Buildings’ Age and Location: Issues In Debate Over Historic Preservation Tax Credit

The Pizitz Building in downtown Birmingham was renovated using historic preservation tax credits.

How old must buildings be before they are considered historic? Should tax credits for their preservation be split evenly across the state or allowed to cluster in the cities?

Both are questions still in play as the Alabama Legislature considers restoring a program that supported renewal efforts, most notably in Birmingham and Mobile.

The historic preservation tax credit, which has helped fund restoration of 51 buildings across the state so far, is headed to a House committee vote next week. But then negotiations will begin over the House sponsor’s vision for extension of the tax credit and a heavily amended version that has been passed by the Senate.

Rep. Victor Gaston, R-Mobile, sponsor of the bill in the House of Representatives, said the important thing is to get the money flowing to the program again. Gaston said that not only do the tax credits help pay to restore often dilapidated buildings, but those projects create jobs for the construction workers and craftsmen employed to do the work.

As introduced, Gaston’s bill would grant tax credits of up to $5 million per project to developers who are renovating historic buildings. Up to $20 million in tax credits could be issued each year, with the money coming from sales tax revenues in the Education Trust Fund.

Big Change

One big change from the previous program, which lapsed last year after the Legislature did not extend it, is that projects to be granted the tax credits would be determined by a new Historic Tax Credit Evaluating Committee, made up by state officials.

Previously the tax credits were granted on a first come, first served basis.

In a perfect world, Gaston said, his version of the bill would be passed by the Legislature.

But considering the changes made to the Senate version of the bill in committee, Gaston expects he’ll have to compromise on some issues.

One change made to the Senate version of the bill is that it would allow tax credits to be used only on buildings 75 years or older. Under Gaston’s bill and the program as it operated until last year, buildings 50 years old may qualify.

Gaston said he prefers allowing 50-year-old buildings to be eligible, but that’s open for discussion.

Sen. Slade Blackwell, R-Mountain Brook, a supporter of the tax credits and the only senator who voted against the changes made in the Senate version of the bill, said requiring structures to be 75 years old or older would rule out tax credits to preserve buildings that are historic because of their significance during the Civil Rights Movement. He also said federal regulations generally consider 50 years as the cutoff for historic buildings.

Dividing Credits 

One of the biggest changes made in the Senate would be to divide the $20 million in tax credits allowed each year evenly among the state’s seven congressional districts. After the first three months of the year, any tax credits not reserved in a congressional district would be available for projects in other parts of the state.

Gaston, who said he has no historic buildings in his district, said that if the tax credits are good for Birmingham and Mobile and put people to work, then that’s good for the state.

But he said he understands the need to make sure that more buildings in different parts of the state get a shot at the tax credits.

Of the 51 projects that received tax credits under the previous program, 20 were in Birmingham,15 were in Mobile and six were in Tuscaloosa. The rest of the projects were scattered around the state.

Critics of the amendments have said dividing the money by congressional district would limit tax credits that could be granted to any one project at the start of the year to less than $3 million, and that might not be enough incentive for a developer to carry through on renovation plans.

Gaston said that, practically speaking, not all of the credits would be claimed in all of the districts, and the credits that go unclaimed revert to a pot that can fund projects anywhere in the state. He said there are different levels of interest in historic preservation in various parts of the state, so he’s comfortable that some of those credits would be unclaimed and return to the bigger cities.

Gaston said he expects to get his version of the bill approved by the House Ways and Means-Education Committee when it meets April 4. The bill then could go to the full House the following week, Gaston said.

Working on Compromise

But in between, he expects to work on a compromise version with Sen. Jabo Waggoner, R-Vestavia Hills, who sponsored the bill in the Senate.

Although it was senators who passed a historic tax preservation credit bill out of committee first and weighed in with the changes they would like to see, it is the House version of the bill that will have to be passed or die. That’s because bills that increase or decrease revenue for the state must originate in the House.

Changes made by the Senate are more about sending a message.

Despite the desire to tweak parts of the tax credit program, the bill has gotten widespread support this year.

After failing last year because of fears about the cost to the state, this year the bill has 87 co-sponsors in the 105-member House of Representatives and 29 co-sponsors in the 35-member Senate.