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  July 29, 2014  
     
  How Maine is Re-engaging Downtowns and Old Buildings
By Gary D. Vogel, Attorney at Drummond Woodsum, and MEREDA Legislative Committee Chair
 
     
 
 
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Who benefits from Maine's Historic Tax Credit?    The answer is we all do.  Here's why.   Maine's Historic Tax Credit was enacted in 2008 and was extended by the legislature for an additional 10 years in 2011.   Together with the federal historic tax credit, it has been used to rehabilitate and redevelop many projects in downtowns throughout the state that "but for" the availability of the state and federal tax credits, would not have been redeveloped.   Buildings that are key components of many communities, such as the Norway Opera House, the Hathaway Mill in Waterville, the Mill at Saco Falls in downtown Biddeford, the Bates Mill in Lewiston, the Baxter Library in Portland have been redeveloped utilizing Maine's Historic Tax Credit.   They have brought vitality to downtowns and portions of downtowns that were blighted by these vacant or run-down buildings.   The projects are all privately owned and developed, adding significantly to the property tax base in these communities.    They have created hundreds of good construction jobs, and ongoing permanent jobs in the businesses located in these buildings in these communities.  Who hasn't walked through downtowns in many Maine communities and marveled at the special nature of the buildings and communities that define these communities?    Large, vacant or derelict buildings in these communities threaten to destroy the very fabric of these communities.  Preserving them helps keep Maine uniquely Maine. 

This past year, MEREDA worked with the Legislature to protect the Maine Historic Tax Credit from threatened cuts that would have capped the credit at levels significantly below the current level of utilization.  Capping the tax credit would not just mean that fewer projects would get redeveloped each year.  It would create uncertainty for any project in the planning stage as to whether the state tax credits would be available to fund large portions of the redevelopment.  For most of these projects, the loss of the state tax credits would create a large funding gap that would result in the inability to undertake the redevelopment project at all.    Historic tax credit developments require significant predevelopment costs in coordinating the various sources of funding, obtaining approval for the use of the tax credits, and significantly added architectural and engineering costs.   Most developers are unwilling to expend the significant upfront predevelopment costs that these projects require if there is a question as to whether the state tax credits will be available.  As a result, a cap of the tax credits would not only delay projects, it would also make many projects never get off the ground.

MEREDA formed a coalition among MEREDA members, GrowSmart Maine, Maine Preservation and other key advocates of the historic tax credit and met with legislators in the state house and senate to help legislators understand the importance of the tax credit, and the difficulties that would be created by capping the credit.  The tax credit was saved from the potentially devastating caps.  However, in an era of continued scrutiny on the state budget, we expect that the tax credit will continue to need to be justified against other state budget priorities.

In 2011, as part of the effort to extend the state tax credit for an additional 10 years, and to preserve predictability for users of the tax credit whose projects are often many years in the predevelopment stages before construction begins, Maine Preservation commissioned a study by Planning Decisions to quantify the benefits of the state historic credit.   The report is available at mainepreservation.com.   It contains a fascinating analysis of the financial costs and benefits to the state from the use of the state tax credit.   It found that in 2011, the state credit supported a net increase of over 500 good jobs each year and an additional $27 Million in new spending each year that would otherwise not occur.  It projected an increase in the property tax base for municipalities of $230 million over 10 years.    The report also found that the state historic tax credit resulted in additional new construction, above and beyond the rehabilitation of existing buildings, because many projects involved the creation of new additions to existing buildings or the construction of adjoining new buildings.  These new buildings or additions do not get state tax credits, but further expand the positive economic benefit of the state historic tax credit, as these additions would not have been constructed without the benefit of the state historic credit that enabled the redevelopment of the existing buildings.  

In summary, Maine's Historic Tax Credit is one of very few incentives that spur economic development in Maine and help preserve the unique attributes that make Maine special.  It brings in needed private capital investment into Maine's communities, benefiting us all.

In an upcoming article, I will explain how the tax credit works to bring in capital to fund development costs for these important projects. 

 
     
     
     
 

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