Bill Signing Ceremony for Minnesota State Historic Rehabilitation Tax Credit, April 1, 2010

State Historic Rehabilitation Tax Credit signed into law today by Governor Tim Pawlenty through Jobs Stimulus Bill

Minnesota joins 30 other states in catalyzing job-creation through preservation projects

Today at 11:00 a.m., Governor Tim Pawlenty signed into law the Minnesota Jobs Stimulus Bill, a diverse array of tax incentives to stimulate job growth in Minnesota.  The bill is estimated to create between 12,000 and 20,000 jobs across the state.

A significant feature of the bill is the State Historic Rehabilitation Tax Credit, an incentive to stimulate green job growth, increase local tax base, and revitalize urban and main street communities through reinvestment in historic properties.  This provision is estimated to create between 1,500 and 3,000 construction jobs annually if Minnesota is consistent with other state programs.

Minnesota’s state historic preservation tax credit will allow a state income tax credit equal to 20 percent of the cost of rehabilitating a qualifying historic property.  The program mirrors the federal rehabilitation tax credit, a provision that has been in place since 1976.  Projects are eligible to claim the state credit if they are allowed the federal credit, a program which requires properties to be listed in the National Register of Historic Preservation to qualify.  Minnesota currently has 1,600 listings in the National Register representing almost 7,000 individual properties.  Projects must be income-producing to use the credit, therefore, homesteaded residential projects are not eligible.  Our law also creates innovation in the tax credit market by allowing a developer to choose either a certificated, refundable credit or a grant, which will stimulate nonprofit use of the incentive, and also can be used against the insurance premium tax widening the investor pool. Click here to link to the Jobs Stimulus bill language.

The state historic tax credit program encourages private investment in underutilized historic properties in both urban and rural Minnesota, generating jobs and stimulating local and state economic development. Thirty other states—including Wisconsin, Iowa, North Dakota, Missouri, and Kansas—have similar programs that were incentivizing Minnesota investors to develop in those states.  By signing the uncapped state historic rehabilitation tax credit into law today, Governor Pawlenty ensured a competitive advantage for Minnesota in our region.

Historic rehabilitation creates more jobs because it is inherently labor-intensive instead of material intensive.  At a time when unemployment among members of the construction trades is at a high level, this measure provides good-paying jobs in areas where employment is desperately needed.  Approximately 60-70% of rehabilitation construction costs are labor resulting in thousands of good-paying construction jobs created around the nation through historic rehab projects.  In Rhode Island, direct construction employment generated by rehab credit projects was 5,334 over two years. A total of 6,871 jobs and $60 million in tax revenue were created in the first four years of Missouri’s tax credit. In Missouri, the cost of the tax credit was recouped in payroll taxes alone. A March, 2010, study by Rutgers University report found that the federal tax credit program stimulated $85 billion in rehabilitation activity nationally and 1.8 million new jobs over the program’s 36-year lifetime.

State historic tax credits create more jobs per dollar output than either manufacturing or new construction.  Realtor and economist Donovan Rypkema recently estimated the potential for job creation in Minnesota based on his study of the highly-successful Missouri state historic preservation tax credit.  Rypkema, presenting to the Minnesota Chapter of the Construction Specifications Institute, reported that historic rehab projects in our state would create 5.7 more jobs per $1 million in output than manufacturing, 4 more jobs than road construction, and 2 more jobs than new construction.

Research demonstrating the economic impact of state historic preservation tax credit programs shows compelling evidence that such programs more than pay their own way. A 2009 report by the Abell Foundation found that Maryland’s state historic tax credit has returned $8.53 in revenue for each dollar of the state’s tax credit investment and has generated $1.74 billion in total economic activity. Between one-third and one-half of that revenue was returned to the state in payroll and sales taxes prior to the state’s issuance of tax credits. Missouri’s data shows $1.373 billion in total economic activity in the 11 years of their state rehab tax credit, or a four-to-one return on investment to the citizens of Missouri.  Research suggesting that similar results could be expected in Minnesota has been compiled by the University of Minnesota’s Humphrey Institute of Public Affairs.

Bonnie McDonald, executive director of the Preservation Alliance of Minnesota, speaks on the impact of the state historic tax credit at the bill signing ceremony, April 1, 2010

“Today is a banner day for the construction, design, and preservation industries in Minnesota,” said Bonnie McDonald, executive director of the Preservation Alliance of Minnesota.  “With the tax credit in place, we will put skilled people back to work, promote green jobs through the sustainable practice of historic preservation, and reinvest in assets that are truly unique to our communities.”

