Category: Public Policy

Categories
DALATC Historic Preservation Missouri Public Policy

New Federal Bills Would Help Neighborhood Preservation Efforts

by Michael R. Allen

Public policy has a tremendous impact on the chance that historic buildings have for survival. St. Louisans know well how many buildings are still standing, gloriously rehabilitated, because of the Missouri historic rehabilitation tax credit adopted in 1998. Many remember what happened to rehab efforts here when the 1986 federal tax act removed the major federal rehabilitation tax credit. Some of us have concerns about the impact of the Distressed Areas Land Assemblage Tax Credit Act, which was passed in 2007 to encourage large-scale urban development without any preservation safeguards.

Two bills recently introduced in the U.S. Congress offer smart policy changes that could help us save thousands of historic buildings in St. Louis and communities across the nation. In Missouri, we have had an inverted policy situation where our state’s laws are more helpful to preservation efforts than the federal laws. In most states, however, it’s the other way around — and the federal laws are very restrictive, with no practical use to homeowners and small developers. That could change if we work to pass these bills.

Historic Homeowners Revitalization Act (HR 3670)

U.S. Representative Russ Carnahan (D-MO) has long been a supporter of changing federal laws to adopt preservation policies that benefit homeowners instead of just developers. On September 29, our hometown Congressman introduced the Historic Homeowners Revitalization Act (HR 3670), which has already gained 28 co-sponsors. Here’s a run-down of the changes it would make to the existing federal historic rehabilitation tax credit:

  • The bill would create a 20% tax credit — capped at $60,000 — for qualified expenses rehabbing primary residences that are certified historic buildings; currently, only income-producing properties are eligible for this credit.
  • The bill would allow buyers of rehabilitated homes to capture the credits for which sellers are eligible, thus creating a useful form of transfer.
  • The bill would allow federal historic rehabilitation tax credits to be transferable for homeowners. Without this feature, homeowners would have a tough time trying to use the new credits. Many small developers can’t use the existing federal historic rehabilitation credits because they cannot be transferred.
  • The bill changes the existing tax credit to allow issuance of credits totaling 130% of eligible rehabilitation costs on residential rental buildings in distressed census tracts. Thus, the bill widens the incentive for retention and enhancement of rental housing where it is needed. If an owner can get 100% for a condo conversion or 130% for retaining rental units, that owner just might go with the higher credit amount — and help neighborhoods retain quality affordable housing.

    Representatives William Clay (D-MO) and Ike Skelton (D-MO) are among the co-sponsors, which include a few Republicans. We need to get all of Missouri and Illinois’ representatives on board!

    Community Restoration and Revitalization Act (H.R. 3715 and S. 1743)

    On October 1, Senators Blanche Lincoln (D-AR) and Olympia Snow (R-ME) introduced the Senate version of the Community Restoration and Revitalization Act (S. 1743) and Representative Allyson Schwartz (D-PA) and Pat Tiberi (R-OH) introduced the House companion (H.R. 3715). This bill provides a nice companion to Carnahan’s measure.

    The Community Restoration and Revitalization Act would amend Section 47 of the U.S. Tax Code to do the following:

  • The bill would raise from 20% to 30% the percentage of qualified rehabilitation costs that can be returned in credits for projects of $5 million or less. These credits would become transferable under the bill.
  • The 10% rehabilitation tax credit for non-historic buildings — the federal rehab tax credit not often mentioned locally — would be able to be used for residential rental properties. This would allow for mixed-use and apartment buildings to use this credit, instead of only all-commercial buildings.
  • Very important among the bill’s changes is removing the 1986 tax law’s provision that set 1936 in place as the cut-off date for buildings eligible for that 10% federal credit. That year marks 50 years back from 1986, but the year itself is codified so now buildings must be 73 years old to use the credit Instead, this bill would change it to a floating 50-year mark.
  • Energy efficiency would be rewarded, with up to $5 per square foot in extra credits for projects that increase efficiency of historic buildings by 30% of more.
  • State historic rehabilitation tax credits would no longer be treated as income for federal tax purposes.
  • The bill would remove restrictions on “disqualified leases” that currently prevent user of the credit from leasing space in rehabilitated buildings to non-profit or civic organizations.

