Act 855 of 2019, sponsored by state Rep. Andy Davis, presents an opportunity to the entire state of Arkansas. This legislation has the potential to put Arkansas on a level playing field with most of our border states when it comes to the incentives offered to building owners of historic structures.
What does Act 855 do? This bill sets up a mechanism to allow the state to offer the same tax credits it does on smaller projects to the much larger projects. For example, let's take the Boyle building at the corner of Capitol and Main in downtown Little Rock, probably the most prominent building in Little Rock that has yet to be restored. If we assume a $20 million rehabilitation cost, under current law, this building would be eligible for a $400,000 state tax credit. If this same building was located in Kansas, Missouri, Louisiana, Texas or even Mississippi, the project would be eligible for a $5 million state tax credit.
Keep in mind that this is a tax credit, not a grant or a loan. In order to actually realize the tax credit, the property owner must first spend the money on qualified rehabilitation expenses as determined by the United States Department of Interior. Owners first submit a plan to the Arkansas Historic Preservation Program, a division of the Department of Arkansas Heritage. The plans are vetted and often modified before they are approved. Pictures that document the current state of the property are required so they can be compared to the pictures taken after the rehabilitation is completed to verify the work has been completed as stated and required.
How is a historic structure eligible for the tax credit? It must either be individually listed on the National Register of Historic Places or be deemed a contributing structure to a National Register-listed historic district, both of which are kept by the United States National Park Service.
Under this new law, qualifying buildings that require more than $5 million in renovation costs will be eligible to receive the 25 percent tax credit. However, there is an additional hurdle to clear.
This tax credit contains language that is modeled after the incentive program for the Arkansas Film Commission. This credit is currently absent a defined revenue stream for ongoing funding, so each large project will have to be approved and the available funding would be contingent upon "grants, donations, or transfers made by any person or government agency or office." These transfers could be made available for the project through the Arkansas Legislative Council and the governor once the necessary funding amount is approved for transfer.
Regardless, this is a step in the right direction. Downtown Little Rock has a couple of buildings that need this shot in the arm to get going. Cities from Hot Springs to El Dorado, Texarkana to Pine Bluff, Fort Smith to Helena all have potential projects that could benefit from these tax credits.
While there is an incentive to the building owner, counties will benefit from the increased property taxes on the property after it is completed. Cities will benefit from the sales tax on construction materials, not to mention the workers who are spending their paychecks in these communities. Our state will also see the increased tax revenue that projects of this scale will generate.
We often hear our elected officials talk about the need for economic investment in our state. This is an opportunity to jump-start that process while at the same time preserving our history for generations to come. Who will be first to try?
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Gabe Holmstrom is executive director of the Downtown Little Rock Partnership.
Editorial on 04/26/2019