Historic preservation makes Twin Cities healthy, wealthy and wise

When I met up with a friend I hadn’t seen in a while, I was amazed at her appearance. She looked healthier, brighter — not more beautiful — just better. After I poured on the compliments, she confided that she’d had some work done by Dr. So-and-So, a highly regarded plastic surgeon. That’s when I realized that the best makeovers don’t transform a person into something she’s not — my friend will never look like Pamela Anderson or Michelle Pfeiffer — but subtly enhance the old face that’s already there.

And so it goes for cities. Historic preservation, a movement that once confined itself to saving national monuments, is now brightening up Minneapolis, St. Paul and other cities around the nation. Keeping the old along with the new won’t make our towns into Barcelona or Florence, but, in the end, produces a better and subtly more interesting us.

Old buildings weren’t always in fashion. Time was, we thought that anything beyond a certain vintage should be junked to make way for “progress.” Such was the rationale behind urban renewal, whose wrecking balls took out huge swaths of character-rich neighborhoods and substituted apartment and office boxes that made the landscape as bland-looking as a face that’s received too many Botox injections.

In reaction, city planners, developers, neighborhood activists and others have turned to the preservation and protection of older buildings. Classic preservation first got underway in the 19th century when advocates devoted themselves to saving historic landmarks and monuments, for example, Philadelphia’s Free Quaker Meeting House.

Another direction

Jane Jacobs, author of “Death and Life of Great American Cities,” however, sent preservation in another direction. Old buildings, she argued, were necessary to give a neighborhood variety and texture and economic vitality: 

Cities need old buildings so badly it is probably impossible for vigorous streets and districts to grow without them. … Chain stores, chain restaurants and banks go into new construction. But neighborhood bars, foreign restaurants and pawnshops go into older buildings. … Well-subsidized opera and art museums often go into new buildings. But the unformalized feeders of the arts–studios, galleries, stores for musical instruments and art supplies, backrooms where the low earning power of a seat and a table can absorb uneconomic discussions–these go into old buildings.

Preservation began to mean more than saving a building from being torn down. A real victory would be to repurpose it. “When a building is being used, it automatically is preserved,” says Will O’Keefe, director of communications for the Preservation Alliance of Minnesota, a nonprofit.

Trouble was and is, many of those charming (and uncharming) old piles were unusable as apartments or offices without expensive renovations that included new heating and air-conditioning, mold remediation, updated electrical systems and so on. Jacobs to the contrary notwithstanding, those fix-ups could cost a lot more than new construction. So to bridge the gap, Congress created the historic preservation tax credit. In 1976, the federal government rolled out the program which allowed building owners to subtract directly from their tax bill a credit equal to 20 percent of the cost of rehabilitating a historic building.

To qualify, a building had to be in a designated historic district like the French Quarter in New Orleans (and fit in with its distinctive architecture — a Home Depot in the French Quarter wouldn’t qualify); or the building must be listed on the National Register of Historic Places. Speaking in Detroit the other day, U.S. Secretary of the Interior Ken Salazar said that over the years, the credit had been involved in the renovation 39,000 historic buildings, which had encouraged $66 billion in private investment and created 2.2 million jobs.

In 2010, the Minnesota Legislature gave the redevelopment of historic buildings a further boost by adopting its own historic preservation tax credit. Property owners may receive 20 percent of qualifying expenses or a cash grant equal to 90 percent of the credit (18 percent) — and they can use it in conjunction with the federal credit. So conceivably, an owner could write off 40 percent of the cost of the renovation. Any building that qualifies for the federal program qualifies for the state program.

Minnesota tax credit

Minnesota’s tax credit by all accounts has been an unqualified success. The Legislature mandated an annual assessment of the program, and in the first year, analysts found that the 14 projects (seven in Hennepin County, four in Ramsey and three in St. Louis) generated $451 million in private spending, $152 million of it going for wages. The tax credit cost the state $49.1 million in revenues, but every dollar of that spawned $9.20 in economic activity.

A second report will be out in a few weeks. It added another 15 projects, four in Hennepin County, seven in Ramsey and four more scattered about the state. Data aren’t all in yet, but the expectation is that the return on the state’s investment will be higher.

Aside from the economic benefits, there’s the giant plus of having formerly empty or underutilized buildings now looking spiffy and doing business. Take Ford Center in Minneapolis, once an assembly plant and later the site of a Honeywell thermostat factory. The $40 million project required adding energy-efficient windows that maintained the building’s original checkerboard design, an overhaul of mechanical systems and creation of a new dramatic glass atrium for an entrance. It now houses HGA, the architectural firm that undertook the renovation, the Olson advertising agency and Caldrea, an “aromatherapeutic homekeeping” products company. Inside, the structure is bright and vastly spacious with ceilings that seem lofty as a cathedral’s. 

David Kelliher, director of public policy for the Minnesota Historical Society, says that many developers have remarked they could never have undertaken the projects without the tax credit. “I’ve heard that repeated at many ground-breakings and ribbon-cuttings,” he says. A 40 percent break, after all, is a pretty good incentive.

Challenging process

Jim Stolpestad agrees. As chairman of Exeter Realty, he transformed the Chittenden and Eastman Building, which started life as a furniture company in 1917, into the C & E Lofts. The 102-unit apartment project, located on University Avenue in St. Paul, cost $20 million and reaped state and federal tax credits of $6 million. The rental office opened in November, and the building is already 50 percent occupied, he says.

“The process was very challenging,” he adds. “It’s only for people with a lot of experience in real estate.” The St. Paul Heritage Preservation Commission, the Minnesota State Historic Preservation Office and the National Park Service all had to sign off on his plans; so there were a lot of meetings and plenty of paperwork.

“Sometimes there were conflicts,” he says, although not serious ones. He had to hire two consultants and a tax attorney to make sure that he was complying with the various regulations.

To raise cash, developers generally sell the tax credits to companies that need them, and doing that can be a hassle because, Stolpestad says, “there’s a short list of folks who want them.” Eventually, he found a willing customer in Sherwin-Williams. He has another project on deck, the old 3M Art Deco headquarters, but he adds, “I’m deciding now whether I want to go through all the brain damage.”  Still, getting the credits was vital to the project’s success, he says.

But it’s not clear that this point how long the credits will last. The state provision allowing the tax credits sunsets in 2015. Several groups, including the Preservation Alliance, are hoping that the lawmakers will make the credit permanent or at least extend it.

“Even the threat that it might disappear could put some developers and financing on the edge,” says Kelliher.