Maryland Historic Credit Produces Economic and Environmental Benefits
By Caitlin Jones & A. J. Johnson
4 min read
Tax Credit Advisor, April 2009: Maryland’s state historic rehabilitation tax credit program has yielded not only economic benefits but also environmental and sustainability benefits, according to a new report published by the Abell Foundation. The foundation supports various efforts to counter poverty and serve the disadvantaged in the Baltimore area.
The report on the Maryland Heritage Structure Rehabilitation Tax Credit comes as the state legislature mulls improvements to the program.
The study says Maryland’s program, established in 1996, “is well established as a community revitalization engine, a key element in the renewal of downtowns and older established communities across the state. Less recognized”¦is the role of the tax credit in reinforcing smart growth, lowering greenhouse gases, improving water quality, saving greenfields, lowering demand for landfill space, and making better use of existing infrastructure. In short, the historic preservation tax credit program is an environmental-economic development win-win.”
Maryland’s program offers developers and homeowners a state tax credit equal to up to 20% of eligible rehabilitation costs for historic commercial (i.e. income-producing) properties and owner-occupied homes.
“Combined with federal historic preservation tax incentives in a similar amount,” the report says, “the state program has provided a powerful incentive for recycling older, underutilized, and economically obsolete buildings into new uses: abandoned warehouse and manufacturing structures have become exciting office space for entrepreneurial new companies; economically and functionally obsolete office buildings have become upscale apartments bringing new residents to formerly struggling downtown areas.”
In its first 12 years, the program has facilitated redevelopment of 407 historic commercial structures involving $923 million in total rehabilitation expenditures, and $213.9 million in state historic credits. According the report, Maryland leads all states in the number of historic contributing structures located in National Register and local historic districts, about 97,610 statewide.
The Impact
The report says the completed commercial projects generated more than $1.74 million in total economic activity in the state, employed 15,120 persons earning $673.1 million, and created 9,248 on-site construction jobs with wages of $443.4 million. The projects also generated an estimated $83.7 million in state and local taxes.
But what is also impressive in the study is the environmental impact. “Our analysis demonstrates that each $1.0 million in historic tax credits results in significant environmental benefits,” the study says.
According to the report, the preservation of an existing urban structure reduces vehicle miles traveled (VMTs) compared to a new suburban development by as much as 75% Ã about 86% of the commercial state rehab tax credit projects have been in Baltimore City.
Historic preservation projects tend to be both energy-efficient and in locations that encourage non-automotive means of access and egress, “yielding dual energy conservation benefit.” A 50,000-square-foot building that reduces VMTs by 40% and building energy use by 30% cuts carbon monoxide production by the equivalent of taking 35 cars off the road.
The study says there is a common misperception that older buildings are less energy-efficient than newer buildings. But federal data indicates that pre-1920 buildings are about as energy-efficient as buildings constructed in 2000-2003. The worst energy offenders are 1970s and 1980s structures.
“The reasons that historic structures are relatively energy-efficient,” says the report, “have to do with the use of materials that are superior insulators, use of natural ventilation, as well as siting/orientation for efficient heating and cooling in the pre-conditioning era.”
Rehabilitation projects don’t expend as much energy as new construction projects; preserve green space; avoid the need for new infrastructure expenditures; reduce storm water runoff; improve water quality; curtail new waste (i.e. buildings are preserved rather than demolished); and foster health benefits.
(Report: http://www.abell.org/ publications/index.asp)
Pending Legislation
The Abell report notes activity under Maryland’s state historic program, heavy in 1996-2002, fell sharply after the commercial property program was cut back during 2002-2004. In 2001, 75 projects with nearly $304 million in rehab costs were completed; in 2005, there were only 20 projects with costs of $32.8 million.
Identical bills (H.B. 309, S.B. 258) pending in Maryland’s state legislature would extend the state’s historic tax credit program through 6/30/14 and authorize the award over this period of up to $100 million in state historic credits for commercial projects on a first-come, first-served basis. The bills would also increase the state credit to 25% for green commercial historic rehab projects, and bar the award of more than 75% of the commercial credits to any one county or Baltimore City. A state House committee held a hearing on 3/5/09. The legislation reflects proposals made recently by Maryland’s governor.
