Loss of tax incentives would be ‘devastating’ for Dayton

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Loss of tax incentives would be ‘devastating’ for Dayton

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John Riazzi, principal with Riazzi Asset Management, is seen here in January inside the formerly vacant Dayton Power & Light facility at 617 E. Third St., which has been transformed into offices, event space and other amenities. Riazzi said the project would not have moved forward without federal historic tax credits. CORNELIUS FROLIK / STAFF

A growing chorus of local developers, preservationists and elected leaders are calling on U.S. lawmakers to preserve a federal tax incentive program that has helped redevelop dozens of historic and iconic buildings in Dayton, resulting in an estimated $270 million in investment.

Federal historic tax credits — which are at risk of being reduced or eliminated as part of the GOP’s sweeping tax reform proposals — provides tax credits that close financing gaps to revive historically significant properties.

Since 1981, the program has made about 64 tax credit awards that have helped redevelop functionally obsolete and vacant buildings in Dayton that otherwise had little to no hope of being revived, the city said.

In an interview this week with CNBC, Dayton Mayor Nan Whaley said for mid-sized cities like Dayton, historic tax credits are not one avenue — they are the only avenue — to rehab many outdated and empty buildings.

“This would stop what we are trying to do,” Whaley told this newspaper.

In November, the Dayton City Commission approved an informal resolution urging the Trump Administration and Congress to continue the federal historic tax credit program, which dates back to the Reagan Administration.

The resolution was sent to U.S. Sens. Sherrod Brown and Rob Portman and U.S. Rep. Mike Turner, R-Dayton.

Supporters of the program across Ohio and the nation have been sending letters and calling their lawmakers urging them to protect the incentive.

The GOP’s tax reform proposals seek to simplify the tax code and supporters say they will provide significant and important tax cuts for many Americans and businesses.

But the House bill passed on Nov. 16 would eliminate the federal historic tax credit, and a Senate bill reduces the value of the credit, according to the National Trust for Historic Preservation.

The federal program currently allows developers who restore historic buildings to get a 20 percent credit on qualified restoration expenses.

Dayton is home to a significant number of aging and functionally obsolete buildings that sit empty or underutilized and, like so many “white elephants” in urban areas, they are not financially feasible to restore and are expensive to maintain or demolish, according to Dayton officials and developers.

The Dayton Daily News reported this week that downtown Dayton’s office vacancy rate is one the highest in the nation, according to real estate firm Colliers International.

RELATED: Dayton area office vacancy remains high

According to the city, federal tax credits helped rehab or develop the Biltmore Hotel, the Cannery Loft Apartments, the downtown Dayton YMCA, the old post office, the Hawthorne School Apartments, the Delco Lofts, the Dayton Arcade and the Salem and Grand building and plenty of other structures.

Projects that have benefited from the credits have invested about $270 million in the city, and the program “plugged important financing gaps” that would have prevented the projects from moving forward, the city said.

Cities of all sizes across the state and nation have projects that were supported by the program. Rust Belt cities, with aging and decaying former industrial and commercial facilities, have especially benefited from the credits.

In downtown Dayton alone, historic tax credits are key funding sources for six current projects and many more in pre-development, representing more than $200 million in investment, according to the Downtown Dayton Partnership.

The partnership has urged citizens to contact lawmakers to protect the program.

Adaptive reuse projects are more expensive than building new structures, and the credits provide a way to tap into a funding source that reduces the extra costs of renovation, said Dayton City Manager Shelley Dickstein.

Losing the financing tool would put urban areas with aging buildings at a disadvantage compared to underdeveloped “greenfield” sites, said Jason Woodard, principal of Woodard Development and one of the developers of the Water Street District.

“Historic buildings with significant character likely could not be restored, which is unfortunate aesthetically if not economically,” said Woodard, who used federal tax credits to help create the Delco Lofts by Fifth Third Field.

Building new is not better but is cheaper, and demolishing the old and obsolete structures to make way for new ones also can be very expensive and cost prohibitive, officials said.

The historic tax credit program is a tax expenditure with a public cost: It cost the U.S. Treasury about $25.2 billion between 1978 to 2016, according to a report by Rutgers University and the National Park Service.

During that period, however, that cost supported $131.8 billion in historic renovation investments, generating about 2.5 million new jobs and billions of dollars in direct and secondary economic gains, the report states.

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