Legislative Update, 2007

2007 legislative goals:

**Face of Connecticut
HB 7275- An Act concerning the Face of Connecticut.  A broad coalition of agriculture, natural lands, historic preservation and urban lands advocates are working in partnership with the state in calling for new policies and comprehensive and consistent funding by the state in four areas that will preserve the unique qualities of Connecticut’s diverse landscape for generations to come:

1-Conservation: investing in natural areas, working farms and clean
water;

2-Preservation and Restoration: invest in our cities and village
centers

3- Plan for responsible growth

4- Protect our investments with a new stewardship fund for conserved
land, state parks, agriculture and land trusts.
See Helen Higgins' Testimony below

**Investment in Historic Preservation is Wise Investment Policy

Never have we been in a more dramatic moment of crisis given the lack of priority in investing in our historic resources, whether they are municipal buildings, urban neighborhoods, commercial centers or historically important rural places. We must commit to brownfields remediation to reclaim our historic industrial buildings before these buildings are beyond repair. We must commit financial resources to jumpstarting restoration projects in our village centers and urban areas where historic preservation and affordable housing intersect so seamlessly. Buildings will and do deteriorate when left to languish and communities and neighborhoods deteriorate with them. We can no longer afford to ignore the economic as well as cultural value that comes with preserving and protecting our significant historic resources.   Historic preservation projects are unfunded and under-funded:

• Lack of pre-construction funds for site assembly, feasibility studies and structural studies to assess costs of historic rehabilitation projects;
• Lack of Brownfield remediation funds. The Governor’s Task Force on Mills has identified seventy nine endangered abandoned mills in Bridgeport, Putnam, Milford, Coventry, Vernon, Waterbury, West Haven, and Brooklyn, to name a few towns;
• Inadequate and possibly no grant funding for preservation planning: the Connecticut Trust for Historic Preservation awarded $248,000 in FY 06-07 for Historic Preservation Technical Assistance Grants. In the Governor’s recent budget, funding for that program, which comes from the Connecticut Humanities Council, will be at zero;
• Inadequate funds for restoration of historic buildings owned by municipalities or non-profits: The Community Investment Act allots one quarter of its recording fee revenues to the Division of Historic Preservation at the Commission on Culture and Tourism. Even at $5 million annually, that is barely the tip of the iceberg to stimulate significant historic preservation activity. Waterbury city hall will cost at least $47 million to restore;
• Too few eligible buildings, both urban and rural, are registered on State or National Register of Historic Places to take advantage of existing tax credits and grants.  Connecticut has 45,000 National Register buildings compared to 70,000 in Massachusetts;
• No grant incentives to preserve historic agricultural buildings. In Northeast Connecticut alone over one hundred historic farms not eligible for existing agricultural funds are susceptible to sale for development.  One hundred seventy three town greens and eighty six historic urban parks, critical to enhancing downtown re-development, have no direct granting fund;
• The federal tax credit for historic buildings that are rehabilitated for income producing uses is underutilized in Connecticut. Since 2001, the state has approved forty-three federal tax act projects for a certified expense of $88 million compared to one hundred and one approved projects in MA for a certified expense of $355 million.  Each $1 in state investment leverages $4 in construction spending;
• Two recently passed state tax credits for historic homes and commercial and industrial buildings need pre-development incentives, including brown fields remediation support for developers to be able to access them.

• Investment in historic preservation projects brings added jobs, increased property values, increased sales tax revenues.  In Colorado, in a 20 year study, $1.5 billion in total expenditures on historic preservation projects generated 522.7 million in household earnings, 21,327 jobs, $4 million in business taxes, $10.8 million in individual taxes and $27.4 million in state sales tax revenue;
• Studies in various cities and states (Greenwich Village; Philadelphia; New Jersey; Maryland) have found that historic designations, in addition to leveraging tax credit and granting programs, maintain if not boost property values and bring in new residents;
• Investment in historic buildings sustains cultural values, contributing to sense of place that makes Connecticut a desirable place in which to live and invest.
• Investment in preserving what is historic, especially in urban centers and neighborhoods, will work to revitalize our cities and towns while taking development pressure off our farmlands and open spaces.
   

