Louisiana real estate developers and preservationists are often at odds, fighting over whether real estate projects comply with local laws and preserve the architectural charm of old neighborhoods. This month, they found common cause over popular state tax breaks for the restoration of struggling historic buildings.
The Louisiana Historic Building Restoration Tax Credit Program reimburses property owners up to 25% of the cost of renovating structures in downtown development and cultural districts and up to 35% in rural areas. Since its creation in 2002, the program has been used to restore approximately 1,800 structures across the state, including landmarks such as the World Trade Center in New Orleans, now a Four Seasons hotel. Ta.
Gov. Jeff Landry’s Louisiana Forward Tax Plan, announced last month, streamlines the state’s tax system through a flat tax on corporate and personal income and eliminates the historic tax credit program and dozens of other tax deductions, at least for now. I’m asking you to do something. , deductions and credits.
Gov. Jeff Landry speaks during a bill signing Tuesday, Oct. 1, 2024, at LSU’s Memorial Hall.
Overall, the reforms would eliminate hundreds of millions of dollars in tax benefits. Landry and his supporters argue that ending these disruptions, along with other reforms, will make the state more competitive, create jobs and boost the economy. Now, as the state Legislature prepares to take up the plan in a special session starting Wednesday, interest groups, including an odd pair of forced real estate developers and preservationists, are organizing to keep the incentives in place. . Oppose ending historic tax credit programs.
The Louisiana Historic Tax Credit Coalition, an advocacy group founded more than a decade ago and comprised of more than 100 developers, preservation organizations, attorneys, and architects, is an advocate of the proposed changes and what they mean for the industry. We have shared information about what to do.
Developers participating in the group believe that once the program ends, which is scheduled to end on June 30, 2025, recovery will already be difficult due to soaring insurance premiums, high interest rates, and a difficult financing environment. They claim that the project will disappear.
Additionally, they say historic restoration credits have been critical in converting old, distressed buildings back into commercial spaces, thereby helping to revitalize downtown cities and small town main streets.
Developer Dyke Nelson used the program to renovate seven historic buildings, including the Baton Rouge power station and 440 on Third, a municipal complex in Lafayette. He said renovating old buildings is typically more expensive than building new ones, so financing is important if Louisiana residents want to revitalize historic districts.
Tuesday, July 18, 2023, at the Rivermark Center in downtown Baton Rouge, Louisiana.
“This is a huge resource that allows us to get into buildings that we wouldn’t otherwise be able to renovate,” Nelson said. “If this plan goes through, it will take the state back 30 years.”
Sandra Stocks, advocacy chair for the Louisiana Landmarks Association, said Louisiana has a vast stock of historic buildings, and the credits have had an “amazing impact on preserving and restoring them.” “There is,” he said.
Louisiana Secretary of Revenue Richard Nelson, the author of the tax plan, said the administration is not specifically opposed to the Historic Recovery Tax Credit, but the program is special as part of a broader tax reform plan. He said he didn’t deserve to be treated.
“If you make exceptions for selective historic buildings, you’re going to have to make exceptions for everyone,” Nelson said. “We felt it was better to look at everything holistically.”
costs and benefits
The push to preserve the historic tax credit comes as lawmakers and the Landry administration hear from numerous lobbyists and interest groups who argue to preserve the incentives that benefit them.
Advocates for the state’s film industry have been the loudest, calling for the preservation of the state’s film tax credit. Earlier this week, Shreveport Mayor Tom Arsenault visited Baton Rouge with hip-hop artist 50 Cent, who plans to build G-Unit, a movie studio and entertainment complex in Shreveport, to explore direct business deals. advocated for incentives to support. Governor Arsenault said. At the same time, Lt. Gov. Billy Nungesser is advocating for a tax program to help promote tourism in the state.
Mr. Landry, Mr. Nelson and other tax reform advocates are all saying the same thing: states have too many incentives, and the tax system is outdated and outdated. In an op-ed published in the Times-Picayune and the Advocate last month, Landry said the reforms are needed to avoid imposing budget shortfalls on residents through tax increases.