    The Community Restoration and Revitalization Act has only one Senate co-sponsor (Snowe, since only one senator can be a sponsor) but 44 House co-sponsors. The Missouri and Illinois delegations need to sign on to this one too — only Representative Carnahan and Illinois Representatives Jerry Costello (D) and Danny Davis (D) have signed on.

    Time to make calls and send letters to your representatives and our senators. Forget bailouts and giant projects. In this recession, the real economic stimulus we need is to widen the amount of money accessible to every citizen that stays at work renewing our homes, shops and communities.

    More information on both bills, including full text, is available on the Preservation Action website.

    • Categories
    JeffVanderLou North St. Louis Northside Regeneration Public Policy

    Vacant McEagle Houses Next to New Habitat for Humanity Homes

    by Michael R. Allen

    What’s wrong with this picture of Bacon Street in JeffVanderLou?

    I think that the problem is obvious: There are brand-new houses next door to vacant buildings. However, in this strange case, the new houses were built before the houses next door went vacant.

    There are three vacant houses at 2731, 2733 and 2735 Bacon Street adjacent to the three new houses built lovingly by Habitat for Humanity. Across the street are more new homes by Habitat. This block has turned around from a drug-infested, vacant-lot-strewn area into a stable place.

    However, in the midst of this uplift came a company called Sheridan Place LC, controlled by McEagle Properties. In 2006 and 2007, Sheridan Place bought up dozens of houses like these, making sure the residents moved out before closing the sales. That’s right — all three of the houses on Bacon were occupied before being purchased by McEagle.

    Why did McEagle need to buy these houses at all? By the time the purchases happened, the Habitat for Humanity development was completed, and new residents had moved in. The three well-kept homes next door were a sign of stability to newcomers on Bacon, but not for long.

    On the other side of the new houses on this side of Bacon is another Sheridan Place special at 2745 Bacon Street, missing its windows and wearing the red boards put on it by the Building Division. The Habitat for Humanity homes are book-ended by vacant buildings that were purchased for a large-scale project that has little to do with this block. Because of Habitat’s fine work, which should be honored and not insulted by crass speculation, this block can’t be subsumed by development. But its vacant homes can be held hostage in a phased development where JeffVanderLou is the last phase scheduled to be completed. These houses still could be vacant in 2025 or later.

    McEagle has no business owning these houses. The city should not follow good money with bad by letting the developer hoard houses around areas that have been successfully redeveloped. The city’s redevelopment agreement with McEagle should require the sale of houses like these on Bacon. If McEagle receives 50% of the purchase prices back in Distressed Areas Land Assemblage Tax Credits, as is expected, then the developer should be able to quickly sell off houses like these at affordable prices. After all, the NorthSide project is supposed to fill in the gaps, not create more.

    Categories
    Historic Preservation Missouri Missouri Legislature Public Policy

    Energy Efficiency Act Snubs Missouri Historic Tax Credit

    by Michael R. Allen

    Missouri State Senator Brad Lager (R-Savannah) won a legislative victory this year when his Energy Efficient Investment Act passed the General Assembly and was signed into law by Democratic Governor Jay Nixon.

    The bill’s chief purpose is to allow utilities to recover costs of energy efficiency measures to deter construction of new power plants. Lager wisely has opposed public subsidy to power plant construction. The state’s Public Service Commission’s rule is that Missouri’s electric companies only raise rates if the rates are equal to or less than the rates that the companies would have charged if the company had built a new power plant. That rule encourages more energy output without addressing efficiency.

    The bill allows utilities to count toward output energy not being consumed and enables utilities to establish programs where customers receive benefits for demand-side efficiency upgrades.

    However, Lager could not resist riding his favorite hobby horse into the bill — opposition to the state’s historic rehabilitation tax credit, which was modified for the first time ever this year in response to Lager’s efforts to kill it.

    Section 14 of the act states:

    Any customer of an electrical corporation who has received a state tax credit under sections 135.350 to 135.362, RSMo, or received under sections 253.545 to 253.561, RSMo, shall not be eligible for participation in any demand-side program offered by an electrical corporation under this section if such program offers a monetary incentive to the customer.

    Sections 135.350-362 deal with a range of tax credit programs that Lager also opposes, including the state’s low income housing tax credit, but sections 253.545-561 enable the state historic rehabilitation tax credit. Vigilance on the rehabilitation tax credit remains crucial in this post-Jeff Smith era.