National Trust for Historic Preservation, Protecting the Irreplaceable , Connecticut Preservation Action, Since 1981, Connecticut’s united voice for historic preservation advocacy

Frequently Asked Questions
RB 1352, AAC Youth Opportunities and Urban Revitalization:
Section 7. State Tax Credits for Historic Rehabilitation

RB 1352 seeks to revise the one-year-old law, Section 10-461a, which grants state tax credits to historic rehabilitation projects.  The new proposal would make the following revisions: incentivize affordable housing development within historic renovations by providing for a 30% credit for affordable projects instead of 25%; remove both the per project and over all program caps; and add “mixed use” to residential as future permitted uses of the building.

1. Won’t tax credits just reward developers for what they were going to do anyway?  Developers and their investors go to the areas where project budgets can be balanced (sources v uses & costs v. future rents/revenue).  Historically, investment in Connecticut flows to “green field” development in wealthier communities, i.e. high revenue communities. Redirecting investment to less wealthy areas requires tools that at least put sources and uses in balance. A state historic tax credit is one such tool. Strong growth in community development projects financed in states as disparate as Missouri & Rhode Island following those states adoption of a state tax credit argues for the tax credit as an efficient and directed tool.

2. Wouldn’t those projects happen anyway?  No.  Investment in Connecticut’s census tracts with high percentages of low income households – census tracts that are both urban and rural – lags badly.  A study of Rhode Island credits showed that most historic redevelopment projects can only justify about 50%-60% of the capital investment necessary to make desired projects happen, i.e. projects suffer a capital “gap.” Developers today must depend on DECD and CHFA to close these gaps, typically using grants financed by the State’s precious bond cap. State tax credits provide an alternative financing tool, one that relieves pressure on the bond cap.

3. What guarantee is there that the project receiving tax credits would further desired community development goals? According to a 2000 National Park Service study, 58% of the contributing buildings in 10,000 of the nation’s historic districts are located in census tracts where the poverty rate exceeds 20 percent.  Various studies of recently enacted state tax credits show that projects caused by new tax credit programs are overwhelmingly located in low and moderate income neighborhoods, e.g. in Rhode Island more than 75% of the projects are located in census tracts with below average median incomes; and more than one-third of the projects are in neighborhoods with median family incomes that are less than half of the average. 1

4. Why are state tax credits necessary?  Tax credits provide capital to close the financing gap on projects that otherwise wouldn’t happen and directs new investment towards the existing built environment. Properties that qualify for historic tax credits enjoy existing infrastructure, i.e. they are already part of the built environment and thus do not need new roads and utilities and the libraries, schools and other public services that already exist. Thus, historic renovation may have higher direct costs but lower total costs than new “green field” development.  Tax credits enable projects that have many desirable public policy outcomes: they encourage community development; they direct development towards existing infrastructure maximizing use of existing transportation and other public infrastructure; they relieve pressure for sprawl; and they capture federal financing that the state presently does not adequately use.

5. Why have state tax credits when we already have federal tax credits for historic rehabilitation?  There were only three federal tax credit projects in the state last year, a woefully small number in a state with as significant an historic fabric as Connecticut. Because the federal credit represents as much as 15-20% of a project’s capital budget and because the federal credit has no negative impact on the State’s budget it makes good public policy to encourage the federal credit as much as possible. A state historic tax credit, because it is almost always coupled with the federal credit, provides such encouragement. A recent analysis in Iowa showed that for every $1 of state credit invested, $5.50 of federal money came into the state.2  Further, other federal credits, e.g. New Markets Tax Credits, can also be tapped.  “The state can enhance the value of the credits by using its funds to leverage private capital.  Recent studies and articles suggest that some [projects] may not have enough equity to leverage all of the conventional capital a project needs.  In these cases, the state [tax credit] dollars encourage lenders to participate by reducing their risk.” 3 

6. How does this credit perform as an investment for the state?  Maryland’s 2004 study of their uncapped program reports that “This Task Force could find no evidence that the Program created or will create a revenue loss to the State. . . . Two economic impact studies . . . have indicated that the State receives, instead, a net revenue gain for projects earning credits under this program.  Approximately 34 cents out of every dollar of earned tax credits is realized by the State prior to the completion of a project, i.e. before the credit is even taken.  This revenue is derived from the sales tax on materials, income tax derived from all employees of the greater development, etc.”4   Rhode Island’s experience is that, “for each $1m in credits, $5.47m of economic output is generated.” 1 

7. Why should we remove the $15m annual cap?  A cap on the aggregate tax credit is a cap on growth.  When a developer budgets a project, and the federal tax credit is not enough to fill a funding gap and make the project viable, the state tax credit would help the developer close this gap and thus qualify for loans—but only if the lender is certain such credit will actually be available.  If the state credit is awarded on a rationed basis, as an aggregate capped credit would be, rather than based on clearly defined criteria, the banker could not be certain that the credit represents real money.  There is no certainty, no loan, and no project.

