Great Preservation Opportunities

Whether or not to reuse historic buildings often hinges on economics, say decision makers—by which they mean a comparison of the direct cost of rehabilitation versus the direct cost of new construction. A new study from the State Historic Preservation Office, Department of Economic and Community Development (SHPO), shows that there’s more to the economics of preservation than that.

In June SHPO released Investment in Connecticut: The Economic Benefits of Historic Preservation, written by Place Economics, of Washington, D.C. Donovan Rypkema, the principal of Place Economics, is considered the nation’s leading expert on the economics of historic preservation. The report concludes that preservation programs have significant economic benefits for Connecticut, including:

• creating jobs and generating revenue for the state, cities, and towns,  
• leveraging scarce public dollars,
• encouraging development that creates sustainable growth, and
• adding to the community quality of towns and cities

Of these benefits, perhaps the one of greatest concern in the current economy is job creation. The report explains that preservation work creates jobs in three ways:

• direct jobs: a carpenter working on a preservation project
• indirect jobs: the clerk at the lumber yard that sells lumber for the preservation project
• induced jobs: the auto dealer who sells a car to the carpenter for wages received for the preservation project

The report shows that preservation projects create more jobs than other activities. For every one million dollars spent, historic rehabilitation creates 14.4 direct and indirect jobs; in contrast, the same amount spent on new construction creates only 11.9 jobs. One million dollars spent on historic rehabilitation would generate $831,896 in salaries and wages; new construction, only $726,659. This means more money in the pockets of Connecticut workers and their families. In addition, part of this money comes back to the state and to towns in the form of taxes, reducing the actual public expenditure.

In Connecticut, the state and federal governments issued $450 million in state and federal rehabilitation tax credits between 2000 and 2010. That investment created 4,224 direct jobs, 782 indirect jobs and 1,554 induced jobs—a total of 6,560 jobs. The same amount of money invested in new construction would have created about one thousand fewer jobs.

Because of the labor-intensive nature of rehabilitation work, more than 80 percent of that figure—$377 million—ended up in the pockets of workers as salaries and wages. For new construction a larger portion of the total investment would have gone for materials, usually imported from out of state.

For towns and cities weighing reusing historic buildings, this study offers an important new opportunity to evaluate the broader implications of preservation decisions. Even though the up-front costs may often be higher, the promise of additional economic benefits may make rehabilitation the better option.

One example is found in Greenwich, where the town continues to pursue plans to demolish its Central Fire Station, part of the Greenwich Municipal Center National Register district (see CPN, March/April 2011). The town proposes replacing the building with a new fire station that will meet modern codes and perhaps reuse pieces from the historic structure.

According to materials from the town, a primary reason for this approach is that it will cost less—$20.5 million, versus $28.9 million to update and renovate the historic building.

Based on the SHPO economic impact report, the new construction will generate 244 direct and indirect jobs and pay workers $14.9 million in wages and salaries. Renovating the building will have a much larger impact on the economy, generating 416 direct and indirect jobs and putting $24 million into workers’ pockets.

            Of course there are other issues to be considered, such as the town’s promise, in 2004, to preserve the fire station as a condition for receiving zoning variances for another project. And the economic benefit figures given here are only rough approximations. But they serve as a reminder that the town needs to consider all the implications of its decision before it tears down an historic building. A careful investigation could show that rehabbing the building would provide a greater economic benefit to the community.

            For private developers, bottom-line costs are the only deciding factor. Generating jobs in the community doesn’t help make a project profitable. But the potential economic benefit to a community could justify public investment in private rehabilitation projects.

            In Rockville, Marc S. Levine Real Estate Interests and The Architecture and Development Studio LLC are redeveloping the Roosevelt Mill as 77 apartments, to be called Loom City Lofts. The mill, a former textile factory built in 1906 and an important early example of reinforced concrete construction, is part of the Rockville National Register district. It has been vacant for many years as the town sought a viable redevelopment option.

Public investment in the project is substantial: the state Department of Economic and Community Development (DECD) granted $1.2 million for predevelopment site work; the town of Vernon has approved real estate tax abatements for 25 years; and the project is slated to receive $4.8 million in federal and state historic rehabilitation tax credits, as well as low-income housing tax credits, a mortgage loan from the Connecticut Housing Finance Authority and an additional DECD subsidy.

This level of public investment is based on the expectation of significant benefits from the project. According to the figures in the SHPO study, the $10 million estimated cost of construction should generate 144 direct and indirect jobs, and pay workers $8.3 million in salaries and wages. In addition, the renovated building will further stabilize a neighborhood that has experienced some improvement in recent years, but still has a way to go. This will increase property values, and, in the long run, generate revenue for the town.

As the study points out, another benefit is sustainable development: the Roosevelt Mill is located in a neighborhood already served by utilities and less than a mile from the downtown center, within walking distance of churches, stores, the town hall, a hospital, and the county courthouse.

The SHPO’s report, Investment in Connecticut: The Economic Benefits of Historic Preservation, can help communities consider public investment in private preservation projects in light of the broader community benefits that those projects can create. Indirect and induced economic benefits of preservation projects can help foster broader community economic viability that preservation projects need to be financially successful.

PHOTO

caption: Central Fire Station, Greenwich

credit: National Register of Historic Places (Agnew Fisher)