Historic rehabs a key part of ‘construction stimulus’ bill

Thirty one states – including Wisconsin and Iowa — currently have a state historic tax credit.


A historic-rehabilitation tax credit is among the key provisions of a “construction stimulus” bill that’s on the move in the Minnesota Senate.

On Monday, the Senate Business Industry and Jobs Committee passed the bill, which aims to create construction jobs with help from tax breaks, expanded local authority to impose assessments and issue bonds for qualifying projects, and land-use permit extensions, among other tools.

The bill, sponsored by Sen. Jim Metzen, DFL-South St. Paul, stems from the efforts of the Building Jobs Coalition, which includes building contractors, organized labor, historic preservation advocates, architects, engineers, and local government officials.

A handful of coalition members testified in the support of the bill Monday, hoping to bring some relief to a construction industry that has seen unemployment reach heights of up to 60 percent in some building trades.

Dave Semerad, CEO of the Associated General Contractors of Minnesota, hopes the bill will bring “a tailwind” to the industry.

“We see a lot of skilled, experienced workers who are on the sidelines, have been unemployed for a considerable amount of time, and their pensions, health and welfare plans, their homes, their families are in financial jeopardy now, as are the contractors that employ them,” Semerad said.

“Most contractors in Minnesota are small businesses that employ fewer than 20 people, and many of these companies are in danger of going out of business because of lack of work.”

“We are in irons, which means we are not going anywhere,” said Harry Melander, president of the Minnesota Building and Construction Trades. “… These are dire times.”

The bill, which was referred to the Senate’s State and Local Government Committee, is the latest version of a construction jobs bill that stalled in the Legislature last year.

A key provision from last year’s bill — a state-backed loan-guarantee program designed to provide gap financing for construction projects — was taken out of the Metzen bill in deference to some concerns the governor and others had.

Metzen, who emphasized that the bill is a “work in progress,” would have liked to keep the loan guarantees in, but he added that the goal is to create a package that members of both parties can support.

“This is not a DFL bill or a Republican bill,” Metzen said. “This is a bill to get people back to work.”

How to pay for it?

One elephant in the room — cost — wasn’t discussed in much detail at Monday’s hearing.

Metzen acknowledged that “some of this stuff will cost some money,” adding that “we are going to try to find it somehow in our existing $34 billion budget. We think we need at minimum maybe $50 million to do a fairly decent job in this area … to get jobs created.”

Among the job-creation strategies in the bill: a “small-business investment credit” and an “angel investor” provision that would provide tax credits to those who invest in small, emerging companies in Minnesota.

Those provisions were added to the Senate jobs coalition bill this year.

Another provision would allow municipalities to create special assessments to pay for energy-conservation projects in existing buildings, or to issue revenue bonds for qualifying “green” construction projects.

The bill’s historic rehabilitation provision offers a 25 percent income tax credit on qualifying rehabs of historic properties. It would apply to investment as well as homeowner projects.

Bonnie McDonald, executive director of the Preservation Alliance of Minnesota, said the state tax credit would leverage a federal historic tax credit and stimulate historic preservation projects throughout Minnesota.

Thirty other states – including Wisconsin and Iowa — currently have a state historic tax credit.

McDonald said historic preservation projects are true “green” jobs that put architects, contractors, and trades people alike to work. She estimates the state tax credit would create 1,500 jobs per year, based on other states’ experiences.

“It takes quite a diverse range of people to ensure that these projects move forward and we would like to put them all back to work,” McDonald said

Historic rehabs are ready to go in cities such as Crookston, Sleepy Eye, St. Cloud, Albert Lea, and the Twin Cities, according to McDonald.

She cited the vacant St. Louis County Jail in Duluth as a project that could benefit from the tax credit. St. Louis County has put the property on the market for $60,000, but so far the county hasn’t found any takers.

A potential developer would have to put “several million” dollars into the property, McDonald noted.

“They need that gap financing to do it,” she added. “They can use the federal rehabilitation tax credit, but it’s not enough to get these projects done in Minnesota. That is why we are 22nd in the nation for leveraging the federal credit.”

Sen. David Tomassoni, DFL-Chisholm, who chaired Monday’s hearing, made reference to the diverse collection of people who testified for the construction bill.

“It’s obvious when our contractors and trades people don’t work, architects and engineers don’t work either,” said “… The industry itself has a wide-reaching effect on people and their jobs, and quite frankly it’s very important that we get all these people back to work.”

Metzen said that he recently discussed the bill with the governor and that they will meet again “soon” for further talks. He added that the House “came on board” a couple of weeks ago with a bill that has “about 70 to 80 percent” of what’s included in the Senate measure.

“They’re starting to agree with this body a little bit,” Metzen said.

Source: Finance & Commerce, Brian Johnson