    Categories
    Historic Preservation Missouri Missouri Legislature Public Policy

    Historic Tax Credit Compromise Celebrated

    by Michael R. Allen

    Yesterday the Missouri Coalition for Historic Preservation and Economic Development sent a press release celebrating the legislative compromise reached in the Missouri Senate at the end of the session. The compromise language is included in an economic development omnibus bill awaiting signature by Governor Jay Nixon.

    Here’s a summary of the compromise:

    * A per-project residential cap of $1,000,000 in qualified rehabilitation expenditures (QREs) for owner occupied single family homes.

    * A small project exemption for projects with $1.1 million in qualified rehabilitation expenditures (QREs) (these do not count toward a cap).

    * $140 million cap on historic tax credits (existing projects do not fall under the cap).

    * An effective date of January 1, 2010.

    Categories
    Historic Preservation North St. Louis Northside Regeneration O'Fallon Public Policy The Ville Urban Assets LLC Wells-Goodfellow

    Private LRA in the Works Across North St. Louis?

    by Michael R. Allen


    The house shown here, located at 4448 Athlone Avenue in the O’Fallon neighborhood, is just one of the 225 vacant properties purchased by a holding company named Urban Assets LLC in the last six months. The spending spree has attracted the notice of neighborhood leaders and elected officials across north St. Louis. Urban Assets has purchased across a wide swath of north St. Louis, mostly between Delmar Boulevard on the south and Natural Bridge Avenue on the north — all of the way from Grand Avenue on the east to the city limits on the west.

    Here is a crude map of the holdings made by this writer using Geo St. Louis:

    The holdings are spread across nine wards and include 120 vacant lots and 85 buildings, mostly historic. The wards and number of properties are as follows: Ward 1 (7), Ward 3 (4), Ward 4 (64), Ward 5 (5), Ward 18 (39), Ward 19 (11), Ward 21 (4), Ward 22 (64) and Ward 26 (27).

    There are distinct concentrations in the Ville and Greater Ville neighborhoods as well as the Wells-Goodfellow and Hamilton Heights neighborhoods. There are a handful, like 4448 Athlone, standing alone far from other holdings. Urban Assets began aggressively purchasing properties at Sheriff’s tax sales in September 2008. Most of the holdings come from tax sale purchasing, with prices often less than $2,000 at auctions with no other bidders.

    This purchase pattern is reminiscent of the start of purchasing by McEagle holding companies like the infamous Blairmont Associates LC — and the same real estate broker is making the purchases for the parties behind the holding company.

    On June 6, 2008, real estate broker Harvey Noble of Eagle Realty incorporated Urban Assets LLC online. The incorporation filing and the registered agent listing on the Secretary of State’s website misspell Noble’s name as “Nobel” and incorrectly state that the zip code for Noble’s office is 63102.

    On the record with KWMU and the St. Louis Post-Dispatch, Paul J. McKee, Jr. denies any involvement with Urban Assets. Examining the acquisition patterns of Urban Assets, one sees that there is no overlap with the McEagle project and a few intense concentrations that suggest efforts to buy out other areas. Whoever is behind Urban Assets could very well soon be in competition with McEagle for the Distressed Areas Land Assemblage Tax Credit Act.

    While Urban Assets seems to be buying whatever it can acquire in certain small areas, generally the company seems interested in vacant property in as much of north St. Louis as possible. The acquisitions almost seem like a private land bank like the city’s Land Reutilization Authority.

    The only apparent incentive to this type of far-flung land banking, however, is the Distressed Areas Land Assemblage Tax Credit. In order to receive that credit, a developer must be appointed redeveloper by the Board of Aldermen. Redevelopment rights don’t necessarily mean that a developer will clear-cut a redevelopment area. Those rights fundamentally mean that a developer acts as gatekeeper for all investment within a redevelopment area — allowing some in and keeping others out.

    Is Urban Assets seeking to become a gatekeeper for north St. Louis, or is their acquisition simply a land-banking scheme?

    Categories
    Historic Preservation Missouri Missouri Legislature Public Policy

    Missouri Senate Passes Economic Development Bill That Includes Historic Tax Credit Cap

    by Michael R. Allen

    Last night, after a long impasse, the Missouri Senate passed a Senate substitute to economic development bill HB 191. The bill reflects a legislative compromise reached on historic tax credits: the state’s first cap on the program.

