Many Maine projects have been helped by the program the U.S. House tax bill would eliminate.

A tax credit program that has funneled millions of dollars into Maine’s economy faces an uncertain future in the congressional bills that are aimed at fundamentally reshaping American tax policy.

While the Senate Finance Committee reinstated a version of the federal Historic Preservation Tax Credit – it had been scaled back by half initially – the tax credit, which became part of the federal tax code three decades ago, is among the tax credits and deductions that have been eliminated in the Tax Cuts and Jobs Act that the House of Representatives approved 227-205, mostly along party lines, last week.

That’s not the only difference that would have to be reconciled with the House version, if the Senate is able to pass its plan. The Republican majority in the Senate is much narrower, and several Republicans are expressing concern over some provisions in the bill, including the repeal of the individual mandate in the Affordable Care Act.

If the tax credit program is cut, officials in historic preservation and economic development say they will lose a program that offers a key incentive for putting old, often neglected buildings back in service, that helps preserve the historic character of communities across Maine, and that pays for itself.

ECONOMIC BOOST

The landscape of central Maine is dotted with projects – in all, more than a dozen – that were completed using the tax credits. They include the Cony Flatiron project in Augusta, the Granite Works Office in Hallowell, the Music Hall Block in Farmington and the Milliken Block in Waterville. The buildings have either been certified historic and are listed on the National Register of Historic Places, or they are deemed to be architecturally contributing to a National Register district.

“It’s been an economic development boon to our cities and to buildings that need an infusion of help,” said Greg Paxton, executive director of Maine Preservation. Maine Preservation’s mission is to promote and preserve historic buildings and places in the state.

“This has been very important to preserving the physical historic record of the state,” said Michael Johnson, rehabilitation tax incentives coordinator for the Maine Historic Preservation Commission.

The federal tax credit program returns 20 percent of the cost of qualified rehabilitation expenses to a property owner. That program is often coupled with the state Historic Preservation Tax Credit program, which returns 25 percent of qualified expenses to the building owner.

“More than $400 million has been spent revitalizing buildings across the state in our larger cities and in our smallest towns,” Paxton said.

The buildings have several things in common. They are old, and often they have been standing vacant and abandoned, sometimes for decades. The owners, he said, can’t afford to take on rehabilitation without some aid.

“The interesting thing is that they cause economic development to happen first before they are paid out,” Paxton said.

All the rehabilitation work must be completed and the buildings have to be in service before the tax credits are paid. By that time, Paxton said, the federal government has already received more in tax revenue than it has expended, and it generates $1.20 in new taxes for every $1 expended in tax credits, according to an analysis by the National Park Service, which administers the federal program.

From 1977 to 2016, the tax credit leveraged more than $84 billion in rehabilitation investment nationally, and created more than 2.44 million jobs.

Maine updated its Historic Preservation Tax Credit program in 2008.

Since then, Johnson said, $334 million has been spent on historic preservation projects. The 20 percent federal credit returned $54 million to developers and the state credit returned $63 million. The combined tax credits have supported 5,300 construction jobs, he said, and 1,300 permanent jobs were created in or relocated to these historic buildings.

A THREAT TO THEATER PROJECT

In Gardiner, supporters of the project to renovate the upper theater at the Johnson Hall Performing Arts Center are about midway through fundraising to reach the $4.3 million target for funds needed to complete the project.

As part of the kickoff for the campaign in September 2016, Kennebec Savings Bank agreed to acquire the project’s tax credits, a move that’s expected to generate about $1.5 million, in addition to donating $100,000 outright.

“If we lose the federal tax credit, there’s a good chance we could lose the state tax credit,” said Patrick Wright, executive director of Gardiner Main Street. The Main Street America program focuses on revitalizing older and historic commercial districts.

That’s a concern for the theater project, Wright said, but also for the historic block of buildings at 149-167 Water St. that Gardiner Main Street acquired from Camden National Bank just over a year ago, with a plan to develop the vacant buildings into retail and residential space using a variety of financing, including historic preservation tax credits.

“It shouldn’t be that hard of a leap for anyone to understand that buildings that are 150 years old are more expensive to rehab,” Wright said.

“As we have seen in looking at rehab possibilities on Water Street, with our current market rates, even with the historic tax credits, it’s a challenge to make large redevelopment projects work. Losing the historic tax credits would significantly hamper that effort,” Wright said.

Gardiner officials plan to weigh in later this month. At the Nov. 29 City Council meeting, elected officials will consider voting on a resolution urging President Trump and Congress to retain the tax credit program.

OLDER BUILDINGS

Developers Collaborative is one of the companies in Maine that takes on building renovations using historic preservation tax credits; in fact, it has done most of them.

“(The program) means more for Maine than a lot of states for a couple of reasons,” said Kevin Bunker, one of the developers at Developers Collaborative. “We have used the credit a lot and we have a lot of historic buildings.”

Maine has one of the strongest state historic tax credit programs in the country, and pairing that up with the federal program means a lot of projects can be done, he said.

Developers Collaborative has completed projects throughout the state, using various kinds of tax credits as part of the financing package, including the Hodgkin School Apartments in Augusta and Gilman Place in Waterville, which are located in town centers on existing infrastructure and are within walking distance to local services.

Bunker said Developers Collaborative has more of the historic renovations than other companies.

If the historic preservation tax credit program ends, he said, that part of the firm’s business will come to a screeching halt. There are no other programs that can help finance the redevelopment of historic buildings.

“We’re not going to be able to save a lot of old schools or great old buildings,” he said.

It’s a big part of what Developers Collaborative does, he said, but no one will be laid off as a result.

NOT FINAL YET

Historic preservationists and developers have been corralling support nationally to try to save the program.

Maine’s congressional delegation has in the past supported preserving and expanding the program.

Rep. Bruce Poliquin, who represents Maine’s 2nd District, has supported it in the past, but when he cast his vote on the tax bill last week, he voted with his party.

Following that vote, Brendan Conley, his press secretary, said Poliquin will be pushing for the credit to be included in the final proposal.

Sen. Susan Collins, R-Maine, said late last week she’ll continue her support for the program. She introduced bipartisan legislation this year to encourage building reuse and redevelopment in small and rural communities, and make renovating community projects like theaters and schools easier while maximizing the impact of state historic tax credits. The legislation would also extend the eligibility of historic properties to use the credit by updating program requirements to reflect current industry practices.

“The Historic Tax Credit is a proven tool for revitalizing communities and catalyzing economic development in Maine and across the nation. Since 2008, it has leveraged approximately $350 million in private investment in our state alone,” Collins said,

“I am pleased that the modified Senate tax proposal would retain the full 20 percent credit for certified historic structures, and I will continue to work with my colleagues to protect this tax provision that is so important to Maine.”