One by one, testifiers approached the table in a State Capitol hearing room to ask legislators to revive pieces of the massive $4 billion tax bill that fell apart in the final hours of last year's legislative session.
Supporters push to revive tax credit for Minnesota's historic buildings
The credit expired in June after negotiations blew up on a historic $4 billion tax bill.
January 14, 2023 at 8:00PM
Among those making their case: supporters of Minnesota's Historic Structure Rehabilitation Tax Credit, which expired in June after negotiations on the bill failed.
"Not having a historic tax credit to support these projects hurts Minnesota," Heidi Swank, executive director of historic preservation nonprofit Rethos, told senators last week. "For the first time since 2011, communities around the state aren't able to benefit from this critical program."
Last year's tax bill would have eliminated the June sunset on the historic tax credit, matching a federal provision and continuing it indefinitely. Before it expired, the 20% tax credit could go toward the rehabilitation of a structure listed on the National Register of Historic Places or one that contributes to a registered historic district.
It's one of the rare tax credits whose impacts are studied annually by the University of Minnesota Extension, which reported a record high 34 applications through the program from developers in 2021. Many feared the credit might expire.
The tax credit was created more than a decade ago coming out of the Great Recession with the hopes of revitalizing old buildings while putting people back to work. Over the last 10 years, projects utilizing the credit have generated an estimated $5 billion in economic activity and created 28,485 jobs, according to the university.
Meghan Elliott, a real estate developer and founding principal of New History, a historic redevelopment company, said older buildings are typically challenging and expensive to put back into service. Sometimes, the cost of reusing them is higher than the value of the building when the project is finished.
She was recently involved in the rehabilitation of the historic St. Louis County jailhouse in Duluth, which had been vacant for decades. It cost roughly $10 million to convert the old jail cells into Leijona (Finnish for lion), a building with 33 units of mixed income housing.
The property is worth an estimated $4 million, but the 20% state and federal historic tax credits helped cover the gap of what it cost to rehabilitate the building.
"In terms of building redevelopment, this is by far the biggest tool we have," Elliott said.
Before the state tax credit was created, Minnesota saw an average of one project per year apply for the federal historic rehabilitation program, she said. While the state credit was active, the average shot up to 10 projects a year.
"I can tell you that if our Legislature enacted this program today, we have 10 more projects right out of the gate just sitting and waiting to see if this program is going to go through," Elliott said. "If it doesn't go through, they will walk away."
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