Economic development strategies work best when they are designed to capitalize on a demographic or economic trend. The data is clear that the 77 M Millennial generation in America strives to live in an urban mixed use environment where they can walk or take a quick Uber or scooter ride to where they want to go. The data is also clear that companies looking to grow cannot do so without the engagement of the Millennials to be the key to their workforce growth. In fact, with China’s One Child Policy creating a huge population drop, America’s Millennial workforce is a major, global strategic economic advantage for corporate site location projects.
Communities seeking an advantage for corporate site location projects will focus in 2019 on redeveloping their communities historic structures not just to do some quality placemaking but to recruit developments and buildings into residential and office projects attractive to this Millennial generation. In fact, rural communities, which are struggling with population losses, are focused on the redevelopment of their historic structures to build a new generation of residential, office and arts facilities designed to attract a younger generation.
Historic preservation increases land values and enhances the regional economy. Historic Preservation helped create more than 2 million jobs and $90 billion in investment. Rehab construction creates 50 percent more jobs than new build construction. Historic preservation is a tool local communities can choose to revive neighborhoods, enhance environmental quality and reduce infrastructure costs by promoting development in existing areas rather than sprawling out. It is estimated that historic preservation projects save 50-80 percent in infrastructure costs compared to new suburban development. A 2011 Economic Impact Study of the Ohio Historic Tax Preservation Tax Credit illustrated strong benefits of the program for the Buckeye state. The study showed for every $1 million in tax credit allocated by the state $8 million of construction spending and 80 construction jobs are created. More importantly, $32 million in total economic impact is created by this $1 million in state investment.
A critical component for using historic preservation to impact workforce development is the use of the federal and state historic preservation tax credit programs. According to the National Trust for Historic Preservation, thirty-one states in the country have adopted laws creating credits against state taxes to provide incentives for the appropriate rehabilitation of historic buildings. In most cases these tax credits take the form of the very successful federal income tax credit for historic rehabilitation contained in Section 47 of the Internal Revenue Code. is a critical step to redeveloping Downtown. The federal Historic Preservation Tax Credit proves a 20 percent tax credit for the rehab of certified historic structures, 10 percent federal tax credit for non-historic structures. The state of Ohio offers a 25 percent state tax credit for historic structures with a special $5M Ohio cap. The program is applicable to financial institutions, foreign and domestic insurance premiums or individual income taxes, and used against liability or refunded up to $3 million in one year. In Ohio, the Historic Preservation Tax Credit application process begins with Historic Certification and applications are accepted generally twice a year for a competitive award from the Ohio Development Services Agency.
States like Ohio and Michigan permit their municipal corporations to create downtown redevelopment districts (DRDs) and innovation districts to promote rehab of historic buildings if a city has a certified historic structure, creates a district as large as 10 contiguous acres around that historic structure and develops a DRD economic development plan. DRDs act like a super Tax Increment Financing program where the growth in property tax around a certified historic structure can be collected to fund the rehabilitation of the historic structure, fund infrastructure, create high-tech innovation districts or fund local historic preservation or economic development groups. The DRD process begins with the identification of a certified historic structure or undertakes the process of gaining that historic certification. DRD districts must have an economic development plan to outline the DRD district and its economic benefits to the community based upon market research and infrastructure development. Next, the municipality must adopt a DRD financial model addressing the building, infrastructure and operational costs through a tax exemption up to 70% of the increased value of real property in the DRD providing the collection of service payments in lieu of taxes from the property owners and voluntary redevelopment charges assessed to property owners within the DRD- both of which may be levied without property owner approval. In Ohio, DRDs are created through a city ordinance describing the area included in the district, the number of years the DRD will exist, the economic development plan, ID of the historic building (s) in the district, potential designation of an innovation district within a DRD, establishment of a special fund for the deposit and dispersal of service payments and voluntary redevelopment charges, and acknowledgement that city must file an annual DRD report to the Ohio Development Services Agency. Finally, in Ohio, following passage of a DRD ordinance, municipalities should enter into various agreements with building owners, school board and other funders of the project.
Whether through the use of historic preservation tax credits, DRDs or other tools, historic preservation will be a prime economic development tool in the coming year.