West Virginia has 92 commercial and mixed-use historic districts ripe for revitalization — yet developers choose to invest in neighboring states instead of in our downtowns due to West Virginia’s uncompetitive 10% historic rehabilitation tax credit.
West Virginia must take action to remain economically competitive with surrounding states. The following data, recorded from 2002 – 2015, shows the massive amount of economic impact generated in Pennsylvania, Ohio, Virginia, and Maryland, thanks to higher state historic tax credit incentives.
An increase in the current state historic rehabilitation tax credit from 10% to 25% would make West Virginia’s historic commercial districts more attractive to developers, spurring private reinvestment.
A 25% credit will:
- Spur private investment. Large and small-scale developers report that historic rehabilitation tax credit programs fill a critical financing gap. However, West Virginia’s current 10% rate doesn’t provide enough of an incentive to make a difference in a developer’s decision to undertake a rehabilitation project. A fixed rate of 20% to 30% is recommended to constitute a meaningful incentive.
- Create jobs. Most of the new jobs created occur in the construction industry. Unlike new construction, a higher percentage of rehabilitation project costs support labor rather than new materials, which may not always come from in-state suppliers. Trade and professional services also benefit from the program, especially industries such as legal, accounting, architectural, and engineering services, as well as wholesale trade and retail trade.
- Provide a return on investment. One-third of the state’s investment is paid back during the construction phase — before a credit is issued. The rate of return for the remainder of the investment depends on the final use of the rehabilitation. Once the state’s initial investment is recouped, the project continues to yield positive economic impacts through a combination of sales, income, and business taxes. Historic tax credits also have been found to spur new construction and increase the property values in the surrounding neighborhood.
- Repurpose vacant and underutilized buildings. In Ohio, 82% of buildings were vacant prior to being redeveloped with the state’s 25% historic tax credit. Similar vacancy rates are found in other states. When a vacant or underutilized building is repurposed, it generates additional revenues to local government through increased property taxes.
To learn more about the economic impacts of encouraging redevelopment of historic properties, contact us.