing stock in Lawrence and New Bedford, this tax credit actively demonstrates the economic benefits of historic preservation while revitalizing our neighborhoods. Not only is the historic fabric of our Commonwealth being reused and communities reenergized, but vital links between preservation, development, businesses and other professions are being forged and strengthened. Jobs are being created, lights are being turned back on, and downtowns are being revitalized.

The program has grown steadily in popularity over five years, from 14 first round

3

MA

SSAC

HU

SETTS STATE T

AX C

REDIT

MASSACHUSETTS STATE TAX CREDIT

applicants to nearly 60 in January 2009, and the demand for the credit is higher than ever. The original $10 million credits annually available increased to $15 and then $50 million in 2006. But even with these expansions, there are not enough credits available to aid the projects that rely on them as a vital funding source. State Tax Credits, when coupled with federal credits, are increasingly becoming the critical source for attaining project feasibility. It is anticipated that the number of applicants and demand for state credits will continue to increase, and an expanded program will be needed to unlock the enormous amount of development potential that these projects represent. If the state credit program is expanded, a potential $1.77 billion worth of re-investment will become possible.

As the lead organization in the conception, lobbying and expansion of the credit, Preservation Massachusetts felt it imperative to quantify the direct benefits of the historic tax credit back to the Commonwealth. It is not hard to see the impact of the credit by viewing construction sites and seeing the before and after pictures of historic structures restored. Yet it is the dollars spent as a result of redevelopment, tax revenues, and jobs created and sustained, that paint the true picture of the credit’s success and illuminate its potential for the future.

Through the support of a Legislative Sub-Committee, our lobbyist and numerous individuals across Massachusetts, this economic study became a reality. This study shows that preservation has potent economic development power and plays an important part in the revitalization of communities. The dedication and support of many made this credit program a reality, and Preservation Massachusetts continues to lead the efforts to sustain and grow the program so it will continue as a vital tool for preservation and re-building our economy.

2002

Preservation Massachusetts creates the Massachusetts Preservation Coalition and it determines a historic tax credit would have the greatest impact on historic preservation throughout Massachusetts.

The Coalition begins a study of tax credit programs in other states, and Preservation Massachusetts hires a lobbyist to begin discussing the credit with state legislators and to actviely seek sponsors.

The development community and preservationists develop working relationships as the economic impact of the Historic Rehabilitation Tax Credit becomes apparent.

A PROGRAM WITH STRONG SUCCESS AND INCREASING NEED

2003 In a difficult economic time, the credit legislation languishes in the Taxation Committee. Senate President Travaglini and staff suggest the credit be a part of the 2003 Senate Economic Stimulus Package. With the help of the development community, the credit passes and is signed into law by Governor Romney in November. The credit program is:

• Up to 20% on certified rehabilitations

• A 5 year pilot program capped at $10 million credits available annually, $50 million total credits

• Administered by the Massachusetts Historical Commission

• 25% of the available credits must be allotted for projects that contain affordable housing

• PM and other organizations commented on the Emergency Regulations, which are promulgated

2004-2005

Senate Bill 2478 is filed to increase the annual credit available for the state historic tax credit. The legislature compromises and increases the cap by $5 million, making a total of $15 million now available annually.

MASSACHUSETTS HISTORIC REHABILITATION TAX CREDIT3

2006 The success of the state historic tax credit is remarkable. The Senate seeks to raise the annual cap to $30 million, while the House seeks $50 million. House and Senate both agree on a $50 million annual cap (retro active to 2005) and extends the program sunset date until December 2011. Governor Romney vetoes the legislation but a voice roll call in the Legislature overrides the veto unanimously in the House and with only one lost vote in the Senate. Permanent regulations are promulgated.

2008-2009

With the success of the state historic tax credit and the increasing number of projects seeking allocations for amounts that far exceed $50 million annually, Preservation Massachusetts makes a strong push to increase the credit cap. The focus of legislative advocacy efforts include extending the 2011 sunset clause, raising the cap to $100 million annually and ensuring this vital program does not suffer with the challenging economic times.

An economic study of the credit, featuring quantifiable numbers on job creation, tax revenue, project profiles and testimony of elected officials and others is undertaken.

