Tax break for work on historic sites saved

Compromise revises allotments, sets limits


April 10, 2004|By Meredith Cohn | Meredith Cohn,SUN STAFF

A state tax incentive developers have used to transform many historic buildings was saved in a last-minute agreement in Annapolis yesterday, keeping on track such projects as luxury apartments to revitalize Baltimore's west side and new housing in a 19th-century Montgomery County seminary.

The heritage tax credit has spurred more than $800 million in private investment in more than 1,000 properties since it was enacted in 1997, supporters say. Saving the program had become a top priority of preservationists and business leaders.

Del. Sheila E. Hixson, a Montgomery County Democrat, argued this week that changes to the program would give the state control of the costs by requiring a new appropriation of funds each year.

She said an agreement has been reached with other supporters, who sought no limits, and Gov. Robert L. Ehrlich Jr., who had included the credit in his legislative agenda with a $30 million cap. The program would have expired in June.

"I didn't want to see the program die," Hixson said. "I wanted accountability and predictability."

Most often used in Baltimore, the program had ballooned since its inception. Some legislators considered it too costly and unpredictable, and sought to rein it in. The governor and other supporters were mostly pleased with the compromise hammered out in the General Assembly.

Developers can tap the tax credit once they complete work on historic buildings. Many sell rights to the credit in advance to obtain capital to start construction - making it crucial for those redoing an old building that needs a lot of work. The credit is typically paired with a federal tax credit. The value of the state credits used for commercial and residential projects since 1997 is about $100 million. Supporters contend that improved buildings have generated many times that in spending and more than $3 in tax revenue for each dollar in credits allowed.

In Baltimore, where about 90 percent of the credits have been used, signature renovations that have used the credit include the Hippodrome Theatre, American Can Co. retail and office building and the Stanbalt and Atrium apartment buildings. Several buildings on the west side, where the city is pushing its most ambitious revitalization project since the Inner Harbor, plan to seek the tax credit.

Also banking on the credit is possibly Montgomery County's biggest historic renovation: the Seminary at Forest Glen. Last used as an Army medical facility, developers want to turn the deteriorating buildings into affordable housing, condominiums and single-family houses. Preservationists who support the project said yesterday that funding for the $80 million project hinges on the tax credit.

All the buildings are on the National Register of Historic Places or in a historic district.

Under the new plan, only half of the funds could be used in Baltimore. Another 25 percent could be shifted to the city if unused by other jurisdictions. Ten percent of the money would be set aside for nonprofit groups.

About $30 million in credits will be available next year, with $10 million available sooner so no projects in the pipeline would be stalled.

"It's important that the program move forward and the tax credit [be] preserved," said Donald C. Fry, president of the Greater Baltimore Committee, which advocated for the tax credit without limits. "We'll have to take a look at it and see if it needs improvement as time goes on."

David H. Hillman, a developer who has tapped the program three times - for a value of $3 million to $4 million each - says none of his buildings would have worked without the tax credit. Often buildings that qualify are in bad condition and sometimes in run-down neighborhoods where developers are unable to charge rents high enough to recover construction costs.

"It costs a whole lot more to renovate a building and change it to another use than to dig a hole in the ground," he said. "This program is one of the few things that doesn't cost government any money and they make money on the outcome."

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