Many underutilized or abandoned commercial buildings, mills, factories and public buildings, such as schools, offer great potential for renovation and adaptive reuse as housing, creative new business locations, recreation centers and other purposes. Rehabilitating these buildings and bringing them up to modern code standards costs at least 25 percent more than building a new structure on open green space.

This session, the Legislature passed LD 262: An Act to Amend the Credit for Rehabilitation of Historic Properties. I sponsored this bill because it improves and expands the State Historic Tax Credit enacted in 1999, strengthening it as an investment tool based on advice from developers and historic preservation experts.

The bill makes several significant changes to the current tax credit program. It removes the cap on project size above the current $100,000 limit – a limit that would not include mills and other larger structures. The tax credit will now be transferable to people or businesses living in other states willing to invest in a Maine project. The rate of the credit will increase to 25 percent of the cost of the project. Downtown building owners with smaller projects ($50,000 to $250,000), too small for the federal tax credits, would be eligible to participate in the program. And the credit is fully refundable.

A recent study pointed out that the sales values per square foot for properties in downtowns that are largely restored (Rockland and Westbrook) are more than double those in downtowns that have not had as much restoration investment (Lewiston and Biddeford). Higher sales values translate to higher revenues for the community, and they reflect higher levels of economic activity.

In the absence of the revisions provided by the bill, historic preservation investment in Maine would continue to limp along at the same modest levels as has been the case for two decades. Maine’s program operates well below the levels attained in other states that have far fewer historic buildings than Maine. Those other states have found that sweetening the terms of the state historic tax credit can jump-start new investments. For example, Rhode Island changed its laws in 2002, resulting in an increase from five projects to 32 in one year, representing $485 million in investments. Iowa made changes in 2001, and saw annual activity increase from $7 million in historic investment to $25 million.

LD 262, when fully implemented, could stimulate an average of 25 projects a year at a total rehab cost of $65 million. Many communities could share the benefit of new investment over time. The cost to the state of the program would be approximately $12 million per year. Seen strictly as a job generation bill, the new tax credit program could create a net increase of up to 800 full-time jobs in Maine in future years. Compared with other state-funded job creation initiatives, adding this many jobs to Maine’s economy would be a bargain, resulting in new income, sales and property tax revenues as well as stimulating additional development in adjacent buildings, streets and neighborhoods.

As noted in the recent Brookings Report on Maine’s future economy, “Historic preservation, in a state such as Maine that has such a large inventory of historic buildings, is an important tool for revitalization. In addition to a number of federal and state programs, historic preservation can be a financing vehicle that brings redevelopment money into traditional communities.”

Rep. Ted Koffman, D-Bar Harbor, represents District 35 in the Maine House of Representatives.