LOOKING

FORWARD

Waltham Watch is a massive industrial complex along the banks of the Charles River that blends Queen Anne and Romanesque architectural styles. Used throughout the 19th century until the mid 20th century by The American Watch Company, this now largely vacant 27 building complex will be converted to office, commercial, restaurant, and retail

space. With tax credit assistance, this underutilized asset can bring jobs and economy to Waltham.

4MASSACHUSETTS STATE TAX CREDIT

n

*

SUFFOLK COUNTY $ 940.9 M POTENTIAL INVESTMENT

$ 128.6 M TAX CREDITS DEMAND

CURRENT DEMAND BY COUNTY

NORFOLK COUNTY

$ 83.8 M POTENTIAL INVESTMENT

$ 10.2 M TAX CREDIT DEMAND

BERKSHIRE COUNTY $ 67.3 M POTENTIAL INVESTMENT


BRISTOL COUNTY $ 133.3 M POTENTIAL INVESTMENT


FRANKLIN COUNTY $ 77.7 M POTENTIAL INVESTMENT


ESSEX COUNTY $ 335.4 M POTENTIAL INVESTMENT


MIDDLESEX COUNTY $ 503.4 M POTENTIAL INVESTMENT


BARNSTABLE COUNTY



HAMPDEN COUNTY


$ 10.1 M TAX CREDIT DEMAND HAMPSHIRE COUNTY



UNDER 1 M

1M - 10 M

11 M - 20 M

21 M - 50 M

51 M - 100 M

101 M - 150 M

CREDIT IMPACT5

CREDIT IMPACT 3

CRED

IT IMPA

CT

LEVERAGING FEDERAL $$$

The Massachusetts State Historic Tax Credit has widely revived the use of the Federal Historic Tax Credit across the Commonwealth. The combination of both state and federal tax credits has proved enticing to developers and allowed many challenging programs to become a reality.

In FY 2008, the National Park Service reports that Massachusetts ranks number 2 in the country with a total of $324,940,381 in certifi ed expenses from 58 projects trailing just slightly behind Missouri’s $376,705,762 in certifi ed expenses from 134 projects.

(Source: Federal Tax Incentives for Rehabilitation Historic Buildings: Statistical Report and Analysis for Fiscal Year 2008, The National Park Service, February 2009.)

n

*

SUFFOLK COUNTY$ 940.9 M TOTAL INVESTMENT

$ 128.6 M TAX CREDIT INVESTMENT

IMPACT BY COUNTY

NORFOLK COUNTY

$ 83.8 M TOTAL INVESTMENT


BERKSHIRE COUNTY $ 67.3 M TOTAL INVESTMENT


BRISTOL COUNTY $ 133.3 M TOTAL INVESTMENT


FRANKLIN COUNTY $ 77.7 M TOTAL INVESTMENT


ESSEX COUNTY $ 335.4 M TOTAL INVESTMENT


MIDDLESEX COUNTY$ 503.4 M TOTAL INVESTMENT


BARNSTABLE COUNTY



HAMPDEN COUNTY



HAMPSHIRE COUNTY



UNDER 1 M

1M - 10 M

11 M - 20 M

21 M - 50 M

51 M - 100 M

101 M - 150 M

IMPACT ACROSS MASSACHUSETTS

Current demand is 293.8 million, which could leverage development investment of 1.7738 billion

With this investment, 25,729 jobs would be created*

4,094 housing units would be created with 910 being affordable housing units

Nearly 8 million square feet would be rehabilitated

Return to MA in tax revenue: approximately 296.9 M

$

4,094 housing units would be created with 910 being affordable housing units

With

*In 2003 Preservation Massachusetts created a model for calculating fi nancial impact of the Massachusetts Historic Rehabilitation Tax Credit. The multipliers were calculated using a customized input-output model, the Preservation Economic Impact Model. Source: Lahr, Mike L. & Listokin, David; Economic Impact of Historic Preservation in Massachusetts; Center for Urban Policy Research, Rutgers University.


CREDIT IMPACT

• Massachusetts closed 2008 with an unemployment rate of 6.9%

• When development is spurred, jobs are created.