“Every time we encounter a budget shortfall, special interests flock to Capitol Hill while hardworking families bear the brunt of the economic burden. For too long, have we turned a blind eye? , have tried to patch things up with temporary fixes and gimmicks,” Landry said. Said. “We know we need both structural and cultural change.”
Nelson said if the flat tax proposal passes this month, the administration could reconsider individual incentive programs during next year’s regular session.
District 89 at the Shreveport, Louisiana Realtor Riding with the Brand Tour stop held at the Shreveport Convention Center on Tuesday, September 19, 2023 in Shreveport, Louisiana. Louisiana state representative and gubernatorial candidate Richard Nelson will speak.
The incentives are large compared to the state’s annual budget of $47 billion. The state’s five largest tax incentive programs, including the Historic Recovery Credit, cost the state more than $423 million in 2022, according to a study by the Louisiana Department of Revenue.
The Film Investor Tax Credit, which provided $146 million, and the Quality Jobs Program, which provided $143 million, were the largest incentives. The historic reconstruction credit ranked as the third most expensive at $58 million. This year’s cost will be nearly $86 million.
The study says incentives not only impact the state budget but also have a positive effect on the state economy. For every dollar of historic building tax credits provided, the state’s economy grows by nearly 25 cents.
But Nelson said the bigger issue is the need for a streamlined and simplified system that makes the state more competitive and attractive to businesses.
“The most important thing in real estate development is getting tenants, but vacancy rates are very high because there is no business to fill buildings,” he said. “The goal is to strengthen our competitiveness and attract businesses here.”
create a sense of place
Supporters of preserving the historic tax credit say the state’s analysis doesn’t take into account the spinoff effects of converting old, vacant buildings back into commercial use or the impact it would have on surrounding neighborhoods. They include neighborhoods like Frere Street, which transformed in the post-Katrina era from a rundown section of old strip malls into a trendy shopping and dining district, and Dyke Nelson’s 440 on Third apartment building in Baton Rouge. An example is given. The first supermarket to open downtown in the state capital in decades.
“Restoring historic buildings creates something that will last for generations,” said state Rep. Michael Echols (R-Monroe), a real estate developer who has used the credits on more than a dozen projects. Ta. “Old buildings create the atmosphere of a place.”
Echols and others cite a 2017 study prepared by Place Economics, a Washington, D.C.-based consulting firm, for Lt. Gov. Billy Nungesser’s office that estimated the state would receive approximately $2.9 billion through the state’s historic tax credit project. It has been revealed that the company has been invested in.
The Louisiana program is modeled after a federal program created by the Reagan administration in 1986 that allows for reimbursement of up to 20% of eligible expenses. Most developers aim to combine state and federal credits. Currently, 38 states offer Historic Recovery Tax Credits. More than half are offering at least the same amount as Louisiana, and other states, including Texas, have modeled their programs on Louisiana’s program.
“The government wants to stay competitive with other states,” said Tom Leonhardt, CEO of HRI, which has used the program for more than a third of its $2 billion worth of projects in Louisiana. “I can understand why people are paying attention to this system for a reason.” . “Well, all the states that they want to be competitive in offer credits like ours.”
“Fill the gap”
Developers say the tax breaks are needed in part because historic projects typically cost more than new construction and can take longer to complete. Additionally, banks these days, even if they are willing, will only finance about 60% of the cost of historic renovation projects.
Some say it’s important to calculate the spin-off effects of renovating historic buildings. Attorney Richard Ross is using the tax credits to build new buildings, including the Fidelity Bank building on Carondelet Street and the former Morris FX Jeff School, now an apartment complex on North Rendon Street. Renovated several buildings in Orleans.
He said he spent $1 million to buy the former school from the city of New Orleans and $8 million to renovate the building and turn it into 26 apartments. In addition to the renovation costs, Ross calculated that he paid $600,000 in state payroll, income and sales taxes for the renovations, and the property currently generates about $120,000 in local property taxes annually. It states that
He received $1.4 million in state historic tax credits.
“To understand the benefits of these projects and the programs that enable them, we need to look at the big picture,” he said.