    HB 191 places a $140 million cap on the annual issuance of historic tax credits, but exempts projects with qualified rehabilitation costs of $1.1 million or less — the majority of projects — from counting toward the cap. The figures will not be indexed to rise with inflation. The new rules won’t go into effect until January 1, 2010. Honestly, I don’t think that these changes will make much of an impact on the program.

    The compromise was made possible when Senator Jason Crowell (R-Cape Girardeau), a staunch opponent of the program in the past, switched his position and began speaking in favor of the program on the Senate floor. Crowell and Senator Jeff Smith (D-St. Louis) worked with leadership and erstwhile historic tax credit foe Senator Brad Lager (R-Savannah) to forge an acceptable compromise. Without Crowell’s switch, a compromise may have been impossible.

    The bill now heads to the House for final approval.

    Categories
    DALATC North St. Louis Northside Regeneration Public Policy

    DALATC and the McEagle Project

    by Michael R. Allen

    Now that McEagle Properties has started to reveal its plan for north St. Louis and downtown, let’s review the Distressed Areas Land Assemblage Tax Credit Act. Last night at a meeting, Bill Laskowsky from McEagle and planner Mark Johnson from Civitas revealed that McEagle hopes to submit a financial proposal to the city of St. Louis’ Land Clearance for Redevelopment Authority by May 26. That proposal will accompany a request for redevelopment rights and tax increment financing. Various government entities will consider the proposal and make recommendations to the Board of Aldermen.

    According to Laskowsky and Johnson, a redevelopment ordinance ideally would be in place by the end of the year so that an application for the Distressed Areas Land Assemblage Tax Credit (DALATC) can be made. The DALATC will allow McEagle reimbursement for 50% of land acquisition costs and 100% of maintenance

    While the redevelopment agreement with the city will have its own rules, the DALATC brings its own rules.

    Here are a few key provisions to keep in mind:

    The DALATC will reimburse McEagle for 100% of demolition costs.

    Under DALTAC, “acquisition costs” are defined as the purchase price for the eligible parcel, costs of environmental assessments, closing costs, real estate brokerage fees, reasonable demolition costs of vacant structures, and reasonable maintenance costs incurred to maintain an acquired eligible parcel for a period of five years after the acquisition of such eligible parcel. Acquisition costs shall not include costs for title insurance and survey, attorney’s fees, relocation costs, fines, or bills from a municipality.

    The DALATC will reimburse McEagle for half of the cost of mowing lawns and boarding up windows.

    “Maintenance costs” are defined in DALATC as the costs of boarding up and securing vacant structures, costs of removing trash, and costs of cutting grass and weeds.

    The DALATC is authorized under Chapter 99 of Missouri law.

    Under Chapter 99, a redeveloper must follow a certain process to have an area declared blighted by municipal authority; that process is detailed online here. Eminent domain power will reside with the city’s Land Clearance for Redevelopment Authority, not McEagle.

    Less than five percent of the acreage within the boundaries of the eligible project area shall consist of owner-occupied residences which the applicant has identified for acquisition under the urban renewal plan or the redevelopment plan.

    Let’s make it clear: eminent domain can be used by McEagle in this project. There just happens to be a reasonable limit to its use, and parcels acquired by eminent domain can’t get the DALATC.

    No city-owned property is eligible for the DALATC.

    McEagle won’t be able to get DALATC for purchase of the hundreds of city-owned parcels it requires for this project. Does that mean that the city will convey the land for a token amount to help the deal move along? Or will the cash-strapped city hold McEagle to the same standards as anyone else who seeks to purchase city-owned land, and charge the typical “full price” for each parcel?

    No more than seventy-five percent of the urban renewal area identified in the urban renewal plan or the redevelopment area identified in the redevelopment plan may be redeveloped by the applicant. The remainder of the urban renewal area or the redevelopment area shall be redeveloped by co-redevelopers or redevelopers to whom the applicant has assigned its redevelopment rights and obligations under the urban renewal plan or the redevelopment plan.

    McEagle will be working with co-developers. Who are these partners? What area non-profit development organizations are likely to get on board?

    The redevelopment agreement shall include a time line for redevelopment of the eligible project area.

    The DALATC requires a redevelopment time line be submitted to the city. What is unclear is whether that time line is binding, and what enforcement mechanisms the city or state can implement to ensure completion of the project.

