On Tuesday, the New York State Legislature, after 125 days, passed an austere budget that includes numerous cuts. Among the casualties was, as expected, the state's historic preservation tax credit program, the fate of which we chronicled in our most recent issue:
New York State, like much of the country, is facing severe budgetary shortfalls. Amid dozens of service cuts, funding reductions, and tax-credit suspensions, a New York State historic rehabilitation tax credit could be eliminated. Preservationists argue that suspending the credits could imperil development projects, which could ultimately contribute to prolonging the state’s financial woes.
New York’s Rehabilitation Tax Credit program is limited to low-income areas, most of which are upstate though there are also some in the outer boroughs, and can provide as much as 20 percent of construction costs up to $5 million in credits for income-producing properties. Unlike federal rehabilitation tax credits, which can only be applied to income-producing properties that are commercial buildings or multi-unit housing, New York State’s can be applied to single-family homes as well. “This credit is really about helping downtown Syracuse, Rochester, and Buffalo,” said Daniel MacKay, spokesman for the Albany-based Preservation League of New York. In its present form, the program has only been in effect since January.
A budget that would include suspension of the tax credits until 2014, when they will expire, has cleared the Assembly and will be debated by the State Senate. The historic rehabilitation credit is one of approximately 30 different credits that would be suspended until the middle of the next decade, though the preservation credits are the only ones with a built-in sunset period, so the suspension would essentially eliminate them. According to MacKay, Governor Paterson is in favor of the suspension.
The Preservation League and the Municipal Art Society argue that suspending the credits will prevent much-needed economic development. “In terms of stimulus, these credits are very effective,” MacKay said, citing numerous conversion projects in small cities. “The economic stimulus has occurred before the credit is even released.”
For developers, the tax credits can be essential for projects in weak markets. “You don’t need these credits in Manhattan. You need them in Poughkeepsie and you really need them in Buffalo,” said Uri Kaufman, founder of the Harmony Group. Kaufman is currently working on three large-scale rehabilitation projects, converting old mill buildings in Cohoes and Saratoga, as well as an asylum building in Poughkeepsie, New York. All three projects could be shelved if the tax credits are suspended. “These are essential to making the numbers work,” he said.
Kaufman estimates that the mill property in Cohoes was generating $25,000 a year in property taxes for the state. If the buildings are rehabilitated, he estimates they will bring more than $700,000 a year to the state’s coffers. “These should have been seen as investments,” he said. “You don’t want to cut what is making you grow.”
MacKay believes that because the credits are focused on projects in upstate New York, traditionally a more Republican-leaning part of the state, a broad coalition of state senators from both parties could fight for them.
“This is not an issue of any particular political stripe,” he said.