Historic-tax-credit revival sought

RESTORING RESPECT: The 150-year-old Pontiac Mills in Warwick was once pegged for a $52 million restoration project. That fell through, and prospective buyers are apprehensive without a historic-tax-credit program in place. / PBN PHOTO/RUPERT WHITELEY
RESTORING RESPECT: The 150-year-old Pontiac Mills in Warwick was once pegged for a $52 million restoration project. That fell through, and prospective buyers are apprehensive without a historic-tax-credit program in place. / PBN PHOTO/RUPERT WHITELEY

The 150-year-old red brick walls of Pontiac Mills in Warwick are showing their age. Listing agent Bruce Thunberg can’t say how long the historic complex can remain vacant before it becomes impossible to save.
As he searches for a buyer willing to invest in what at one point was a $52 million restoration project, Thunberg hears a familiar refrain from developers intrigued by the old textile mill: When will Rhode Island bring historic tax credits back?
“That is what everyone is waiting for,” said Thunberg, of Landmark Realty Group in South Kingstown. “I can’t tell you how many phone calls I get from building developers and investors asking about the tax credits. The fact that they have been talked about since 2008, it has been like a baited hook with no barb.”
Since lawmakers staring down a budget crisis four years ago eliminated the state’s historic-tax-credit program, planners, developers, mayors, Realtors and builders throughout the state have pushed for its return to spark a market for old properties like Pontiac Mills across the state.
Last year an effort to bring the credits back to life died in the House Finance Committee, but this year proponents have launched bills in both the House and Senate with at least conceptual support from leadership in both chambers and the governor’s office.
“I think the bill last year was kind of late in the session and the Finance Committee was dealing with a sizable deficit,” said Rep. Jeremiah O’Grady, D-Lincoln, who sponsored a historic-tax-credit bill in the House.
With a day job as project manager with the Olneyville Housing Corp., O’Grady said every day he sees several old industrial buildings west of Olneyville Square that look like candidates for tax credits and would boost the neighborhood if restored.
The main concern about historic tax credits has always been their cost, so O’Grady, his Senate counterparts and supporters of bringing them back have come up with a “leaner” version of the program in the latest bills. To start, the size of the credits would shrink from 30 percent of total project cost, as they were before 2008, to 20 percent. Preservation projects that reserve one-quarter of the building, or the entire ground floor, for commercial use will be eligible for a 25 percent credit.
The bill would spread out large credits so that no more than $5 million can be claimed per project each year and nothing could be claimed until fiscal 2014, to protect next year’s budget.
In addition, developers must show they are making significant progress toward finishing a project within 18 months of being approved for a credit.
In all, O’Grady said the changes could lower the overall cost to the state from the $33 million range where it was in the last few years, to between $20 million and $25 million.
“There is very little construction going on with historic properties right now without the tax credit,” said Arnold “Buff” Chase Jr., who has developed historic buildings in downtown Providence with the help of historic credits. “It can be looked at as a jobs bill and stimulus, where three or four years from now it might not be necessary.”
Chase said several vacant commercial buildings on Westminster Street in downtown Providence could be candidates for the credits and would bring more economic activity to the area.
Proponents of bringing the historic credits back point out that since 2008, Rhode Island and New Hampshire have been the only New England states without such incentives.
They also point out that Massachusetts’ 20 percent tax credit has been critical to a number of recent mill-redevelopment projects in New Bedford and Fall River, while similar projects in Rhode Island have been few and far between.
“It is a competitiveness issue within the Northeast,” said Scott Wolff, executive director of GrowSmart Rhode Island, a major historic-credit backer. Introduced in 2002, Rhode Island’s historic-tax-credit program was eliminated in 2008 under a combination of recession-year budget pressure and concerns about whether some of the projects taking advantage of the credits brought sufficient public benefit for the cost.
With this in mind, the O’Grady bill would exclude social clubs from claiming the credit and most single-family homes.
In the program’s history, 246 credit-eligible projects (which include phases of multistage projects) have been completed, while 14 have been abandoned and 72 are still eligible for credits but have not been completed, according to Paul Dion, chief of the state Office of Revenue Analysis.
The state has approved projects with a potential historic-tax-credit value of $455.7 million.
Of that total, $295.9 million worth of credits have been certified for completed projects, although $19.7 million has not been redeemed, so the state’s total loss of revenue stands at $276.2 million, Dion said.
There is also an estimated $155.5 million worth of credits for pending “active” projects that haven’t been completed, but still could be, while $25.5 million worth of credits have been abandoned.
While they come with an upfront cost to the state in lost taxes, proponents of historic tax credits say budget projections of the programs often fail to take into account the revenue they create through sales tax on building materials and income taxes for newly employed construction workers.
What’s more, the credits stand to provide a property-tax boost to cities struggling against insolvency, most of which have a large stock of old, industrial buildings and less undeveloped green space. Avoiding bankruptcies or municipal bailouts gives the state cost avoidance, supporters say. Combined with federal historic credits of 30 percent, the state historic tax credits, usually sold to investors, can make up the premium associated with a historic renovation.
Located on the banks of the Pawtuxet River across Route 5 from the Warwick Mall, Pontiac Mills has become an economic-development priority for city and state officials as well as an example cited by historic-tax-credit supporters.
Owner Hampton Hodges purchased the 15.5-acre property as an investor in 2001, but a master plan to redevelop the complex fell through when the architect and visionary for the project, Bruno D’Agostino, died the same year, Thunberg said.
Since then, one building was torn down to make way for the NYLO hotel and the complex was inundated with water when the Pawtuxet River overflowed its banks in 2010.
With a listing on the National Register of Historic Places, Pontiac Mills was approved for historic tax credits in 2008, but Hodges balked at paying the $800,000 fee required to grandfather them while waiting for a buyer, Thunberg said.
Thunberg said Hodges, who recently met with Gov. Lincoln D. Chafee about Pontiac Mills, is not a developer and wants to find a buyer who is, or an equity investor, to lead a mixed-use renovation.
The existing master plan calls for a new parking garage, new office building and demolition of six of the existing buildings deemed beyond repair.
The fiscal 2013 budget being put together by lawmakers this spring includes difficult decisions and fights over new taxes and service cuts, so bringing back the tax credits is far from a sure thing.
Chafee did not include the revived program in his budget proposal, but said he supports historic tax credits in concept. Senate President Teresa Paiva Weed in a statement voiced similar support.
Fox spokesman Larry Berman said the House speaker “supports [historic tax credits] but in a limited scope.” •

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