Historic tax credits crucial to Buffalo's comeback in jeopardy - The Buffalo News

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Historic tax credits crucial to Buffalo's comeback in jeopardy

Dozens of Buffalo's tarnished gems have been restored in recent years because of historic tax credits that came out of Washington.

The Hotel @ the Lafayette. The Guaranty Building. And the Richardson Olmsted Campus to name just a few.

Now the federal historic tax credit looks in danger of being eliminated.

That worries developers and preservationists, who credit part of Buffalo's comeback to reusing these old buildings as loft apartments, retail establishments and office space.

"Without that historic tax credit, nothing would have been done in Buffalo," said Rocco Termini, who has used federal and state tax credits on 15 projects in the city.

But the federal credit that helped subsidize renovations of the historic buildings was not included in the Republican leadership's House and Senate tax reform bills.

"Every building downtown and on the Buffalo Niagara Medical Campus that has been redone all used the historic tax credit," Termini said. "If this passes, everything will stop like a locomotive that's been struck by lightning. Nothing can go on without them."

Developers use federal and state tax credits to attract private capital for historic projects that are mostly in the Northeast. The projects tend to cost more, pose more design challenges and are sometimes in challenging locations, making it harder to attract lenders and investors. Banks and other investors benefit by using the credits to derive substantial tax breaks and proceeds from the projects' successes.

Termini said the state tax credit alone doesn't provide enough money.

"None of what's occurred in Buffalo would have happened with the state tax credit alone. Buffalo would still be in the dark ages," he said.

Projects in jeopardy

Sixty-five projects in Western New York took advantage of the tax credits between 2002 and 2016, according to the National Park Service. The federal agency tracks use of historic tax credits because it determines, along with state historic preservation offices, whether a historic building qualifies as a certified historic structure, and if the rehabilitation work would preserve the building's historic character.

The Guaranty Building and the Richardson Olmsted Complex benefited from historic tax funds. They're part of the mix for the rehabilitation underway at the Trico and AM&A's buildings. Babeville, the former church-turned-music-hall, benefited from them. Developers have used the credits on a half-dozen buildings along a renewed Niagara Street,  including the Mentholatum and Crescendo Lofts.

 

Webb Lofts on Pearl Street. (File photo by Harry Scull Jr. / The Buffalo News)

 

Downtown restaurants Tappo and Toutant benefited from the credits, as have all of the downtown apartment and loft conversions, including Phoenix Brewery Lofts, AM&A's Warehouse, the Webb Building, the Foundry and the Sinclair.

Preservation Buffalo Niagara sent a letter on behalf of its Buffalo Niagara Developers Roundtable to U.S. Reps. Tom Reed, Chris Collins and Brian Higgins earlier in the year, urging them to support the program. A dozen leading developers are in the group.

"In Western New York, the historic tax credit has resulted in over a half billion dollars invested in rehabilitation projects, the vast majority of which would not have come to fruition if it were not for the credits that close the gap between projected redevelopment costs and projected rental income," according to the letter. "These projects have resulted in thousands of jobs and many millions of dollars in tax revenues."

The letter warned that the loss of the historic tax credit "would seriously jeopardize" the City of Buffalo's Northland project on the East Side, where job training and light manufacturing are planned.

The Buffalo Niagara Partnership, which represents business interests, also said losing the tax credit would hurt the region.

"Given the age of our building stock locally, losing it would be a real concern for Buffalo Niagara and all of New York State," said Grant Loomis, vice president of government affairs. "I think you see that same concern shared by others in the Great Lakes region, and the Northeast in general."

 

The Foundry. (John Hickey/Buffalo News)

'Positive impact'

Key public officials also support the federal credit.

"Historic tax credits were designed for older middle-sized cities like Buffalo, Rochester and Syracuse, and we've used them extremely effectively," said U.S. Sen. Charles Schumer. "They tried to cut it out of the last budget; we restored it. They're now trying to cut it out of this budget; hopefully we'll restore it."

Schumer, the Senate's minority leader, added: "They're not just for preserving nice old properties; they're job-creating."

"Historic tax credits are a large part of the reason for the renaissance occurring in Buffalo," Higgins said.

Higgins sits as the vice ranking member of the Ways and Means Committee, which has a big say on tax legislation that eventually reaches the House floor. Several congressional representatives on the committee represent Northeast districts with historic buildings able to benefit from the tax credit, he said.

"My strategy is to work with them not only to preserve the tax credits but to extend them indefinitely," Higgins said.

Reed, a Republican from Corning, also sits on the Ways and Means Committee. His district includes Corning, Elmira and Jamestown, which have all benefited from the tax credit's use. He also wants to see it continue.

"The historic tax credit is important to our communities and is responsible for revitalizing many of our aging buildings," Reed said. "This helps working families and seniors throughout our region. As we move forward with comprehensive tax reform, I will continue to fight for tax policies, such as these credits, that have a positive impact throughout Western New York.”

Rep. Chris Collins used historic tax credits when he was chairman of Zeptometrix, the Buffalo biotech company on Main Street.

Louis Sullivan’s Guaranty Building was completed in 1896 and designated a National Historic Landmark in 1975. (Robert Kirkham/Buffalo News)

'Distort the market'

Chris Edwards, director of tax policy studies for the Cato Institute, a libertarian think tank based in Washington, D.C., said the group generally opposes tax credits, although the group hasn't staked out a position on historic tax credits.

"The standard arguments against tax credits are that they complicate the tax code and encourage corruption," Edwards said. "That's because you give local officials and politicians discretionary power over businesses, which encourages businesses to provide favors to officials and politicians."

The conservative Tax Foundation also is philosophically opposed to tax credits.

"Providing incentives to the tax code can be pretty inefficient and distort the market," said John Buhl, the group's spokesman.

He said the organization prefers eliminating tax preferences and and creating lower rates for everyone.

Buhl also questioned whether Buffalo developers would not do the projects without the tax credits.

"When you put a preference in the tax code you would expect them to say that without it they would not have embarked on that project," Buhl said. "I'm sure the tax breaks can move the needle, but if they were that non-viable, you have to question whether historic preservation credits and the state tax credits really make that much of a difference."

According to the National Trust for Historic Preservation, some 41,250 buildings have been rehabilitated in the United States using historic tax credits since the program was created in 1981. The trust calls it "the most significant investment the federal government makes toward the preservation of our historic buildings."

The same study found an average of $1.20 to $1.25 is returned to the Treasury in tax revenue for every dollar invested, making it "a proven job-creating, community-revitalizing investment that enhances property values and attracts more investment and residents."

"It doesn't cost the federal government a penny," Termini said, "but try and make some of these Southern and Western congressmen understand that."

 

 

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