From the renovated State Theater in Ely, Minnesota, to the 25-story Landmark Towers office building renovation project in downtown St. Paul, real estate developers over the past decade have raised the financing multi-million dollar redevelopment projects with the help of a state tax credit that effectively forgives 20% of the cost of historic renovations.
That may not be the case for very long.
After 11 years of history, housing and business stimulus, Minnesota’s historic tax credit program is set to expire on June 30, leaving a string of pipeline projects to falter.
“With 100% certainty, our project here in St. Paul, the Landmark Towers, would be suspended without the state historic tax credit, and in Duluth, the Duluth Armory would be suspended,” said Chris Sherman, President of Minneapolis. Sherman Associates.
“THERE IS NO DOWNWARD TO THIS”
Lawmakers on both sides of the political aisle have smiled at the prospect of expanding the People’s Tax Credit Program, which launched in 2011 and has since funded more than 170 major historic preservation projects across the state. , many of which are housing-related.
The credit, originally slated to expire in 2021, received a one-year extension from the state legislature a year ago, and state lawmakers appeared willing to make it permanent this year.
“People who support affordable housing love it,” said Paul DeGeest, director of development at Rethos, a St. Paul-based historic preservation agency. “People who support big business love it. People who support small businesses love it. People who have luxury condos love it. There is no downside to this.
Instead, the bill to enshrine the tax credit program in law landed in a sweeping tax bill that, despite bipartisan agreement, remains stalled, the victim of a partisan stalemate on other issues that lawmakers were unable to unblock in the final days of the legislative session. .
URGE LEGISLATIVES TO CONVENE AN EXTRAORDINARY SESSION
On Thursday, a coalition of real estate developers, housing advocates, union carpenters and historic conservatives gathered on the steps of the Minnesota State Capitol building to urge lawmakers to meet again in a special legislative session and to approve one of the less controversial bills before them.
Finding national funding for real estate projects is competitive, advocates said, and future redevelopment dollars could go to any of the 38 states that currently offer landmark tax credits.
“Let’s finish what we started for all of Minnesota,” said Heidi Swank, executive director of Rethos and chair of the Revitalize MN Coalition. “Legislators agreed that the historic tax credit was important for communities across the state to grow and prosper.”
Swank said each tax credit dollar yields $9 in property tax revenue, construction jobs and additional investment. This yield increases to $16 in Greater Minnesota, where construction costs are cheaper.
In the face of legislative inaction, “we must express our frustration and disappointment,” said Adam Duininck, director of government affairs at the North Central States Regional Council of Carpenters. “We just came out of a session with over $10 billion in surplus and virtually nothing of impact happened.”
The pandemic has freed up some office buildings, but projects like Landmark Towers in St. Paul won’t be renovated and repositioned without this tax credit. Chris Sherman says Sherman Associates will have to go, same with Duluth Armory’s $30 million renovation. pic.twitter.com/GKxERS1ppp
— Frederick Melo, journalist (@FrederickMelo) June 9, 2022
HEAVY USED IN ST. PAUL
From the Schmidt Artist Lofts on West Seventh Street to the Oxford Flats on Selby Avenue, the historic tax credit program has been used extensively each year by developers in St. Paul, where some 80% of structures were built before 1972. of the year makes a structure potentially eligible for federal designation as a historic building.
Still, while the biggest beneficiary of the tax credit has been affordable housing and office redevelopment in St. Paul and Minneapolis, Swank said nearly every legislative district in the state has benefited from a project.
A tally of 150 historic preservation projects across Minnesota since 2011 includes the renovation or historically sensitive redevelopment of the historic State Theater in Ely, New Ulm’s Grand Hotel, and the once closed campus of Pillsbury Baptist Bible College in Owatonna.
Members of the Revitalize MN coalition rejected the idea of simply extending the tax credit for another year, noting that it is difficult for developers to sit down with lenders to finance years before construction s are unsure of the financial tools that will be available to them. road.
Developers have combined the state historic tax credit with an equally sized federal historic tax credit, in addition to other financial incentives, to preserve history when building homes or offices and buildings. commercial spaces.
The credit “allows us to leverage a lot of additional funding, both public and private — private funding that will alternately go to other states,” Sherman said Thursday. “Billions of investments, I believe, will take place over the next three to five years, if and when we pass the historic state tax credit.”