Housing, labor, preservation advocates fight June 30 sunset of MN historic tax credit program

Frederick Melo, Pioneer Press
·4 min read

From the renovated State Theater in Ely, Minn., to the proposed remodel of the 25-story Landmark Towers office building in downtown St. Paul, real estate developers over the past decade have pieced together financing for multimillion-dollar redevelopment projects with the help of a state tax credit that effectively forgives 20 percent of the cost of historic renovations.

That may not be the case much longer.

After 11 years of boosting history, housing and business, Minnesota’s historic tax credit program is set to expire on June 30, leaving a series of pipeline projects teetering.

“With 100 percent certainty, our project here in St. Paul, the Landmark Towers, would be on hold without the state historic tax credit, and up in Duluth, the Duluth Armory would be on hold,” said Chris Sherman, president of Minneapolis-based Sherman Associates.

‘THERE’S NO DOWNSIDE TO THIS’

Lawmakers on both sides of the political aisle have smiled upon the prospect of extending the popular tax credit program, which rolled out in 2011 and has since financed more than 170 major historic preservation projects across the state, many of them housing-related.

The credit, originally scheduled to sunset in 2021, received a one-year extension from the state Legislature a year ago, and state lawmakers appeared open to making it permanent this year.

“People who support affordable housing love it,” said Paul DeGeest, a development director with Rethos, a St. Paul-based historic preservation agency. “People who support big business love it. People who support small business love it. People who have luxury condos love it. There’s no downside to this.”

Instead, proposed legislation to enshrine the tax credit program in law landed within a wide-ranging tax bill that, despite bipartisan agreement, remains stalled, victim to partisan gridlock over other matters that lawmakers were unable to unclog in the final days of the legislative session.

URGING LAWMAKERS TO CONVENE SPECIAL SESSION

On Thursday, a coalition of real estate developers, housing advocates, union carpenters and historic preservationists gathered on the steps of the Minnesota state Capitol building to urge lawmakers to reconvene in a special legislative session and approve one of the least controversial bills before them.

Finding national financing for real estate projects is competitive, said advocates, and future redevelopment dollars could flow instead to any of 38 states that currently offer historic tax credits.

“Let’s finish what we started for all of Minnesota,” said Heidi Swank, executive director of Rethos and president of the Revitalize MN coalition. “Lawmakers agreed the historic tax credit was important for communities across the state to grow and to thrive.”

Swank said every $1 from the tax credit yields a return of $9 in property tax revenue, construction employment and additional investment. That return grows to $16 in Greater Minnesota, where construction costs run cheaper.

In the face of legislative inaction, “we need to express our frustration and disappointment,” said Adam Duininck, director of government affairs at the North Central States Regional Council of Carpenters. “We just came out of a session with over $10 billion of surplus and basically nothing of impact happened.”

HEAVILY USED IN ST. PAUL

From the Schmidt Artist Lofts on West Seventh Street to the Oxford Flats on Selby Avenue, the historic tax credit program has been heavily used each year by developers in St. Paul, where some 80 percent of structures were built before 1972. Reaching the 50-year mark makes a structure potentially eligible for federal designation as a historic building.

Still, while the primary beneficiary of the tax credit has been affordable housing and office redevelopment in St. Paul and Minneapolis, Swank said almost every legislative district in the state has benefited from a project.

A tally of 150 historic preservation projects across Minnesota since 2011 includes the historically-sensitive remodel or redevelopment of Ely’s historic State Theater, New Ulm’s Grand Hotel and the once-shuttered Pillsbury Baptist Bible College campus in Owatonna.

Members of the Revitalize MN coalition rejected the idea of simply extending the tax credit for another year, noting it’s difficult for developers to sit down with lenders for financing years ahead of construction if they’re uncertain what financial tools will be available to them down the road.

Developers have combined the state historic tax credit with a federal historic tax credit of equal size, on top of other financial incentives, to preserve history while building housing or office and commercial space.

The credit “allows us to leverage up a lot of additional financing, both public and private — private financing that will alternatively go to other states,” said Sherman on Thursday. “Literally billions of investment, I believe, will occur in the next three to five years, if and when we pass the state historic tax credit.”

Related Articles