Tax credit won’t save ‘Superman’

The revived Rhode Island historic-tax-credit program unveiled by lawmakers last week likely won’t help the state’s tallest vacant building, but will be in high demand for other projects, preservation advocates say.
“It’s a win because we are getting the program restored in a fairly significant way,” said Grow Smart Rhode Island Executive Director Scott Wolf, a leader of the coalition that has backed restoring the program for the last five years. “What they’ve proposed is not as robust as would be ideal, but it’s significant. Maybe it’s not a home run, but it’s a double.”
The fiscal 2014 state budget released by House Democratic leaders last week would open up a pot of $34.5 million in funds set aside for earlier historic tax credits that have been abandoned by stalled projects.
Unlike the more open-ended proposals from Gov. Lincoln D. Chafee and Senate President M. Teresa Paiva Weed earlier in the year, the House budget caps historic credits at $5 million per project and at $12 million per year.
Those caps are bad news for High Rock Development LLC, the owner of the former bank headquarters at 111 Westminster St. in Providence known as the Superman Building.
High Rock, with Providence-based Cornish Associates, wants to convert the historic Superman Building into apartments. It estimates the project will cost $114.7 million and require $39 million in state assistance.
The House budget does not include any direct appropriations to the Superman Building and the $5 million ceiling on historic tax credits is likely too low to make a critical difference in getting the project built.
“Obviously, we are disappointed that support for 111 Westminster was not included in the budget that passed the House Finance Committee,” said William J. Fischer, spokesman for High Rock in an email. “Although disappointed, we readily understand the political realities of this conversation, given budgetary constraints. We will continue to have discussions with elected officials at the municipal and state level as to how 111 Westminster can once again contribute to both the state and Providence’s economy. We remain committed to Rhode Island and look forward to those discussions.” Fischer declined to address specifics of High Rock’s future plans for the tower, such as whether ownership would consider leasing it to office tenants and how long the light at the top of the tower will stay on.
But the Superman Building’s loss could be a benefit for the owners of smaller historic buildings across the state.
Before the historic tax credit was suspended in the 2008 budget crisis, the majority of projects looking to use the program were seeking less than $5 million in credits.
Wolf said, if passed as it stands in the budget, the revived historic tax credit would likely draw enough projects seeking credits in the $1 million to $2 million range to reach the annual $12 million limit.
Facing a recession, budget crisis and criticism that the program had become too expensive and overused by projects with minimal public benefit – such as homes and social clubs – lawmakers stopped issuing new credits in 2008.
They allowed projects with approved credits to grandfather them in exchange for a fee, but set a deadline for showing progress that expired in May.
The credits are worth 25 percent of a project’s expenses, which have to meet restoration guidelines qualified by the R.I. Historical Preservation and Heritage Commission. Similar federal credits worth 20 percent of expenses are also available.
Developers generally sell the credits to brokers, who take a cut of their value and sell them on to corporations interested in reducing their tax liability. Critics of the system point out that these middlemen reduce the value of each public dollar spent.
To encourage job-producing developments, the budget proposal bars social clubs and nonclustered residential buildings with less than three apartments.
Projects without either 25 percent of total area, or the entire ground floor, reserved for commercial activity only qualify for a 20 percent credit. Providence Revolving Fund Executive Director Clarke Schoettle said about 85 percent of historic-tax-credit projects have had total values under $25 million.
“I think there are a lot of projects in downtown Providence poised to make a move,” Schoettle said. “Over the next 12 to 24 months, I think we will see millions of dollars of reinvestment. The $12 million cap could be reached just with the projects out there now.”
In discussions last year about reviving the tax credits, program proponents resisted a union-supported proposal to require contractors on historic projects to have a qualified apprenticeship program.
In the House budget, a version of the apprenticeship requirement survives, but only for projects valued more than $10 million. Contractors with fewer than five employees would be exempt.
John Grosvenor, partner at Northeast Collaborative Architects in Newport, which specializes in historic projects, said he expects the revived tax credits to attract “a ton” of interest.
“My only disappointment is that the kitty isn’t larger,” Grosvenor said. “If there are a couple of big projects, it doesn’t leave much for smaller projects.”
If the program passes, (the full House is scheduled to vote on it June 25) Grosvenor hopes one of the projects Northeast Collaborative is working on, Pontiac Mills in Warwick, will take advantage of it.
Although tax-credit supporters hoped the program would have been made larger, they acknowledge the proposal in the budget is likely to be reviewed and tweaked down the road anyway. The House budget includes a sunset provision for the historic tax credit after four years, meaning at minimum the program would have to be reapproved then.
“We are operating under the assumption we will still be advocating expansion over time and we assume it will provide multiple benefits that make it easier to go back to the General Assembly,” Wolf said. •

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