• The Massachusetts Rehabilitation Tax Credit catalyzes development by providing up to 20% of the certified rehabilitation cost leveraging the devloper’s initial investment and allowing projects to move forward.

• Projects currently waiting in the wings for tax credits could create upwards of 25,000 construction and permanent jobs for the Commonwealth

CREATING JOBS

8

LOOKING FORWARD The Hewood Wakefield Company Complex in Gardner will create 100 construction jobs and 50 permanent jobs. With State Tax Credits, these jobs can become a reality.


CREDIT IMPACT

• 25% of allocated credits must go to affordable housing projects

• Over the past five years, tax credit investment has created 851 new housing units with 422 of those units being affordable housing units

PROVIDING NEEDED HOUSING

LOOKING FORWARDWampanoag MillFall River, MA

December 15, 2008

D E V E L O P E R : WinnDevelopment

A R C H I T E C T : The Architectural Team

Rendering

Comprised of two mill buildings, Wampanoag Mills reflects Fall River’s booming 19th century textile industry. Mill Number 1 once housed upwards of 1,605 looms and 64,872 spindles in its five story granite structure. The Mills currently house some commercial and factory outlet tenants, and future plans will create quality rental housing for persons 55 and older.

10


CREDIT IMPACT

REVITALIZING COMMUNITIES

In downtown Lawrence, mills stood vacant for many years after textile companies closed their operations. With the loss of the industry, former factories no longer stimulated the economy and instead drained Lawrence.

Washington Mills’ rehabilitation into 155 housing units which would not have been possible without State Tax Credits, brought $ 40 million worth of investment to downtown Lawrence. Now the home of over 200 new residents, Washington Mills is acting as a catalyst for future development in Lawrence.

Throughout Massachusetts, the State Rehabilitation Tax Credit is filling the funding gap to help revitalize communities and draw investment to cities like Lawrence.

Built in 1929, Greenfield’s First National Bank’s Art Deco features stand out against the predominantly Greek and Federal revival style of downtown. The strong forms of the building, reinforced concrete and steel beams used in construction were meant to inspire confidence in local banking. Years of neglect may have deteriorated some elements, but not plans for creating retail and restaurant space in this local

landmark. This project needs $.7 M in tax credit allocation to strengthen their own investment of $ 4.1 M.

LOOKING

FORWARD

12


Union Crossing is a major redevelopment located between downtown Lawrence and a new intermodal transportation center. The project will include 125 housing units of mixed income housing, including affordable housing for working families, approximately 125,000 sf of commercial space, a 12,000 square foot daycare center, and two acres of public open space including a streamlined pedestrian thoroughfare, new park space, and playground. This project embodies so much more than just preservation; it answers a critical need for housing, helps bring new jobs to Lawrence, promotes transit oriented development and puts life back into a complex that was in danger of becoming vacant and blighted.

Union CrossingLAWRENCE, MA December 16, 2008

View South

RaisedLawn Panel

North Canal

Promenade

EntryPavilion

ShadeTrellis

East IslandBridge

Playground

CREDIT IMPACT

OTHER BENEFITS OF PRESERVATION

Urban RevitalizationDowntown cores become re-populated thus improving the market for retail services, bringing eyes on the streets and turning on lights in the windows. Local economies are stimulated from the increased demand resulting from infusion of new building users.

Transit Oriented DevelopmentHistoric districts often have excellent access to public transportation thus offering alternatives to driving thereby reducing the states carbon footprint.

Re-use of existing infrastructureCities and towns benefit by not having to build new infrastructure.

ConservationBuilding preservation preserves open space and reduces waste. There is less new construction in greenfields and less waste in our landfills.

Sense of PlacePreserving places with deep historical and cultural significance improves our quality of life.

LOOKING FORWARD

14

WHAT IS THE MA REHABILITATION TAX CREDIT DOING IN YOUR COMMUNITY?

