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Toledo Blade - "Tax-Credit Cap Means Some Sites Are History"

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Location: Columbus, OH

Toledo Blade - "Tax-Credit Cap Means Some Sites Are History"

It was a Friday and people were lining up outside the Ohio Historical Society.

This wasn't for a new major exhibit at the museum but rather for the birth of a new state historic preservation tax credit the following Monday morning.

"Boy, that line started growing," said Franco Ruffini, deputy state historic preservation officer. "By Monday morning there was a good 40 or so wrapping around the building. In our first hour we accepted 62 applications."

Ultimately, the decision to be near the head of that line on June 29 proved to be the difference between receiving tax credits potentially worth millions of dollars and coming up empty for plans to transform historically significant factories, warehouses, department stores, and other neglected buildings into revenue-generating condos, apartments, retail shops, and art galleries.

Any project submitted later, including the proposal to save the historic 1884 Seneca County Courthouse, was for all intents and purposes dead on arrival once the cash-strapped state imposed a $120 million cap on a program that proved more popular than expected. That closed the doors on a two-year pilot program just eight months into its existence.

"Even some people who were standing in line were out of luck," said Joyce Barrett, executive director of the nonprofit Heritage Ohio. "The law required that you be the fee-simple owner, so everybody who wanted to apply had to buy the building. There are now people who can't do the deal because the tax credit was part of the financing to make the project happen.

"We knew the law had a provision for first-come, first-served, but we also understood that the law said the Department of Development could approve no more than 100 projects," she said. "Everyone believed that meant 100 projects per year."

Instead, just 37 projects of the first 39 applications submitted were approved before the state exceeded the dollar cap for the full two years.

Lt. Gov. Lee Fisher, who doubles as Gov. Ted Strickland's development director, is a fan of the program, but he would prefer a merit-based program in which projects with greater economic value would compete.

"The estimated cost of the program [when the law was passed] was less than $100 million over two years," he said. "If we approved all the applications in the first year alone, they would have been $215 million. If we had the same kind of interest in the second year, the cost would be $400 million over two years."

Mr. Fisher said he would be open to the idea of giving the Ohio Historic Preservation Office the authority to score projects based on their historic value and the urgency of their situation. The Seneca County Courthouse could be demolished in a matter of months to make way for a more modern replacement after county voters rejected a bond issue and the property-tax attached to preserve it.

The courthouse - in the heart of Tiffin's nationally designated historic business district - topped the most-endangered list of the nonprofit Preservation Ohio last year and is expected to repeat there again this year.

"Unfortunately, the Seneca County Courthouse application was not among the early applications," Mr. Fisher said. "Nothing would have pleased me more than to approve that application within the $120 million budget, but the application came in very late. It never got to the stage of doing the cost-benefit analysis, so I do not know whether there would have been a cost benefit."

Currently, the Ohio Historic Preservation Office's role is limited to an initial review verification that the historic structure at the heart of the application meets the criteria of the program, including whether it is listed on the National Register of Historic Places or is located in and contributes to a local historic district. It makes no recommendation as to whether a project should be granted a credit.

"There's already some blogging going on around the state, especially coming from Cincinnati," said Thomas Palmer, executive director of Preservation Ohio, another statewide historic preservation program. "They're asking, 'Why are we less important?' They have these buildings in Over-the-Rhine, where these tax credits would really jump-start the [impoverished] neighborhood.''

Ms. Barrett of Heritage Ohio doesn't like the idea of having projects compete against each other. The answer, she said, is to lift the cap.

"If someone wants to invest in Ohio, let them invest in Ohio," she said. "We cannot pick and choose whether one project is better than another. I love the Seneca County Courthouse, but I can't choose that over another community. That would be an ugly program.

"All of these projects have to prove they will generate positive income for Ohio," she said. "Let every community succeed."

Jonathan Sandvick, president of Sandvick Architects in Cleveland and vice chairman of Heritage Ohio's board, had a staff member armed with about 20 applications near the front of that line when the Office of Historic Preservation opened its doors on the morning of July 2 and began time-stamping applications in the order they were received.

One of his clients, the backer of a proposed $178.1 million conversion of an old Hercules engine plant in Canton into a major exhibition and retail center, was granted the largest tax credit approved, $37 million.

Also among Mr. Sandvick's successes were two Toledo projects - a $3.1 million credit toward a $21.9 million conversion of Toledo Traction's Water Street steam plant into town homes and loft apartments and $556,500 toward the $3.7 million transformation of the old Continental Baking Co. on North Summit Street into apartments and retail space.

The Hercules project in Canton and the steam plant and Continental Baking projects in Toledo were stamped in as applications 4, 10, and 19 respectively.

The law requires a follow-up study of the program, but the Cleveland Business Partnership, a business organization, isn't waiting. It is launching a study now of the 37 projects already approved to examine what the return on the state's investment might be.

Mr. Sandvick argues that the state has been short-sighted by placing a dollar limit on a program when the law creating it had none. He noted that the tax-credit checks for these 37 projects won't be written by the state until they are finished, but the financial gain, particularly from construction jobs, would be immediate.

"Some [credits] won't go out for as many as five years," he said. "Some projects could be delayed a long time. I certainly understand how the cap decision was made when the budget crisis emerged and how someone might do a static review, not looking at the dynamic impact of money coming in but just the flow of money going out.

"The governor is now pushing a $1.7 billion [bond issue] stimulus plan," Mr. Sandvick said. "This [tax credit] program does a tremendous amount of stimulation, and it doesn't cost the state anything."

Stephen McQuillin, a Westlake historic preservation architect who submitted Seneca's application, was 12th in line when the doors opened on July 2. Even then, some of the applications he submitted that day ended up too far down the list for consideration. He said it might be a good idea for the state to take into consideration a building's situation, including whether it faces a more immediate threat of demolition than others.

"But how do you quantify that?" he asked. "If [the owner of the Hercules plant] knew that was part of the criteria, could he develop a plan to tear the building down and say, 'I'm going to put in a parking lot if you don't give me this tax credit?'•"

Sen. Kirk Schuring (R., Canton), who wrote the law creating the program, said he is negotiating with Mr. Fisher on changes that would give the state more discretion in deciding which projects are more worthy. They are also talking about phasing in tax-credit payments over time to address the state's cash-flow concerns. He hopes a bill could pass before June 30 when lawmakers recess for the summer and that the current dollar cap could be lifted.

"The essence of this thing is that it is both historic and economic," he said. "You kill two birds with one stone. …This is a jobs program," he said. "This is a way of stimulating our economy, and we're doing it in areas of our state that need it the most."

And what about the fate of the Seneca County courthouse?

Mr. Schuring said he's also willing to consider historic scoring of projects.

"I love historic buildings and the architecture, and the Seneca County Courthouse is a fine example of that," he said. "If there's a way to somehow get this program to assist with that restoration, I'm willing to try."

Changes to the state's historic preservation tax credit program may be too late for Tiffin's courthouse. County commissioners there are moving forward with plans to demolish the historic structure this summer.

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