Historic tax credits can stabilize commercial tax bases

COURTESY OLNEYVILLE HOUSING
COMING BACK: Rep. Jeremiah T. O'Grady also serves as a project manager for Olneyville Housing Corp. He says that Olneyville is past the worst part of the foreclosure crisis.
COURTESY OLNEYVILLE HOUSING COMING BACK: Rep. Jeremiah T. O'Grady also serves as a project manager for Olneyville Housing Corp. He says that Olneyville is past the worst part of the foreclosure crisis.

Rep. Jeremiah T. O’Grady’s career change from human resources to real estate, eventually becoming a project manager for Olneyville Housing Corp., put him in a unique position to watch the havoc caused by the collapse of the housing bubble. Elected to the General Assembly in 2010, the Lincoln Democrat is now trying to reverse some of the damage caused by the downturn through smart growth priorities such as the restoration of historic tax credits and transportation-funding reform. For his efforts on Smith Hill, O’Grady was a co-recipient of GrowSmart Rhode Island’s 2012 Outstanding Leadership Award.
He discusses what tripped up this year’s bid to bring back historic tax credits, the future of transportation funding and whether neighborhoods like Olneyville have stabilized since the recession.

PBN: There was a lot of support for bringing back the historic tax credits this year, including among leadership, but again it didn’t happen. What went wrong?
O’GRADY: We assembled a tremendous coalition of advocates for a full restoration, including developers, municipal officials driven by the tax-base stabilization benefit, labor leaders looking at the job benefits and smart-growth advocates who could see the efficiencies inherent in reusing our portfolio of historically significant buildings. When it came down to it, there is always a tension between what you want to be able to do and what you can afford to do. The House Finance Committee, despite our best efforts, concluded that this was not something that could be done this year.

PBN: How close to passing was the compromise bill that emerged out of the Senate?
O’GRADY: I really liked that as a fallback. Back in 2008, when the original program was discontinued, there was a small window for those with eligible projects to reserve future credits and it required people to estimate how many they would be using and pay an upfront processing fee to reserve those credits. What the state did was booked a liability in the amount of credits that were reserved. Since then there was an abandonment of at least $25 million [by people] who wanted a refund of their fee. In addition to that $25 million, there were undoubtedly projects that over-reserved credits. The fallback was to say, the time isn’t right to open it up entirely, but we could just open up the credits that have already been booked as an interim number to get things going again.
I think by the time we had gotten to the point of a fallback, everything was pretty well-settled.
PBN: Are you satisfied with what the budget does for transportation?
O’GRADY: One of the big issues was we were borrowing $80 million every two years to fund short-term repairs and the federal match. The cumulative effect was more than 50 percent of the gas-tax revenue was going toward debt service for [the Department of Transportation.] This year’s budget shows no borrowing for the federal transportation match, so that is a key win.
On public transportation, there seems to be general acceptance of the unsustainability of relying on the gas tax to fund roads and RIPTA. It is a per-penny tax, not a percentage, and those pennies are going down compared with inflation. When prices spike, people drive less and demand for public transport is more, so you have an adverse relationship. I would have switched all vehicle-registration fees that go into the general fund to transportation funding. If these are transportation user fees, they should be dedicated for transportation. But that creates a hole in the general fund and there is reluctance to create a hole that we don’t see an obvious way to fill. I believe that there is acceptance that the way we fund now doesn’t work and we need something else.

PBN: In Olneyville, has the foreclosure problem stabilized?
O’GRADY: There were two sides to the foreclosure crisis. One was absentee-landlord speculation that went on in the last housing boom. The other was the single-family, owner-occupied purchaser in over their head. In Olneyville it was the former, the speculative flip-driven transaction that characterized the rental market. When those fell apart, they fell apart immediately. Banks were lending way above the rents that would service the mortgage and any mortgage that was going to fail failed then, right in 2008 or not long afterward. So the volume of foreclosures has dropped off dramatically. There are still buildings that are boarded up and are in that abandoned stage, but there is some activity coming back. [Olneyville Housing Corp.] is doing a 40-unit project on a building that was foreclosed that we are now rehabbing. I think in Olneyville, we are past the worst.

PBN: In more-expensive neighborhoods taxes without the homestead exemption are so high they drive away investors, and in lower-income neighborhoods, assessments are so low no one can get a loan. How do we break that cycle?
O’GRADY: We are seeing banks coming back to reasonable underwriting assumptions. In Olneyville, if $500 to $600 a month rents are reasonable, then you have to subtract the operating expenses and when taxes spike you are left with little for debt service. You need to stabilize your commercial tax base and the way to do that is restore the historic-tax-credit program. What we saw in Pawtucket and West Warwick and other places with mill buildings with low assessed values, once they were rehabbed, they had great assessed values and that takes the pressure off the rest of the tax base. Until we see a stabilization of the tax bases, you are going to see the troubles we have. •

- Advertisement -

INTERVIEW
Jeremiah T. O’Grady
POSITION: State representative and project manager for Olneyville Housing Corp.
BACKGROUND: O’Grady worked in human resources for Internet startups in Washington and Boston until 2001, when he moved to his wife’s hometown of Lincoln and went into real estate. In 2005, he was hired by the Olneyville Housing Corp.
In 2004 he was elected to the Lincoln Town Council. After a term on the Lincoln Budget Board, he won a seat in the General Assembly in 2010.
EDUCATION: BA in geography and political science from the University of Vermont, 1997; master’s in public administration from the University of Rhode Island, 2009
FIRST JOB: golf caddy
RESIDENCE: Lincoln
AGE: 41

No posts to display