Historic tax credits fuel downtown development
By Ken Mammarella
Special to Delaware Business Times
A good way to appreciate the importance of the Delaware Historic Preservation Tax Program is to experience downtown Wilmington’s revitalization as a consumer, a resident, a worker or a businessperson.
Or talk to Mike Hare, executive vice president of The Buccini/Pollin Group. “Any projects that we have done with the historic tax credit would not have happened without it,” he said.
And Buccini/Pollin has done plenty. Since its 2001 creation, the program has awarded $63 million in tax credits to 208 properties statewide. The biggest credits by far are in downtown Wilmington, with about half of these big downtown projects by Buccini/Pollin.
Such credits are vital to combat downtown’s high acquisition costs and competitive limits on rent, he said, noting the capital stack often includes other incentives, such as state programs for low-income housing and downtown development districts and a federal program for historic areas. Federal credits were called into play in the GOP tax overhaul, he said, “but our latest recon is they will stay in place.”
In a report to the General Assembly, Tim Slavin, director of Delaware’s Division of Historical and Cultural Affairs and state historic preservation officer, praised the state’s tax credits for preserving the past and “creating jobs and promoting economic revitalization in the present.” His report figures that the $63 million awarded so far leverages $277 million in investments.
“Every $5 million in tax credits translates into 350-400 jobs,” then-Gov. Jack Markell said in 2010.
The impact can also be measured in end results. For a dramatic case study, consider the program’s biggest award: $7.7 million for the old Delaware Trust Building in downtown Wilmington. It was damaged by fire, filled with asbestos and vacant for six years, Hare said. Today it has 20,000 square feet of retail, three floors of parking and 280 apartments filled with taxpayers.
For each project in downtown Wilmington, Hare can contrast the old forlorn, moribund state with its current gleam and vigor. An old furniture store at 6 E. Third St., vacant for 30 years, today boasts an improved facade, reclaimed use of the upper floors and multiple apartments. Obsolete office space at 838 N. Market St. unused for 10 years, has been converted into attractive apartments.
Buccini/Pollin’s latest project made possible by the program is the old DiSabatino Building at 6-8 W. Ninth St. The rehab opens up the long-unused upper floors and includes three live/work units for artists and makers among the apartments. “It drives residential development west and opens up the width and girth of downtown living,” he said of this project, adding that 70 percent of people moving into Buccini/Pollin buildings downtown are new to Wilmington.
Buccini/Pollin is also counting on the program to rehab the iconic DuPont Building for Chemours.
The program “started with the big projects that revitalized lower Market Street and other areas,” Slavin said, and its reach has expanded as more developers, businesses, homeowners and nonprofits learned about it.
The program covers buildings in the National Register of Historic Places, in register districts or eligible for such registration. Over the years, it has been evolved. A 2010 renewal established two pools of money, for big and small projects. Legislation in 2014 set up pools for downtown development districts, named so far in Dover, Georgetown, Harrington, Laurel, Milford, Seaford, Smyrna and Wilmington. The credit is fungible and can be sold and applied to state income and franchise taxes.
Of the 208 buildings impacted so far in 17 municipalities, 82 of those are in Wilmington, and 46 more are in New Castle County, with 52 in Sussex and 28 in Kent. After rehab, 89 are homes or residential outbuildings, and 63 are residential, perhaps with commercial space.
“But for the credit, these buildings won’t be revitalized by anyone,” Hare said of all such projects.
Although the money allotted has grown from $3 million to start to $6.5 million in fiscal 2018, it has not grown enough for all the interest. “We’re about sold out for the next two years,” Slavin said.