At the Providence Preservation Society’s annual meeting, to be held Jan. 22 at the Providence Public Library’s main branch, PlaceEconomics principal Donovan D. Rypkema will be keynote speaker. Rypkema, a preservation consultant based in Washington, D.C., will talk about using historic preservation as an engine for economic growth.
He recently spoke with Providence Business News about preservation issues and historic preservation tax credits.
PBN: How did get you into the field of studying and consulting on the economics of historic preservation? And how has that field changed since you entered it?
RYPKEMA: Sheer capitalist greed. I got involved in historic preservation in order to get the tax credits. But what I learned from that experience was there were these people who called themselves “preservationists,” all of whom talked about real estate; none of whom knew anything about real estate. At the time I was a real estate appraiser and small-scale developer. So I sort of became a translator between the language of real estate and economics and the language of historic preservation.
I have been in historic preservation for nearly three decades and here is the biggest change: 30 years ago, historic preservation was an end in itself – save old buildings in order to save old buildings. Today, historic preservation has become not an end, but a means. And the ends for which historic preservation is the means are multiple and include downtown revitalization, affordable housing, luxury housing, heritage tourism, small-business incubation, job creation, smart growth and, in my little niche in the world, economic development.
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PBN: The national economy, along with the Rhode Island economy, has tanked this year. What does that mean for historic preservation nationally? Are fewer historic buildings knocked down when the economy is in distress?
RYPKEMA: Demolition (although this is often not acknowledged) is actually quite expensive, especially when you include the financial and environmental costs of the landfill. So, yes, I think there probably is less demolition when the economy is in a down cycle. But there’s another pattern on the positive side. Because, unlike new construction, rehabilitation can be undertaken incrementally, it is often a counter-cyclical economic activity – i.e., “I can’t build a new building at the moment, but I can rehab the second floor of the building I already own.”
PBN: Rhode Island this year cut its 30-percent historic tax credit program because the state has a multimillion-dollar budget deficit. What’s your take on similar state programs? How effective are they?
RYPKEMA: I understand and sympathize with legislators who are trying to fill budget gaps in recessions, but in doing so they often myopically look at the issue.
In every study I’ve read measuring the costs and benefits of state historic tax credits, the state government received more than it cost. So what the legislature in Rhode Island actually did was deepen the recession here by eliminating a relatively minor tax expenditure from the state budget. You’d be hard pressed to identify any state program of any kind – either a direct-appropriation program or a tax-incentive program – that generates more income for the state than it costs. And Rhode Island threw out one of the few that met that test.
PBN: Will a new presidential administration affect historic preservation?
RYPKEMA: Probably. And it’s too early to know exactly how, but I’d guess positively.
But historic preservation is an activity that has very strong bipartisan support. It isn’t an accident that as first lady Hillary Clinton championed the Save America’s Treasures program and when Laura Bush moved into the White House she began a parallel program, Preserve America. One might make the case that Democrats are stronger preservation supporters than Republicans, but former U.S. Sen. John H. Chaffee was one of preservation’s best supporters.
PBN: In your blog, you created a system to aggregate potential positive impact from government investment and found that historic preservation incentives ranked the highest, followed by infrastructure repair and public transportation. How did those rank higher than other government investments, like buying toxic assets from banks?
RYPKEMA: Well, I’m not a macroeconomist but it occurred to me that if the government is going to spend billions of taxpayers’ dollars to stimulate the economy, there must be some set of principles upon which those decisions would be made. I was absolutely appalled when I could find no such set of standards. And as we’re hearing about the $850 billion stimulus package being developed for enactment in January, it is rapidly becoming just a [handout,] with every interest group saying “give some of that money to us and we’ll stimulate the economy” with no underlying rationale as to what should qualify and what should not.
So I was so presumptuous to suggest there ought to be a set of principles for the government’s counter-cyclical activities. Among those was that the expenditures should be for capital projects. Look, it is our children and grandchildren who are going to be paying off what will end up being $2 trillion in deficit spending. The least we can do is spend it on assets that they will be able to use.
Among the other principles were projects that are: labor intensive, targeting segments of the economy hardest hit in this recession, geographically dispersed and representing sustainable development. Not spelled out as a principle, but probably in my mind when I scored the alternatives, was that we shouldn’t use taxpayers’ dollars to reward greed or stupidity.
So infrastructure and historic preservation ranked high. Buying loans that banks shouldn’t have made in the first place did not.