The Preservation Alliance of Minnesota and the Minnesota Historical Society have led a broad coalition of local government, business, and community organizations in promoting the state historic rehabilitation tax credit since 2000 when the legislation was first introduced.  In 2009, the Alliance and the Minnesota Historical Society joined the Building Jobs Coalition, a diverse group of contractors, building trades, architects, engineers, economic developers, and public officials committed to investment in Minnesota’s design and building industry through strategic legislation and public policy. The historic rehabilitation tax credit was a key provision of the legislative agenda brought to legislators by the Coalition in 2009 and 2010 to put the design and construction industry back to work.

The Alliance, the Society, and the Building Jobs Coalition thank Governor Tim Pawlenty for signing this catalyzing incentive into law.  We also want to recognize the significant leadership that led to this bill’s passage from Senators Tom Bakk and Jim Metzen, Representative Ann Lenczewski, Speaker Margaret Anderson Kelliher, and Senate Majority Leader Larry Pogemiller.  The state historic tax credit will be coordinated through the Minnesota State Historic Preservation Office, which will issue application materials in the near future.

PLEASE take a moment to thank your state Senator, Representative, and Governor Pawlenty for establishing Minnesota’s state historic preservation tax credit.  The House of Representatives passed the legislation 112-20: click here to read if your Representative voted for the legislation (read page 9761).  The Senate passed the legislation on a vote of 58-3: click here to read if your Senator voted for the bill (read page 9254).  You can visit with your state Senator and Representative while they are in your community over the Easter / Passover break this week or put in a phone call to their office.  Click here to visit the Minnesota Historical Society’s History Matters page providing access to your legislators’ contact information. Click here to visit the Minnesota Historical Society’s History Matters page with a thank you letter template about passage of the state rehabilitation tax credit.

A Word copy of the press release can be found here.

The Preservation Alliance of Minnesota would like to thank the many members of the Tax Credit Task Force and the Building Jobs Coalition for supporting passage of the state historic preservation tax credit:

1000 Friends of Minnesota
Adolfson & Peterson Construction
Aeon
American Institute of Architects MN
American Institute of Architects Northern Minnesota Chapter
Anchor Bank of St. Paul
Associated General Contractors of Minnesota
Association of Women Contractors
Armlin, Damon & Associates
Artspace
Bentz-Thompson-Rietow
BKV Group Architects
BOR-SON Construction
Builders Association of Minnesota
City of Brooklyn Park
City of Chaska
City of Hastings
City of Minneapolis
City of Oakdale
City of St. Paul
Danny’s Construction Company
Duluth Affordable Housing Coalition
Duluth LISC
Duluth Mayor Don Ness
Duluth Preservation Alliance
Ellerbe Becket
Faegre & Benson
Fifth Quarter Enterprise/ Emerging Markets
Graham Construction Services
Hammel Green and Abrahamson
Historic Saint Paul
International Brotherhood of Electrical Workers- Minnesota State Council
International Brotherhood of Teamsters
JE Dunn Construction North Central
Johnson-Wilson Constructors
KKE Architects
Knutson Construction Services
Kraus-Anderson Construction
Laborers District Council of Minnesota and North Dakota
Lakehead Constructors
Larkin Hoffman
M&I Bank
McGladrey & Pullen
McGough Construction
McGrann Shea Anderson Carnival Straughn & Lamb
MetroPlains Development
Minneapolis Building Trades
Minneapolis Department of Community Planning and Economic Development (CPED)
Minneapolis Heritage Preservation Commission
Minnesota Historical Society
Minnesota Landmarks
Minnesota Mechanical Contractors Association
Minnesota Pipe Trades
Mortenson Construction
National Association of Minority
Contractors-Upper Midwest
National Electrical Contractors Association-Minnesota & Dakotas
National Trust for Historic Preservation
North Central States Regional Council of Carpenters
Northland Securities
North State
Operating Engineers Local #49
Opus Northwest Construction
PCL Construction Services
Platinum Bank
Plumb/FNR Builders, Inc.
Port Authority
Preservation Alliance of Minnesota
Ryan Companies US
Schafer Richardson
Shaw-Lundquist Associates
Sheet Metal Workers
Sondreal Law Firm
Stark Preservation Planning
St. Paul Building Trades
The Hathor Group
Thor Construction
Urban Works Architecture
U.S. Bank
Woody’s Rebar Company

This Old House proposed for a comeback!

Homeowners looking to reinvest in their historic property will be pleased to hear that there is movement at the Capitol this Session to revive Minnesota’s This Old House provision.  This Old House, which sunset in 2003, allowed for the increase in property tax assessments due to improvements made to an homesteaded property to be abated.  Assessment increases were completely abated the first 10 years and then added back in increments over the next 10 years.

Senator Terri Bonoff (DFL-Minnetonka) has introduced SF2426 to reestablish the program.  In the House, Representative John Benson (DFL-Minnetonka) has authored a companion version (HF2842).  Both bills have been referred to their respective Taxes Committees.