N

n

BERKSHIRE COUNTY RED LION INN, STOCKBRIDGE

THE COLONIAL THEATRE, PITTSFIELD

HAMPDEN COUNTY

WORTHINGTON COMMONS, SPRINGFIELD

FRANKLIN COUNTY RISTORANTE DIPAOLO, TURNERS FALLS

WORCESTER COUNTY HANOVER THEATRE, WORCESTER

PARKHILL MILL, FITCHBURG

ESSEX COUNTY BROWN SCHOOL, PEABODY

CORDOVAN, HAVERHILL

WASHINGTON MILLS, LAWRENCE

BRISTOL COUNTY UNION STREET LOFTS, NEW BEDFORD

SUFFOLK COUNTY 311 SUMMER STREET, BOSTON

BAKER SQUARE II, DORCHESTER

FEATURED TAX CREDIT PROJECTS

MASSACHUSETTS HISTORIC REHABILITATION TAX CREDIT

RED LION INN, STOCKBRIDGEDEVELOPER: THE FITZGERALD FAMILY

ORIGINAL USE: HOTEL

REUSE: HOTEL

17

TOTAL PROJECT COST:

$ 6 M

TOTAL TAX CREDITS:

$ .50 M

TAX CREDIT PROJECTS

REUSE: HOTEL

18

THE COLONIAL THEATRE, PITTSFIELDDEVELOPER: THE COLONIAL THEATRE ASSOCIATION

Since the Colonial Theatre opened its doors in 2006, values of a typical home within the city of Pittsfield have risen an average of 20%. More and more people are coming downtown to the 40 plus new condo units, dozen-or-so restaurants, half dozen shops, and a handful of small businesses that have been established since the reopening.

Mayor James M. Ruberto


ORIGINAL USE: THEATRE REUSE: PERFORMING ARTS SPACE

TOTAL PROJECT COST:

$17 M TOTAL TAX

CREDIT:

$1 M

TAX CREDIT PROJECTS 20

UNION STREET LOFTS, NEW BEDFORDDEVELOPER: HALLKEEN AND THE WATERFRONT AREA HISTORIC LEAGUE (WHALE)

TOTAL PROJECT COST:

$12.3 M

TOTAL TAX CREDITS:

$ 1.01 M

New Bedford’s historic properties and their architectural features are recognized as some of the city’s greatest attributes. Without the MHRTC our history and heritage would be at risk. It takes a tremendous amount of dedication and vision to restore these types of buildings for 21st century use and the MHRTC plays an essential role in their redevelopment.

Mayor Scott W. Lang, New Bedford

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TAX CREDIT PROJECTS

CONVERTED TO MIXED INCOME HOUSING/COMMERCIAL SPACE

35 HOUSING UNITS

WITH 9 AFFORDABLE

UNITS

22

BROWN SCHOOL, PEABODYDEVELOPER: STRATFORD CAPITAL


TAX CREDIT PROJECTS

TOTAL PROJECT COST:

$15 M

TOTAL TAX CREDITS:

$ 1.0 M

41 NEW HOUSING UNITS; 20 ELDERLY AFFORDABLE UNITS

24

THE CORDOVAN AT HAVERHILL STATION, HAVERHILLDEVELOPER: BEACON COMMUNITIES LLC

TOTAL PROJECT COST:

$39 MTOTAL TAX CREDITS:

$2.50 M


ORIGINAL USE: SHOE RELATED MANUFACTURING

REUSE: HOUSING

146 NEW MIXED INCOME HOUSING UNITS; 40% AFFORDABLE UNITS


WASHINGTON MILLS, LAWRENCEDEVELOPER: ARCHITECTURAL HERITAGE FOUNDATION AND BANC OF AMERICA CDC

TOTAL PROJECT COST:

$42.1 M

TOTAL TAX CREDITS:

$5.40 M

In a region dotted with historic mills, Washington Mills stands out—not only for the quality of its recent renovation but also for the impact of its rebirth on the town of Lawrence. This project has demonstrated in remarkable fashion how historic preservation can be a real catalyst for downtown revitalization.

