TAWN PARENT Commentary: Bill offers new hope for Main Street

March 13, 2006

Recycling isn't just good for the environment. It's good for buildings, and ultimately for economic development.

When the Disciples of Christ moved its international headquarters downtown from Irvington in 1995, it left behind a 121,000-square-foot structure built in 1910 that could easily have become a vacant eyesore in the east-side neighborhood. Instead, local developer Mansur Real Estate Services Inc. helped give it new life as Mission Apartments for seniors.

That $6.5 million project might not have happened without the help of federal historic preservation incometax credits. Many other local treasures-including Union Station, the Canterbury Hotel and the Lockerbie Glove Co.-have been reborn with the assistance of the credits. Since they were introduced in 1986, the credits have been used for rehabs worth more than $33 billion nationally.

The Community Restoration and Revitalization Act (CRRA), now pending in Congress, would make the credits even more valuable by facilitating their use for small projects, condominiums and affordable housing.

The credit program is already popular here. Indiana ranked 13th in the country for the number of historic-preservation projects completed using federal tax credits in fiscal 2004. Eighteen such projects were completed that year, and others were under way. That doesn't include credits given to restore buildings that are old but not deemed historic.

"The federal tax credit program has been extremely effective in leveraging private money to produce increased vitality in our cities and towns," said Kevin Krulewitch, managing member of Downtown Alternative, a local developer that has done 15 historic rehabs with federal tax credits since 1990.

All over the city lie many more potential projects that have not been economically feasible. CRRA may be just what they've been waiting for.

This is not just about architecture. Historic preservation creates more jobs than new construction. Missouri's $346 million in annual historic rehabilitation produces a yearly economic impact of $1 billion, including heritage travel spending, construction spending and the creation of retail and service jobs, according to a 2001 Rutgers University study.

Now before the U.S. House of Representatives' Ways and Means Committee, CRRA would make several key improvements to the tax-credit program:

increase the credit from 20 percent to 40 percent for small projects (under $2 million) and projects in especially disadvantaged areas;

allow projects to be sold immediately as condominiums, eliminating the current five-year waiting period before conversion;

permit the 10-percent credit for old but non-historic buildings to be used for affordable housing;

relax the basis-reduction rule that lowers tax benefits dollar-for-dollar according to the amount of credit taken; extend the use of credits to buildings at least 50 years old.

Backing the bill are local developers and preservationists as well as national groups such as the National Housing & Rehabilitation Association.

"This is not just a tax shelter for wealthy individuals," said Krulewitch, a former accountant who also is an adviser to the National Trust for Historic Preservation. "It's a vehicle to stimulate the economics of a Main Street that has been distressed and does not have the underlying market factors to encourage development."

Increasing the tax credit for small projects will be particularly useful, because transaction costs often eat up as much as half of the credits for small projects, rendering them economically unworkable, Krulewitch said.

He also predicts a big payoff from the condominium provision.

"You're going to see buildings [rehabbed] that couldn't have been done before because it wouldn't have been a rental candidate," he said.

Jobs, tourism, affordable housing, revitalized neighborhoods: Indiana needs more of what this bill would provide. If you agree, here's how you can help:

Write to Rep. Mark Souder, R-3rd District, at souder@mail.house.govto thank him for co-sponsoring the legislation. While you're at it, send a note to the rest of our congressional delegation, asking them to support it. (Their e-mail addresses can be found at www.house.gov.) Our city and state are struggling to make ends meet. It only makes sense to capitalize on our assets. Great neighborhoods and fine architecture are near the top of that list. An expanded tax-credit program would help us make the most of them-and turn more eyesores into economic engines.

Parent is associate editor of IBJ. Her column appears monthly. To comment on this column, send e-mail to tparent@ibj.com.
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