The Statler Hotel, the Lone Star Gas Building, the Davis Building, Dallas Power & Light — most of downtown Dallas' landmark redevelopment projects have something in common.
Developers used historic-preservation tax credits to help fund the building renovations.
But with tax reform underway in Washington, D.C., the popular tax credits that have saved thousands of historic buildings around the country are facing the wrecking ball.
Cities and commercial property builders and investors have relied on the tax credits to turn around downtowns and make old building redevelopments possible. With Congress focused on killing tax breaks, the historic-preservation credits aren't expected to survive.
"We are fortunate we have gotten as many projects completed as we have," said Dallas architect Jerry Merriman, whose firm has done the development designs for many of downtown Dallas' buildings. "I would say of the projects we have done, maybe one of 18 might have still happened without the tax credits.
"It's been critical to preserving these buildings."
Since 2002, projects in the Dallas area have received a greater number of historic-preservation tax credits than any other Texas market. More than two dozen local redevelopments have used the credits in the last 15 years, according to a study by the National Trust for Historic Preservation.
Statewide, more than 130 developments representing some $1.1 billion in investment have received the credits since 2002. Developers for the Texas projects obtained more than $187 million in federal tax benefits that they could use or resell to help fund their construction.
"Think of the jobs in our city alone this has created and what it has meant [for] downtown in terms of activating these buildings and the new jobs in restaurants and hotels," Merriman said. "There are a couple of projects people are looking at waiting to see what happens with the tax credits.
"They will probably walk away if they lose the credit."
Not only would some historic building redevelopments stall, owners would be more motivated to tear the buildings down to avoid property taxes on vacant structures.
"In downtown Dallas, there is probably $600 million to $700 million in development that would not have happened without these credits," said Munsch Hardt real estate attorney Phill Geheb, who's worked with developers to line up the credits. "With the specter of tax reform hanging over everyone's head, we've know these credit programs were on the chopping block.
"These credits have been around for almost 40 years, and now they are going to be gone," he said. "I don't think folks understand the devastating impact this will have."
Geheb said that particularly in smaller and secondary cities, the federal historic-preservation tax credits are allowing old buildings to be saved and repurposed as part of downtown revitalization efforts.
The tax credits helped compensate for the higher costs of preserving old structures, Geheb said.
"You'll start seeing more historic properties scrapped," he said. "These developments are 20 to 30 percent more expensive than new construction."
By: Steve Brown