8. If we uncap the credit, won’t we expose the state budget to potentially large revenue holes?  Unlike most grant programs, where the state puts out money before a project starts, the historic tax credits used by a project aren’t earned or disbursed until after the project has been completed, or “placed in service.”  Application is made before a project begins, but credits cannot be claimed until a taxpayer files for the credit, so a project applied for in 2007 and completed in 2009 will be claimed in 2010.  Therefore, the state would be able to predict the cost of the program two to three years in advance.  For example, in Rhode Island’s experience, the state has committed about $135m in credits, but due to the time lag inherent in construction only about $20m of the credits are cashed in annually.  Taking into consideration income tax revenues directly associated with construction jobs spurred by the credit, Rhode Island’s net annual cost to state revenues is only $15m—a bargain when compared to the $480m in private investment in preservation the credits have leveraged. 1

9. Why should we remove the per project cap? Capping the dollar amount of credits that a project could qualify to receive limits the incentive to small projects only—not larger scale projects that could drastically improve and preserve entire downtown communities.  The Rhode Island program is uncapped, leading to four large-scale projects (in addition to the 130 other, smaller projects) that would not have happened with a cap.  Missouri has enjoyed real success with revitalization of large projects in St. Louis that would not have happened with a project cap.

10. Won’t we be spending a lot of money on historic rehabilitation?  Historic rehabs are a tool to target investment towards village, town and city centers.  Connecticut will really be investing in affordable and market-rate housing and mixed-use buildings.  When one adds community revitalization, economic development, investment in heritage, and smart growth, this measure becomes relatively inexpensive and very smart indeed.

11. What makes a good tax credit?  “Not all state tax credit programs are created equal.  Some state programs have been extraordinarily productive in stimulating economic activity.  Many others have produced mixed or minimal results.  The state historic tax credit is a relatively efficient credit since the investment it generates continues to provide economic activity to the state long past the initial investment, i.e. the real estate isn’t moving.  More generally, two factors greatly influence the effectiveness of the state historic tax credits:  a limit or cap on the amount of credit and a lack of transferability.” 5

**Barn Preservation
HB 7220: An Act concerning the Preservation of Historic Barns and
Agriculture Structures.
See Todd Levine's Testimony below.

**Delay of Demoltion
SB 618:  An Act concerning the Delay of Demolition within the Boundaries of Historic Properties.
See the Testimony of Helen Higgins below.

 

See testimony of CTHP's Brad Schide and Helen Higgins below.
See testimony of Karen Senich, Acting Director of CT Commission on Culture and Tourism below.
See testimony of Anita L. Mielert, National Trust Advisor.

Testimony in favor of Barn Preservation, HB 7220 - CTHP staff, Todd Levine supports an Act concerning the preservation of historic barns and agricultural structures. Testimony in favor of the Face of Connecticut, HB 7275 - Testimony of Helen Higgins in support of Face of Connecticut, HB 7275 Testimony in Support of Delay of Demolition SB 618 - CTHP, Executive Director Helen Higgins testimony in support of Delay of Demolition within the Boundaries of Historic Properties. Testimony in Support of Urban Revitalization, Bill 1352 - Testimony of CTHP staff, Brad Schide, Circuit Rider and Executive Director, Helen Higgins in support of Bill 1352, an act concerning Youth Opportunities and Urban Revitalization. Testimony of Karen Senich, Connecticut SPHO - Testimony of Karen Senich, Acting Executive Director of Connecticut Commission on Culture and Tourism regarding Bill 1352 Testimony in Support of Bill 1352 from Anita L. Mielert - Testimony in support of Raised Bill 1352 from Anita L. Mielert, National Trust Advisor