Toledo has a rich and varied historic building stock, representing many architectural styles, both downtown and in neighborhoods throughout the city.
The preservation and repurposing of just one historic building can spark additional private investment in an overlooked area. The rehabilitation of these buildings, including upgrades to meet building codes and increase energy efficiency, however, can require investment that cannot be justified by projected income from rents or other business activities.
Federal and state historic tax credits were created to bridge the funding gap and make preservation financially viable. Currently, the Federal Historic Preservation Tax Credit is capped at 20 percent of “Qualified Rehabilitation Expenses”, is not competitive, and available to any property on the National Register of Historic Places. Federal credits can be combined with the Ohio State Historic Preservation Tax Credit, which is capped at 25 percent of QREs and is competitive, with applications accepted twice per year by the Ohio Development Services Agency. QREs include almost all costs incurred in rehabbing the building from the envelope in, as well as some project planning costs.
Toledo has underutilized these programs. In the first 10 years of the Ohio HP Tax Credit program, Cleveland had 67 approved projects, Akron had 13, and Toledo only seven. In an effort to increase knowledge, we coordinated with Heritage Ohio to bring their Dollars and Sense of Building Rehabilitation Workshop to Toledo on Jan. 31. More than 80 individuals attended, indicating a keen interest in preserving the city’s architectural legacy.
The ongoing conversion of the Toledo Edison Steam Plant to ProMedica’s corporate headquarters and Hensville are two notable and successful projects that have utilized historic preservation tax credits. However, tax-credit money is available for much smaller projects. In fact, 8 percent of available funds in each application round for the Ohio Historic Preservation Tax Credit is set aside for projects with QREs less than $1,250,000, requesting $250,000 or less in credits, and in the last several funding rounds, not all the small-project funding has even been allocated.
Unfortunately, transaction costs and risks associated with small projects are the same as those associated with large projects, and therefore, investors are much more inclined to form partnerships to take on larger, rather than smaller rehabilitations. A new bipartisan bill introduced in the U.S. House of Representatives, H.R. 1158, the Historic Tax Credit Improvement Act of 2017, aims to make the use of the federal tax credits by small rehabilitation projects more feasible. Included in this bill is an increase in the credit from 20 percent of QREs to 30 percent, and allowance of transfer of credits by certificate for equity, making their monetization less cumbersome.
Please call or write your representatives and encourage them to support H.R. 1158.
For information and guidance on Historic Preservation Tax Credits, please visit the Ohio Historic Preservation Office website: ohiohistory.org.
Sandy Spang is a Toledo city councilman-at-large. Erin Claussen and her husband, Greg, bought the 116-year-old Hotel Royal building in the Old South End.
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