    The DALATC sunsets in 2013.

    Any attempt to receive all $95 million has to start soon to beat the sunset.

    Categories
    DALATC Historic Preservation Missouri Legislature Northside Regeneration Public Policy

    Tax Credit Action in the State Legislature

    by Michael R. Allen

    Yesterday the Missouri House of Representatives passed the House Committee Substitute (HCS) to Senate Bill 377. Now included in the bill is a $150 million cap on the historic tax credit with a $250,000 (in credits issued) exemption and a $250,000 (in credits issued) per-project cap on residential rehabs. The $150 million cap might not have much impact with healthy “micro” exemptions like these. The question: Is this a good enough micro exemption to keep present level of tax credit activity going?

    Meanwhile, Representative Tim Flook (R-Liberty) offered an amendment to the HCS for SB 377 that, among other things, changed the language of the Distressed Areas Land Assemblage Tax Credit (DALATC) to allow issuance of up to $20 million per year instead of the current $10 million. On the House floor, Rep. Flook stated that a group of representatives had met with developer Paul J. McKee, Jr. to see his plans for north St. Louis, and that those plans needed an extra boost during this session. Of course, McKee still has to be designated redeveloper by the St. Louis Board of Aldermen in order to apply for the DALATC. Since the DALATC credits must be spent on development within the project area, the higher issuance could mean more immediate development activity after McKee receives the credits.

    Flook’s amendment passed.

    Categories
    Abandonment North St. Louis Northside Regeneration Public Policy St. Louis Place

    Where Ed Box and Peter Kinder Meet

    by Michael R. Allen

    The Suave House at 2512 Palm Street in St. Louis Place has been adorned by both the graffiti artistry of Ed Box and the political signage of Peter Kinder. The fact that’s it is owned by a Paul McKee, Jr.-controlled holding company (N & G Ventures) creates a strange political triangle of sorts. McKee owns many of the vacant buildings of St. Louis Place, Box tags them and Kinder posed himself as a gatekeeper of north St. Louis’ future by championing a tax credit that could help McKee make sense of his holdings.

    Someday MetroLink may run down Palm, which merges into Natural Bridge. There are pockets of storefronts like this one on Natural Bridge west to the city limits. Unlike Martin Luther King Drive, Natural Bridge largely passes through areas of high population density, making it a natural commercial thoroughfare for north St. Louis. In fact, on the block just west of the Suave House there already are popular small businesses in sidewalk-fronting buildings. The area already functions as a commercial gathering spot, but it needs enhancement. Of course, commercial districts on public transportation corridors don’t work well if they are not densely built out, and buildings like the Suave House indicate the density and building form that is needed to build up Natural Bridge in the future.

    McKee would be wise to think about this northern edge of St. Louis Place, where Palm meets Natural Bridge, and its relationship to other neighborhoods west of here and the future presence of light rail. This is a seam, not an edge. This eastern end could be the gateway to a renewed Natural Bridge Avenue commercial district. The Suave House is a welcoming building that defines this block not as a marked boundary but as the face of one side of a street that laterally connects the entire city.

    Of course, MetroLink itself could be a boundary of sorts if Metro insists on building out a light rail line like the ones it currently operates. The drawings for the north extension show many streets crossing Florissant Avenue, Palm and Natural Bridge that would not go through due to the placement of contained tracks in the middle of those major thoroughfares. That could hurt the tremendous potential of these streets to sprout more pedestrian-oriented commercial areas. A less invasive light rail system would be better — how about a street car? Meantime, let’s protect future building blocks like the Suave House.

    Categories
    Historic Preservation Missouri Legislature Public Policy

    Governor Nixon Speaks on Historic Tax Credits

    by Michael R. Allen

    Today, Democratic Governor Jay Nixon visited the Missouri House of Representatives today where he voiced support for a “soft cap” on historic rehab tax credits that would apply to larger projects. We were wondering what Nixon thought about the future of the state’s best tax credit program.

    Anyone who wonders what Republican Lieutenant Governor Peter Kinder has to say about historic rehab tax credits can check out a new video on the reborn Pub Def posted this morning. The video features interview footage with Kinder, Senator Jeff Smith, Amy Gill and Eric Friedman on the struggle to retain the historic tax credits.