New Study Quantifies National, State Economic Benefits from HRTC

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Tax Credit Advisor June, 2006: The federal historic tax credit has generated a high volume of construction and permanent jobs, tax revenues, and other economic benefits, according to a new study by the National Trust for Historic Preservation and Rutgers University.

The study’s findings were presented April 26 in Washington, DC to the Tax Policy Council, by John Leith-Tetreault and Corinne Ingrassia of the National Trust Community Investment Corporation. NTCIC, an arm of the Trust, syndicates federal/state historic and federal new markets tax credits.

Ingrassia told The Tax Credit Advisor in a subsequent interview the study was intended to “get a better picture of the actual impact” nationally of the federal historic credit, a federal tax incentive that helps finance the rehabilitation of older, noteworthy buildings. She said the new study is the first of the national economic impact of the federal historic credit.

For the study, NTCIC utilized a “preservation economic impact model” developed by Rutgers University’s Center for Urban Policy Research, and plugged in National Park Service figures on total development costs and qualified rehabilitation expenditures for 1,910 historic credit projects that received Part 2 or Part 3 approval during the 15-month period ending December 31, 2005 (federal fiscal year 2005 and the first quarter of FY 2006).

Jobs, Taxes Produced

According to the study, these federal historic credit projects generated 46,323 construction and 59,265 permanent jobs nationally during this period and about $364 million in state and local taxes (personal sales, property, and state/local personal/corporate income).

The projects also generated nearly $5.0 billion in “gross state product,” a measure Ingrassia said included such economic benefits as labor, generated income, taxes, rents, and dividends.

The approved deals had collective total development costs (TDC) of $7.017 billion, the study indicated, up 7 percent from $6.530 billion for the 15 months ending September 30, 2004.

The study also has estimates of total annual qualified rehabilitation expenditures (QRE) for federal historic projects for FY 1999-2005. Total annual QRE started at $945 million in FY 1999, peaked at $2.9 billion in FY 2003, dropped to $2.2 billion in FY 2004, and recovered to $2.5 billion in FY 2005.

Ingrassia said the total annual QRE amount is expected to continue rising. She also noted the historical average annual ratio nationally of total QRE to TDC during FY 1999-2004 has been 76 percent.

State, Local Activity

The study also provides, for the 10 leading states in four categories, estimates of the volume of construction and permanent jobs, taxes, and GSP generated by federal historic credit projects in the 15-month period ending December 31, 2005. Missouri led in all categories, with 5,995 construction and 7,562 permanent jobs, $40.6 million in taxes, and $566 million in GSP. Pennsylvania and Virginia were No. 2 and 3 in all four categories.

The study, actually a series of slides and charts, also has total TDC for federal historic credit projects for the 15-month periods ending December 31, 2005, and September 30, 2004, for each of 44 states and for the 15 most active cities. In the most recent period, Missouri was No. 1 at $843 million, followed by Pennsylvania, Virginia, Massachusetts, and North Carolina.

Kansas City, Mo. led the top 15 cities in TDC in the most recent time frame, at $395 million, followed by Philadelphia, St. Louis, Chicago, and Durham, N.C. Milwaukee was No. 1 in FY 2003-04 at $411 million.

Conclusions

In addition to showing the large economic benefits generated nationally by the federal historic credit, Ingrassia said the study also appears to show that historic credit activity has been greater in states with a larger state historic tax credit (e.g., Rhode Island, Missouri, Virginia), and in states with a strong and effective state historic preservation office (e.g., California, Pennsylvania, Ohio). Strong SHPOs, she explained, assist developers in getting their projects approved by helping them perfect and strengthen their applications.

Ingrassia indicated developers might use the study’s findings to help gain local approvals for new historic projects, by citing the positive economic impact generated by the historic credit in general, and by their own project specifically for the local community.