Revival of state historic tax credit opens doors for St. Paul’s older commercial properties

Frederick Melo, Pioneer Press
Updated ·5 min read
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As the state legislative session came to a close, history buffs, housing advocates, labor and others invested in old architecture and new construction received an early Christmas present in the form of a state tax credit for the rehab of historic commercial properties.

Signed into law by Gov. Tim Walz at the end of May, the state historic tax credit was extended by eight years to June 30, 2030, retroactive to when it sunset a year ago.

The state credit, included in the omnibus tax bill, is being touted as a win for St. Paul — which has a high concentration of old buildings — and for Greater Minnesota, where officials have been hard-pressed to find funding to preserve some of their most iconic structures.

“It was a long-fought battle,” said Erin Hanafin Berg, policy director at Rethos, a St. Paul-based historic preservation organization that has been advocating for the credit’s extension at the Legislature since at least 2018.

The state tax credit, created in 2010, effectively forgives up to 20% of the cost of historic renovations for office buildings, housing, hotels, entertainment venues and other rehabs and conversions of commercial properties, including energy efficient retrofits. It mirrors a federal historic tax credit of the same size, offering developers of properties listed on the National Register of Historic Places double incentive to breathe new life into vacant or underutilized old buildings by adding housing or another commercial use.

Supporters have called the tax credit an important economic development tool, and the state’s leading incentive for the historic preservation of old commercial properties.

Major projects in St. Paul and statewide

Getting the state credit extended took bipartisan lobbying over the past three years from the Revitalize MN Coalition, composed of some 22 developers and historic preservation groups, as well as trades groups such as the Minnesota Building Trades Council and others affiliated with the Building Jobs Coalition.

Revitalize MN tallied more than 170 historic preservation projects completed across the state since 2011, including the historically-sensitive remodel or redevelopment of New Ulm’s Grand Hotel, Ely’s historic State Theater and the once-shuttered Pillsbury Baptist Bible College campus in Owatonna.

In St. Paul, developers have been counting on the state tax credit to move forward with the redevelopment of a large portion of the old Hamm’s Brewery complex on Minnehaha Avenue, the downtown Landmark Towers building and other projects in the pipeline.

At the Hamm’s complex, JB Vang Partners, Inc. plans roughly 250 units of affordable housing in a combination of old and new construction, as well as a two-story marketplace.

For the Hamm’s site, the revival of the state tax credit “absolutely could be good news,” said Justin Fincher, a vice president of development with JB Vang. “The Hamms Brewery is not yet listed on the National Register, so that is the first step. If we are successful in listing it, then absolutely, the state historic tax credit would be a tremendous benefit to our project.”

Buhl Investors, an Edina-based real estate investment management firm, used historic tax credits to open the Amber Union Apartments at Snelling and Larpenteur avenues in Falcon Heights, converting the 1940s-era TIES office building into a 125-unit affordable housing development. Buhl has also placed a bid on a historic property in Minneapolis, a project that it would not have pursued but for the tax credit, said Peter Deanovic, Buhl’s founding principal.

“The renewal of the tax credit is a huge deal, not just for St. Paul, but for the state,” Deanovic said.

“We have a limited supply of historic structures, even though there’s a concentration in St. Paul,” he added. “You go to New York and there’s a ton of buildings that were built pre-1970 and have not been replaced. You go to Minnesota, and there’s a limited number of architecturally-significant buildings that have been preserved. It’s not like our supply is the same as Chicago. This is one of these tools that while complex, is really important in trying to preserve that history.”

Public projects eligible through infrastructure bill

Berg noted that the tax credit could serve as an incentive to explore history as the city and private industry look to invest more heavily in the Rice Street business corridor, including the vacant Sears department store complex near the State Capitol. Properties at least 50 years old or older may qualify for National Register status, provided there’s something distinctive about their history or architecture.

“There’s the potential to do the investigation to find other projects that could be eligible,” Berg said. “People don’t know what’s going to meet the first level of criteria — which is it has to be listed in the National Register — until they do the research and figure it out.”

The legislative session revived another historic preservation tool through the $2.5 million state infrastructure bill, which is funded by a combination of state bonding and surplus cash. The Minnesota Historical Society will offer cities $1 million in matching grants over the next two years for improvement projects related to publicly-owned buildings that are listed in the National Register.

For instance, a $50,000 library, courthouse or city hall project — say, a roof replacement, elevator upgrade or mural restoration — would be eligible to apply for $25,000 from the Historical Society’s “Grants-in-Aid” program.

“Over the next two years, there’s $1 million for cities and public entities to tap into, which I think is pretty notable,” Berg said. “It’s not consistently funded. It really depends on there being a robust bonding bill. Now there is.”

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