Richard Moe, President, National Trust for Historic Preservation


155 NEW HOUSING UNITS

10% OF UNITS ARE AFFORDABLE HOUSING

28TAX CREDIT PROJECTS

RISTORANTE DIPAOLO, TURNER FALLSDEVELOPER: DENISE DIPAOLO

TOTAL PROJECT COST:

$ 385,000

ORIGINAL USE: DOWNTOWN COMMERCIAL SPACE

REUSE: RESTAURANT


TOTAL TAX CREDITS:

$ 59,000


WORTHINGTON COMMONS, SPRINGFIELDDEVELOPER: FIRST RESOURCE COMPANIES

TOTAL PROJECT COST:

$19 M

TOTAL TAX

CREDIT:

$2 M


ORIGINAL USE: APARTMENTS

REUSE: HOUSING

100% AFFORDABLE HOUSING UNITS


311 SUMMER STREET, BOSTONDEVELOPER: ADD, INC.

TOTAL PROJECT COST:

$ 30 MTOTAL TAX CREDITS:

$ .70 M

The Massachusetts State Historic Tax Credit program has been and continues to be a significant and critical source of funding for the development of our company’s new home at 311 Summer Street. ADD Inc’s efforts to rehabilitate this precious asset that is a piece of Boston’s history would not have been possible without the existence of this funding source, as well as the support from so many of our allies and partners that spoke on our behalf to secure continued funding from the State. Today, we occupy the building, lease space on A Street and Summer Street, and have successfully repositioned an underutilized and at risk asset to the benefit of the neighborhood and the greater Fort Point Channel community.

Fred Kramer, AIA, Principal, ADD, Inc.MASSACHUSETTS HISTORIC REHABILITATION TAX CREDIT39

TOTAL PROJECT COST:

$30 M

TOTAL TAX CREDITS:

$.70 M

TAX CREDIT PROJECTS

ORIGINAL USE: COFFEE MANUFACTURING

REUSE: OFFICES AND RETAIL/COMMERCIAL SPACE

40


BAKER SQUARE II, DORCHESTER (LOWER MILLS)DEVELOPER: WINNDEVELOPMENT

BEFORE

• Original Construction Date: Complex date: 1868-1947• Original Use: Chocolate factory

Walter Baker started manufacturing chocolate on this site in the 1770’s.


ORIGINAL CONSTRUCTION DATES:

1868-1947

TOTAL PROJECT COST:

$28 M

TOTAL TAX CREDITS:

$6.38 M

AFTER

Baker Square II received the PM 2008 Paul Tsongas Award for preservation,

economic development and use of historic tax

credits.

80 NEW HOUSING UNITS CREATED WITH 8 AFFORDABLE HOUSING

UNITS

THE HANOVER THEATRE, WORCESTERDEVELOPER: WORCESTER CENTER FOR PERFORMING ARTS, LLC

We could never have done this project if it wasn’t for the State Historic Tax Credit and the support of Preservation Massachusetts.

Ed Madaus, Founder, The Hanover Theatre, Worcester


TOTAL PROJECT COST:

$32.8 MTOTAL TAX CREDITS:

$ .75 M


TOTAL PROJECT COST:

$ 17.5 M

PARKHILL MILL, FITCHBURGDEVELOPER: MASSINNOVATION

86 HOUSING UNITS CREATED, 100% AFFORDABLE HOUSING

TOTAL TAX CREDITS:

$ 2.5 M45 MASSACHUSETTS HISTORIC REHABILITATION TAX CREDIT

86 HOUSING UNITS CREATED, 100% AFFORDABLE HOUSING

“Anwelt Heritage Apartments, New England’s first eco-friendly, affordable senior housing project, is an excellent example of just how vital the State’s Historic Rehabilitation Tax Credit Program is to Gateway Cities like Fitchburg. This award-winning, $20 million, adaptive reuse project here in Fitchburg just would not have been possible without the State Historic Tax Credit Program.”

-Fitchburg Mayor, Lisa Wong 46TAX CREDIT PROJECTS

Acknowledgements

Massachusetts Preservation CoalitionComposed of statewide developers and preservationists

Preservation Massachusetts45 School StreetBoston, MA 02108617.723.3383www.preservationmass.org

This project has been funded in part by a grant from the National Trust for Historic Preservation’s Eastern Massachusetts Preservation Fund

By Cyndia Golze, Architectural Heritage Foundation, 2009

Documents

Massachusetts Historic Rehabilitation Tax Credit Program: Leveraging Funds to Stimulate Development and Economy