By TED CARTER
Restorations and conversions of historic buildings across Mississippi stalled when the state ran out of historic tax credits are back in motion with the Legislature’s $60 million replenishment of the credits.
The $60 million allocation is for five years and limits the state credits to $12 million annually. Unlike the initial $60 million allocation in 2006, the new round of credits excludes non-revenue producing residential properties.
Restoring the money comes as a relief to the Mississippi Heritage Trust, which in October listed the preservation credits among the state’s 10 Most Endangered Places along with such historic structures as the French Hotel in Senatobia, Margaret’s Grocery in Vicksburg and Phoenix Naval Stores Office in Gulfport.
“Certainly, we are very glad the Legislature funded the historic tax credits,” said Lolly Barnes, Heritage Trust executive director, in an interview last week.
Barnes noted the new allocation will allow developers to move forward with commercial projects such as conversion of the vacant Eastland Federal Courthouse in downtown Jackson to mixed-use and the conversion of the former Veterans Hospital in Gulfport to a resort hotel and mixed-use development.
Loss of the credits in 2015 put a $2.7 million gap in the equity for the Gulfport project just as the construction loan was closing, said co-developer Neal Juneau in an interview last fall.
Property owners and developers whose projects qualify for the credits can use them to defray 25 percent of the cost, primarily for construction, of a historic preservation. They become especially attractive when combined with the 20 percent federal historic tax credits.
Hayes Dent, principal of Dent Strategies, helped lobby for the new credits. He said the state will get a strong economic return on its investment. But he expects the $12 million cap on yearly allocations to destabilize overall restoration efforts, considering the multi-year undertaking most restorations involve.
“It is hard for me in my mind to grasp why they want to limit that,” Dent said in an interview.
Legislators were unwilling to say why they insisted on limiting the allocations, according to Dent. He agreed they may have wanted to ensure the credits would last for their five-year authorization.
“We hope we can continue to work with legislators and educate them on the importance of historic tax credits and how they can grow the economy” he said, citing research that shows Mississippi gets back $1.75for each dollar it invests in historic preservation.
The state’s $60 million credits generated $269 million in building rehab expenditures since their inception in 2006 and a total economic output of $432.5 million, according to an economic impact report prepared by Mississippi State University’s Stennis Institute of Government and Community Development.
While Dent figures a number of projects are already certified for the credits and will soon begin taking them, he said he thinks the amount of credits available will be sufficient to allow new commercial projects to move into the pipeline.
Recipients do not get the credits until the project is completed, but credits are designated as eligibility milestones are met.
Like Dent, Jim Woodrick, director of historic preservation for the Mississippi Department of Archives and History, expects the tax credit allocation is sufficient to allow new projects to move from the drawing boards to actual construction. “Of course there will be room,” he said.
The last $60 million credit lasted 10 years, he noted. So it “does not make sense that the new cap” would be reached in five years, Woodrick added.
The Hertz Investment Group plans to promptly seek certification for preservation credits that are a key to converting downtown Jackson’s Regions Building, once the home of Deposit Guaranty, to apartments. The project is not yet certified, but “we absolutely are working on that,” said Jim Ingram, Hertz executive vice president and chief investment officer.
Barnes, the Heritage Trust chief, said the decision to keep non-revenue producing residential restorations from eligibly diminishes an holistic approach to preserving Mississippi’s past. “It’s very disappointing because we need to look at our historic communities as a whole,” she said. “That was the one incentive we had to offer people who buy and take on these historic homes.”
Dent said he expects the exclusion of single-family dwellings from the historic tax credits will have particular impacts in such historic cities as Vicksburg and Natchez.