When Mike Rogers Jr. and Steve Willard decided to move their construction company downtown, they helped to breathe new life into a more than 40-year-old building.
Rogers, of Rogers & Willard builders, said they chose the old Turner Todd Motor Co. (Buick) building at 455 St. Louis St. because of what it used to be.
“You could look at it and tell at one time it used to be a really good building,” he said. “You had to have vision to see it.”
With the help of state and federal historic tax credits their vision has been transformed into a modern-looking, 40,000-square-foot office complex with off-street parking.
“It took up almost all of a city block and allowed us to have a parking lot we control,” Rogers explained.
The state’s Historic Preservation Tax Credit, which has been both praised and criticized, made the roughly $5 million investment possible, Rogers said.
“We wouldn’t have been able to do it without the tax credits,” Rogers said. “We probably would’ve stayed where we were.”
The state began offering a tax credit of up to 25 percent for the rehabilitation of historic commercial and residential properties in 2013. The law allowed for up to $20 million in credits per year, according to the Alabama Historical Commission website, meaning roughly $60 million worth of credits have been awarded for projects statewide in three years.
Under the current law the credits expired in 2015, but there are two legislative proposals — HB62 and SB230 — to extend the credits for an additional seven years.
The House version of the bill received a favorable report from the House Ways and Means Education Committee last week and will move on to the House floor. The House bill includes an amendment to suspend the credits in times when the budget is prorated or level funded, which is a cause for concern, according to Jacqulyn Kirkland, marketing and public relations manager for the Alabama Historical Commission.
“This amendment creates uncertainty concerning when the state would issue or honor credits, and it severely devalues the credits,” she wrote. “This could, in effect, cause bank loans to default and projects to result in bankruptcy.”
The Senate version is awaiting committee action.
While most of the tax credit projects have taken place in Birmingham and Mobile, one local legislator, State Sen. Trip Pittman of Fairhope, called the measure “corporate welfare” and said he wasn’t in favor of an extension.
He said the credits “give money to rich people” and could distort the market if expanded past the initial three-year period.
“You’ve got to be careful when you give incentives that you don’t continue them,” Pittman said.
While he said he wasn’t initially in favor of the credits three years ago, he realized downtown Mobile, among other places in the state, needed some help. Pittman reluctantly went along with the plan and stands by the three-year limit.
The limit allows for natural momentum to take over after a project is kickstarted by the initial credits. The continued momentum is a way to measure if the credits are actually getting the desired result.
“Subsidies need to expire,” Pittman said. “If they don’t, you don’t know if they work.”
Otherwise, he said, speculation kicks in and the value of the property becomes inflated. Pittman said an alternative is allowing the credits to sunset, then bringing them back in two or three years to help stymie speculation.
“I made a deal for three years,” he said. “It has worked … from the momentum it has inspired. Let’s let it expire.”
The issue facing the Legislature with the tax credits parallels a legislative debate on minimum wage last week, Pittman said.
“The bigger debate is, where are we going,” Pittman said. “Are we going to reward people who don’t need the reward, or are we going to give tax credits to small businesses to hire or raise salaries?”
The momentum Pittman mentioned appears evident along St. Louis Street. Rogers said the Buick Building has inspired others to make changes and move downtown. The building to the west has been painted to match its facade, while the building across the street is going to be home to an engineering firm, and the Mobile Area Chamber of Commerce is planning a business incubator down the block, Rogers said.
Rogers said those developments may have happened on their own, but the Buick Building investment could have been “the spark” of inspiration. He said he’s in favor of extending the credits.
“I think of all the programs I’ve been involved in related to government, this has been one of the most impactful,” he said. “Not only does it pay for itself by providing an increase in taxes, it removes blight, restores neighborhood pride and serves as an example to others about what can be done.”
Rogers said the extension of the credit would allow the momentum downtown Mobile has experienced over the past few years to continue.
An economic impact study commissioned by the Alabama Historical Commission performed by Novogradac & Company indicated the tax credits were a benefit to communities in the state.
According to the study, the tax credit program is responsible for 2,133 direct construction jobs and 1,373 operational-phase jobs. The projects using the credits are considered anchor tenants and create a “halo effect.”
The impact of the credits is impressive, the study found. Over a 20-year period, every dollar spent on the program will reap $3.90 in return and by 2019 the state should break even.
“It is our opinion that the Historic Rehabilitation Tax Credit is beneficial to the state of Alabama and should be extended,” the study concluded. “An extension of the program would continue to provide strong tax revenue to the state, as well as provide strong anchor development for projects in need.”
Only Birmingham, with 20 projects, has benefited from the historic tax credits more than Mobile, with 14. The projects in Mobile range from residential homes and apartment buildings to commercial spaces, according to the Advance Alabama website. Many of the projects are downtown.
The Admiral Hotel on the corner of Government and Joachim streets downtown was one of the listed projects, representing a $16.1 million investment. The Emanuel-Staples-Pake Building on Royal Street is another example. When completed, the building will be designed as a mixed-use structure with apartments and retail, according to the website. The total rehabilitation investment is estimated at $5.7 million.
Developer Pace Burt is responsible for three of the developments in Midtown, including the recently completed Marine Street Lofts at 951 Government St.
The “South Beach flair” is what initially attracted him to the white, multi-story building at the intersection of Marine and Government streets, he said.
“It had a whole neighborhood behind it,” Burt said. “It was a home run.”
Burt recently completed the 50-unit development and has already rented most of the space. The project, he said, could not have been completed without state and federal tax credits.
In addition to the Marine Street Lofts, Burt is using credits to renovate two old school buildings into apartments. Stabilization work is beginning on the Russell School in the Oakleigh Historic District near the Marine Street Lofts and at the Old Shell Road School building in another part of Midtown.
Both school buildings will be converted into roughly 24 apartments. Burt said he’s not concerned about finding enough renters for 48 new apartments.
Because a renovation is costlier than new construction, Burt said, the credits allow developers to take on these more expensive projects and possibly help revitalize neighborhoods.
For his projects, Burt said he takes advantage of not only the state credits, but also federal credits, which he then sells to investors to help reduce costs.
In addition to these and others already under construction statewide, Kirkland said, 13 projects would get underway this year if the credits are extended.
Burt said he hopes the program will continue into the future, especially as other states are using a similar model to create historic development credits of their own.
“I can’t imagine the state being that narrow-minded,” Burt said of proposals to end the credits. “Everyone around Alabama is either creating or expanding historic tax credits. I’m surprised there’s pushback to get rid of it.”