Capital District Gets $hot in the Arm

Developers, preservationists get an injection of tax credits

By CHRIS CHURCHILL, Business writer
Sunday, August 9, 2009

$100,000 and $1 million.

The first number is the state historic preservation tax credit a developer received for converting Troy's downtown Stanley's building to apartments.

The second number is the state tax credit the very same project would receive next year, under legislation signed recently by Gov. David Paterson.

Those numbers help explain why developers and historic preservationists are giddy over the new law, and why they predict it will bring a wave of redevelopment and renovation to upstate's urban centers.

"It just opens up a whole new world for historic property owners," said Susan Holland, executive director of Historic Albany Foundation.

The program already seems to be pushing projects forward -- including the renovation of downtown Albany's Dewitt Clinton building into a Hilton hotel.

The enhanced tax credit "gave the project a shot in the arm," said Scott Townsend, owner of the architecture firm that's working on the redevelopment. "It definitely increases its feasibility."

The State Rehabilitation Tax Credit makes commercial redevelopment projects eligible for up to $5 million in tax benefits, applied against construction costs. Homeowners, meanwhile, can receive credits for as much as $50,000 for their renovation projects.

That means that if a homeowner spends $150,000 to renovate a building, one-third of that cost would be rebated. Likewise, if a developer spends $25 million on a commercial building, that work essentially receives a $5 million discount, above and beyond available federal tax credits.

There are caveats: Projects are eligible only if they're on the National Register of Historic Places, or located in a National Historic district. And they must be within a census tract where annual household incomes are below the region's median.

Still, thousands of properties in the Capital Region qualify for the help. They include most downtown Albany buildings, due to the Downtown Albany Historic District, and much of the Troy and Schenectady downtowns.

They also include residential areas -- like Clinton Avenue in Albany, The Stockade in Schenectady, and the Washington Park neighborhood in Troy.

In fact, the Preservation League of New York State estimates 2,000 homes in Albany alone are eligible for the tax breaks.

Jay DiLorenzo, president of the preservation league, predicted the program "will prove one of the most effective economic and community development programs in the state."

New York has had a historic tax credit since the start of 2007. But developers and preservationists complained that the program wasn't effective, leading to a push for an upgrade.

"It came with conflicting regulations that made it a paper program," said Joe Fama, executive director of TAP Inc., a nonprofit architecture firm in Troy. "It wasn't usable."

An enhanced preservation tax credit almost became law last year. But Paterson vetoed the legislation, citing the budget crisis. This year, he signed the bill, calling it an important program for economic development.

Among other changes, the bill increases the credit available for commercial projects from $100,000 to $5 million and boosts the help for homeowners from $25,000 to $50,000.

"We finally have an effective tool on the books," said Daniel Mackay, director of public policy for the preservation league, which pushed hard for the enhanced credits.

For homeowners, the credit is applied to the state income tax and can be rolled over to future tax returns if the amount exceeds the income tax paid. Homeowners with annual income below $60,000 can receive the amount beyond income tax as a rebate, according to Mackay.

That essentially makes it a grant program for low-income homeowners.

The state estimates the program will cost it $58 million over five years; some observers, though, believe that number is conservative by a long shot.

But proponents argue the program will ultimately return much more to taxpayers, because it will return abandoned properties to tax rolls and increase the taxable value of dilapidated structures.

Proponents also say the timing of the program is apt, as it comes during a credit crunch that has made banks reluctant to lend to renovation and redevelopment projects. Knowing the work will be backed by tax credits could lead banks to open their checkbooks.

The money could also put projects that haven't been economically feasible over the hump. Historic properties, after all, can be far more expensive to renovate than newer properties.

The credits apply to construction work that occurs after Jan. 1, which means some firms may delay starting projects this year to ensure they qualify.

It also means that the 2007 redevelopment of the Stanley's building in Troy occurred three years too early for what could have been its $1 million tax credit.

"That's going to be quite an incentive," said Jeff Pfeil, whose eponymous firm turned the building into The Conservatory apartments. "Can we apply retroactively?"

Chris Churchill can be reached at 454-5442 or by e-mail at cchurchill@timesunion.com.

