Developers around the state are dusting off dormant renovation projects after the legislature restored historic preservation tax credits in its budget last month.
The tax credits expired last year as part of a broader Republican-led tax reform plan. Without them, many historic preservationists said renovating old buildings wouldn’t be financially feasible.
The credits will cost the state about $8 million a year, a fraction of the total budget, but the program was a big priority for Gov. Pat McCrory. He traveled to Burlington this week to celebrate the program’s return.
“This is going to help revive the Main Streets of North Carolina,” McCrory said Wednesday. “What we proved was a grassroots effort can make a difference in the state capital ... to change bad legislation and make it even better, to preserve our history, to preserve our culture and to continue economic development and to create jobs.”
Myrick Howard, director of Preservation North Carolina, said many historic renovation projects were revived “right off the bat” when the budget deal became final.
“Where we’re seeing it is more in the smaller towns where the projects just could not work without the extra incentive,” he said. “We even have heard word of a couple developers (specializing in historic projects) that are coming back to North Carolina” after moving operations elsewhere.
While most of the new tax credit projects haven’t yet been formally announced, Howard said he knows of renovations in the works in Shelby, Gibsonville, Manteo and Winston-Salem. They range from a hospital to an old school to a hotel.
The new version of the tax credit isn’t as generous as the program in place from 1997 to 2014. The old credit gave property owners back 20 percent of the cost of improvements to income-producing properties and 30 percent for home restorations.
Now the credit is equal to 10 or 15 percent of the cost of improvements to income-producing properties, depending on the total cost of the project. For homes, the credit is 15 percent of the cost, up to $22,500. The percentage is higher in the state’s poorer counties.
“We aren’t as far out there in the lead as we used to be” compared with other states, Howard said. “It’s still a good incentive, and I think it will be a very useful incentive.”
Property owners can now receive the entire credit at once, instead of spacing it out over several tax years as required in the old program. “Would you rather have $15 in a day or $4 a year for five years?” Howard said, explaining the change. “Even with the percentage cut, the fact that you can take it in one year is a big step forward.”
While the historic tax credit program is a blip in the state’s $21.74 billion budget, McCrory’s administration lobbied heavily to restore it.
His secretary of cultural resources, Susan Kluttz, toured 52 downtowns across the state, asking local leaders to call their legislators in support of the program. A tax credit bill easily cleared the House, but Senate leaders refused to hold a vote on the House’s bill.
The issue wasn’t resolved until closed-door budget talks between the House and the Senate wrapped up in September. Some Republicans opposed the tax credits, arguing that all tax credits should be eliminated to allow a lower tax rate for everyone.
The program wasn’t always controversial. For decades, the legislature repeatedly renewed the tax credit in near-unanimous votes. A 1997 push to make the credit more generous was led by Republican Sen. Ham Horton. Sen. Bob Rucho – a Mecklenburg County Republican who spoke out against the credit this year – co-sponsored the legislation, records show.
“It was an ideological thing related to tax reform, and it showed the division within the Republican Party itself,” Howard said.