Friday, March 24, 2006

Historic Preservation as an Economic Engine

Here in Rhode Island, it was recently announced that a major development was going to built in Providence thanks in no small part to the availability of historic preservation tax credits.

A Baltimore-based developer plans to transform a string of mill buildings along the Woonasquatucket River into a $333-million neighborhood. Dubbed the American Locomotive Works, it is the largest single investment in Providence since the Providence Place mall. . .

Struever's first Valley Street project, the Rising Sun Mills, is marked by a glitzy sign with 9-foot high illuminated letters. The company also is developing The Plant on Valley Street and Royal Mills at Riverpoint in West Warwick. The firm's total investment in Rhode Island is a half-billion dollars, not including its proposed $138-million project to develop the Heritage Harbor Museum at the former Narragansett Electric Co. power plant in Providence.

At a news conference today with Governor Carcieri and Mayor David N. Cicilline, the company plans to announce its intentions to refurbish 26 historic buildings on the former U.S. Rubber, American Locomotive Works and Nicholson File sites. The project also includes 380,000 square feet of new construction.

Struever has partnered with Rhode Island's prominent Licht family, which controls most of the land for the project. The developers plan to use historic tax credits and seek $41 million in public subsidies for infrastructure improvements.

As for the historical importance of the buildings being renovated:

THE OLDEST BUILDING on the ALCO site was built in 1885 for the Rhode Island Locomotive Works, which eventually was purchased by American Locomotive Works. At one point, the company contracted with a French firm to build the luxury Berliet automobile. Struever hopes to resurrect a test track that circled the building and create a pedestrian path.

The complex was sold to a rubber manufacturer in 1896 and eventually became U.S. Rubber Co., which made military balloons during World War I and golf balls, bath caps and tires. During World War II, the company employed 3,200 people. Licht Properties bought it in 1975.

Licht bought the Nicholson File Co. mill complex in 1960. The first building on that site was built in 1865 and grew as the company became the most successful maker of machine-made files, at one point employing 1,200 people in 1916. It closed in 1958.

And there was this ironic twist:

"I'm excited to see these old, old historic buildings [that] had a legacy of one type being now converted and being the future of not only the city, but the state," Governor Carcieri said.

Carcieri, who has threatened to cut back the state's historic tax-credit program, said ALCO was the perfect, neighborhood-transforming use of the credits. Struever will be using $30 million in state historic tax credits.

Carcieri initially supported the historic tax-credit, but real-world budget shortfalls have caused him to re-evaluate his stance:
In 2001, the state increased the amount of income tax credits developers can take for revitalizing historic properties to 30 percent of the total value of the project. Spurred by the generous incentive, developers -- many from across the country -- flocked to Rhode Island, unveiling plan after plan to renovate old mills and historic buildings statewide.

It adds up to about $ 840 million worth of proposed investment that will create condos, apartments, shops, restaurants -- and jobs -- from West Warwick to the Olneyville section of Providence. In return, the developers expect to collect about $ 148 million worth of historic preservation tax credits from the state by 2007, according to the state budget office.

Since 2004, state legislators have warned about the impact the tax credits could have on state revenue. A one-year moratorium on the program was proposed by legislators in 2004.

Developers said it would stall development. Governor Carcieri called it "short-sighted" and predicted the number of people applying for tax credits would eventually slow down. The moratorium wasn't approved. The number of developers applying for credits continued to increase.

Last month, Governor Carcieri suggested reducing the state's historic tax credit, which is one of the most generous in the nation. The tax credit program is expected to require the state to lose $ 84.6 million in income during this fiscal year. The state budget office projects it will cost the state $ 260 million in lost tax revenue by 2011 -- much more than the state expected to shell out for the program. Although Carcieri hasn't yet introduced legislation to change the historic tax credit program, the state budget office is analyzing it.

Republican Carcieri is being opposed by the Democrat dominated legislature, but in the past they have been reluctant to find cuts from some of Rhode Island's bloated government programs to "pay for" such things as the historic tax-credit. Like many others, I support the current level of the historic tax-credit and think that instead of looking to cut this economic engine, the Governor should look towards reducing spending in other areas (which he has proposed and was rewarded with a pummelling) and the Legislature should--in good faith--assist him. But don't count on it during an election year.

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