Increase Sought for W.Va. Historic Rehabilitation Tax Credit
Preservationists to make their case
WHEELING — To compete with border states such as Ohio and Pennsylvania and encourage redevelopment of vacant buildings, advocates will make a case to state legislators and the public that West Virginia’s historic rehabilitation tax credit needs to be expanded.
Wheeling Heritage Executive Director Jake Dougherty said his organization, along with the Preservation Alliance of West Virginia, the American Institute of Architects and the Abandoned Properties Coalition, will present its argument prior to and during the state’s next regular legislative session in 2017. He and others view the credit as a clear investment tool underutilized within West Virginia, and said a larger credit would result in a positive economic impact by making the state more attractive to private developers.
Wheeling City Council approved a resolution to support such an increase at the state level earlier this month.
Ohio, Pennsylvania and Virginia offer a 25-percent historic credit, compared to West Virginia’s 10 percent. For this reason, Craig O’Leary, program director of the Regional Economic Development Partnership, said businesses considering regional development definitely take such breaks into consideration as they go a long way toward ensuring a project is profitable.
He referenced the revitalized Stone Center, Orrick, Herrington and Sutcliffe’s restored Wheeling Stamping Co. building, the Wagner Building, the Ohio Valley Building, the Maxwell Building and the Fort Henry Club as projects made possible because of historic tax credits.
“If you look at that list of projects and compare it to major developments downtown, excluding The Health Plan, you’ll get the same list,” O’Leary said.
Ernie Dellatorre, president of McKinley and Associates, said the ongoing rehabilitation of the Fort Henry Club at 14th and Chapline streets would not have happened without the state’s historic tax credit. He said it’s a vital asset because it’s exactly what allows a developer to keep property leases competitive and lure tenants. He said he would support an increase.
“It’s (the current tax credit rate) certainly a disadvantage,” Dellatorre said. “We’re committed to West Virginia, but if you look at other developers with multiple opportunities it’s a pretty simple decision to make.”
How They Work
Private developers may apply for state historic tax credits through West Virginia’s State Historic Preservation Office. Those applying must intend to produce commercial, income-producing property.
The office collaborates with the National Park Service, and it awards credits based on a developer’s submitted list of qualifying rehabilitation costs. These include such items as architectural and engineering fees, construction costs and financing fire suppression systems. The project must also meet the Secretary of the Interior’s Standards for Rehabilitation.
To be considered at all, a building must be a certified historic structure, either individually listed on the National Register of Historic Places or located within a national historic district. There are over 1,000 registered historic districts in West Virginia.
The tax credit can be applied to a developer’s annual income tax after a restoration project is complete, either in the year of project completion or a year back.
It is a dollar-for-dollar reduction in income tax liability, meaning a tax credit of $1 dollar reduces the amount of income tax owed by $1.
West Virginia has not limited how many historic tax credits it can award annually, according to Jennifer Brennan, structural historian with the SHPO. If a rate increase were to occur, she could not say whether this would change. Other states typically cap the number of credits it will provide each year.
Dougherty said the credit is simply an investment tool, although he speculated that many will likely hear the phrase “tax credit” and arrive at a different conclusion. He said with West Virginia’s estimated $300 million budget deficit, legislators and residents alike may scoff at the idea of increasing the credits.
Dougherty said it’s a matter of offering an incentive to spur new state and local tax revenues, and create longstanding economic impact.
A 2015 study from West Virginia University’s Bureau of Business and Economic research stated that from 2003 to 2013 SHPO provided $12 million in tax credits for projects totaling more than $110 million.
The report said this generated roughly $175 million in economic impact throughout this period, with $69 million in direct wages and another $2.9 million in state taxes.
“I do think it’s a bipartisan issue. I do understand that one of the challenges we might run into right away is tax credit and budget issues,” Dougherty said. “That’s where making sure we emphasize the education (of this subject) and talk about the impacts it can have is so critical.”
What’s Already There
Mike Gioulus, a historic preservation consultant, said there are a number reasons a developer would prefer a historic redevelopment rather than starting from scratch. For one, it’s at times less expensive because the building already exists — especially with the aid of state tax credits.
He said new construction may also mean rezoning of a particular property or require new infrastructure for utilities and roads. In a downtown setting, there likely isn’t enough land available, either, which designates a higher price.
A developer interested in downtown real estate has better odds of success if it considers rehabilitation of a standing building, Gioulus said.
He added that old buildings add character to a city, and it’s this quality of authenticity which may attract people to live in it. He said developers tend to follow population trends, as that’s how they make money. Historic buildings, brought up to code, present an aesthetic value and provide a place a sense of identity.
Dougherty believes West Virginia offers a wide net of urban environments that are ripe for dense development and a second wind. He cited Huntington, Morgantown, Charleston and Martinsburg as examples, as well as Wheeling.
He said these are West Virginia’s true assets, and said they should be reconsidered.
“These are classic West Virginia cities that were vibrant and have the opportunity to be vibrant again. In some cases, we’re starting to see energy in these cities,” Dougherty said. “We need to make sure we don’t get in the way of things and see that more private development occurs. I think that’s something we can all agree on.”