Historic buildings and future development projects could take a hit under a new tax cut plan released last week by House Republicans eliminating the Federal Historic Tax Credit.
If eliminated, a number of projects across the state and in the Milwaukee area depending on the 20 percent credit could be affected.
“The HTC attracts capital to development by making available a credit equal to 20 percent of eligible rehabilitation expenses only to qualified projects,” said a letter written to Wisconsin’s House Republicans and signed by nearly 100 state municipal leaders, developers and historic preservationists. “This creates the opportunity for a return on investment for the owner that would otherwise not be available. Making such projects possible facilitates significant local investment and economic development while preserving our history.”
A representative for House Speaker Paul Ryan could not immediately be reached for comment.
A similar letter was sent to the chairman and ranking member of the House Committee on Ways & Means.
Over the last 15 years, the federal HTC has made 188 projects possible in Wisconsin, creating more than 14,000 jobs and a total private sector investment of $736.1 million, according to the letter.
“In 2016 alone projects totaling more than $28 million in private investment were approved in Wisconsin communities with populations under 60,000, proving that this program benefits every corner of Wisconsin,” the letter said. “Between 2014 and 2016 HTC projects have added more than $570 million in new property tax assessment value to Wisconsin communities.”
The possible loss of the Federal Historic Tax Credit comes two months after Gov. Scott Walker’s line item budget veto to Wisconsin’s historic preservation tax credit program, which will reduce the per-project cap from $5 million to $500,000 beginning July 1, 2018.
The Alexander Company is counting on about $7 million from the Federal Historic Tax Credit program for the Solders Home project at the Clement J. Zablocki VA Medical Center.
The Madison-based developer is planning to begin the restoration of six buildings to their original purpose of serving veterans in early 2018, after the land is secured. The $40 million project will likely die without the federal credit, said Joe Alexander, president of The Alexander Company.
“There are 100 projects on the boards right now in Wisconsin with approved state historic credits,” Alexander said. “If they are not under construction or the sites have not been purchased, they could be halted completely with the elimination of the federal credit.”
Kendall Breunig, owner of Franklin-based Sunset Investors, who has developed several projects using state and federal historic tax credits, said one of the biggest questions looming concerning the possible federal cut is when it would go into effect.
“At least with the state credits we know we have until the end of June 2018,” Breunig said. “Everything with the federal (tax cut) is really hard to predict right now.”
Breunig has worked on a massive effort to revitalize the Pritzlaff complex at 305 N. Plankinton near downtown Milwaukee since 2007. The $32 million project used $4.1 million in state historic tax credits and roughly the same around in federal historic tax credits. Without the credits, the project, which includes the Ward 4 business incubator and 99 apartments, would not have been possible.
“The other thing is, buildings that are historic and are renovated without the credits won’t have to comply with any restoration standards, and I think most people think there is value to that,” Breunig said.
The Federal Historic Tax Credit program was created in 1978 and made permanent in the 1986 tax reform law with the support of President Ronald Reagan.
The credits have generated $1.20 in construction activity and tax revenue for every dollar of credit issued by the federal government, according to a 2015 economic impact report by the National Park Service and Rutgers University.
The annual cost for the program is $1 billion, but it has an estimated economic impact of more than $5 billion in private sector development annually.
“We acknowledge that a critical goal of tax reform generally is to free up capital for new investment,” the letter said. “Perversely, the elimination of the HTC would eliminate this critical flow of private sector capital to Wisconsin towns and cities.”