Harmony Mills

Developer Uri Kaufman used federal tax credit programs to develop part of the Harmony Mills complex in Cohoes into upscale apartments. The state's enhanced program could hasten redevelopment of the remaining part of the complex.

New York began offering historic renovation tax credits in 2007, but an enhanced version of the program will take effect at the start of 2010.

The program:

increases the credits available for residential projects to $50,000

increases the credit cap for commercial projects to $5 million, although it will not pay for more than 20 percent of all costs

targets "distressed areas," defined as neighborhoods where annual income is below the regional median.

makes credits transferrable within business partnerships to allow for greater investor flexibility.

can provide a rebate to homeowners who pay too litte in state income tax to benefit from a credit.

Source: Office of Gov. David Paterson

Clinton Avenue

Homeowners along Clinton Avenue in Albany are eligable for a credit of up to $50,000 under the enhanced Rehabilitation Tax Credit program, because the street is a National Historic District.

Stanley Building

The former Stanley's Department Store building in downtown Troy received $100,000 in state tax credits when it was rehabbed in 2007. Under the new program, it would have received $1 million.

Abandoned churches

Preservationists say the tax credits bring new hope to buildings like the former St. John's Church in Albany's South End. Many such buildings across the Capital Region are abandoned and falling into disrepair, but could be renovated for new uses.

Downtown Albany

The Art Deco skyscraper at 11 N. Pearl St. is among the many downtown Albany buildings that could receive the expanded tax break, if its owners decided to renovate, because it is considered part of Downtown Albany Historic District, which also includes Broadway and State Street.

Dewitt Clinton

The architect working on a plan to develop the Albany building, which is across from the Capitol, said the historic tax credit program greatly increased the projects feasibility. "It's a great boost for the building," Scott Townsend said. "It's a great boost for all downtowns."


http://www.timesunion.com/AspStories/story.asp?storyID=829299&category=BUSINESS

High Speed Rail Wrong Road for America

In the face of high energy prices and concerns about global warming, environmentalists and planners offer high-speed rail as an environmentally friendly alternative to driving and air travel. California, Florida, the Midwest, and other parts of the country are actively considering specific high-speed rail plans.

Close scrutiny of these plans reveals that they do not live up to the hype. As attractive as 110-to 220-mile-per-hour trains might sound, even the most optimistic forecasts predict they will take few cars off the road. At best, they will replace for profit private commuter airlines with heavily subsidized public rail systems that are likely to require continued subsidies far into the future.

Nor are high-speed rail lines particularly environmentally friendly. Planners have predicted that a proposed line in Florida would use more energy and emit more of some pollutants than all of the cars it would take off the road. California planners forecast that high-speed rail would reduce pollutionand greenhouse gas emissions by amere 0.7 to 1.5 percent—but only if ridership reached the high end of projected levels. Lower ridership would nullify energy savings and pollution reductions.

Randal O’Toole is a senior fellow at the Cato Institute and author of The Best-Laid Plans:How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future.

More by Randal O'Toole

These assessments are confirmed by the actual experience of high-speed rail lines in Japan and Europe. Since Japan introduced high-speed bullet trains, passenger rail has lost more than half its market share to the automobile. Since Italy, France, and other European countries opened their high-speed rail lines, rail's market share in Europe has dwindled from 8.2 to 5.8 percent of travel. If high-speed rail doesn't work in Japan and Europe, how can it work in the United States?

As megaprojects—the California high-speed rail is projected to cost $33 to $37 billion—high-speed rail plans pose serious risks for taxpayers. Costs of recent rail projects in Denver and Seattle are running 60 to 100 percent above projections. Once construction begins, politicians will feel obligated to throw good taxpayers' money after bad. Once projects are completed , most plans call for them to be turned over to private companies that will keep any operational profits,while taxpayers will remain vulnerable if the trains lose money.

In short, high-speed rail proposals are high cost, high-risk megaprojects that promise little or no congestion relief, energy savings, or other environmental benefits. Taxpayers and politicians should be wary of any transportation projects that cannot be paid for out of user fees.


http://www.cato.org/pub_display.php?pub_id=9753