After much recent thunder and lightning over the state rehabilitation stimulus program–a legislative thoroughbred which was unaccountably hamstrung by the Governor’s budget office prior to leaving the starting gate last year–the rainmaking got underway in earnest yesterday, led primarily by western New York’s legislative delegation. An urgently needed fix which has been on their radar screen since last year got some much-needed gale-force wind in its sails in recent weeks as the sturm-und-drang played out in the western New York media. High-stakes moves by local developers to show us what kinds of projects we could make happen with our grand old buildings–and what we could risk losing–have clearly gotten Albany’s ear as well as the attention of everyone who wants to see new life breathed back into our decaying urban places. And Donn Esmonde’s flailing away at the very people who have moved the ball to first-and-goal position certainly added heat if not any light (which was thoughtfully added the following day by Phil Fairbanks).
As someone who’s been involved with the advocacy for (and written about) this program since 2006, I’ve always seen and understood it as a long-term, crawl-walk-run presumption. Even in the best of times, Albany is so often a place where good ideas go to die. In just one example of many, friends in Rochester have for nearly a decade led a statewide fight against lead poisoning, building a strong coalition and traveling to Albany weekly, only to be sent back to the drawing board. So it’s a miracle that any legislation at all made it through last year’s Albany, entangled in a mire of coups, scandal, and leadership meltdown we haven’t seen the like of since…well, this year.
But our legislative delegation, God bless them, is going back to the well again. Led by Assemblyman Sam Hoyt (Assembly sponsor); Senators William Stachowski and Antoine Thompson (Senate co-sponsors, along with upstate Senator Darrel Aubertine); and Assemblymembers Francine DelMonte, Dennis Gabryszak, Crystal Peoples-Stokes, and Mark Schroeder (among Assembly co-sponsors); yesterday they submitted companion bills (A10168, S7042). This new legislation will allow project developers to allocate the state rehabilitation tax credit within a partnership or LLC different from the federal tax credit, and the ability to apply the credits against the bank and insurance taxes.
Sounds like a lot of MBA talk–how will that help? At a tax credit workshop last year in Syracuse, covered here, a key discussion was the importance of resale (or syndication) of the credits. In practical application, that’s the way the tax credits inject upfront financing needed to make a project work, and get the work started. So as a developer, even though the tax credits offset your tax obligations up to several years down the road, you can sell them to investors (for a percentage of future value) as soon as you qualify. That gets project cash flowing right away, “shovels in the ground,” and payroll taxes and permit fees flowing to cash-strapped local governments. Best of all, people get hired and paid.
The other key role of the tax credits is to help fill the funding gap. Since costs of doing business are high all over the state, yet rates of return have been stagnant upstate for decades, developers usually look to apply tax credits of all kinds, from affordable housing credits, brownfield credits, etc. The name of the game is bridging the gap between upfront costs and expected return over time. Having a strong state-level rehabilitation tax credit (to add to existing federal credits created decades ago), can make the difference between a project being viable or not. It also encourages developers to invest in our older and historic building stock, which is good policy and environmentally friendly. But only if developers can easily resell (and for maximum value) the tax credits. This legislative fix will help with that, by removing unnecessary financial constraints to investing in the credits.
When this fix is made, western New York is especially well positioned to turn it to maximum advantage. Our combination of older building stock and poor economic climate have led–in true WNY lemons-to-lemonade fashion–to the development of a local specialty in the use of tax credit programs of all kinds and the financing of building rehabilitation projects. Steven Weiss of the law firm Cannon, Heyman, and Weiss puts people to work right here in Buffalo helping organizations and developers around the world with securing tax credits of all kinds. Preservation architect Clint Brown has educated people all over the state using case studies of local projects, including one he has undertaken himself. And we have several developers who proven very savvy and adept at juggling these many funding sources, turning them into projects and jobs. And ECIDA even kicks in, with a special funding stream for adaptive reuse projects for older buildings.
Would you like to learn more about the rehabilitation tax credit program and other techniques for developing and funding these kinds of projects? You’re in luck, as there will be a FREE daylong workshop held tomorrow, March 11, at the Earl Brydges Library in Niagara Falls, organized by Preservation Buffalo Niagara and the Preservation League of New York State. The presenters are all top-notch. Check it out.
So…what are the chances for success for this legislative fix? Surprisingly good, I’ve been told. First, the Governor doesn’t like all the bashing his budget office has taken for hamstringing last year’s bill, and would love to do anything right now that might help boost his own standing. And he now knows that any budget impacts of these changes (although they will be offset by increases in state and local revenue) will be felt by another governor. He’s signaled he will sign.
If he doesn’t, I’m sure Governor Ravitch or Governor Cuomo or Governor Paladino will.
Lafayette Hotel room overlooking the square.