In an era of fiscal restraint and austerity, the federal government’s involvement in Historic Preservation has come under attack by those wishing to reduce the federal deficit. Today’s Washington is a place where everyone is “expected to take a hit” from budget cuts, and as preservation advocates we need to be prepared to identify what programs are perhaps not meeting their intended purpose, or not performing to the level we expect. I am surprised to be one of the early “pro-preservation” responses to his proposal.
I wholeheartedly accept that we need to reduce our nation’s deficit, as do most preservation advocates. I accept that there may be programs, which are redundant, ineffective, or not living up to their intended outcomes. But, what I am not willing to accept is a categorical discontinuation of programs that are effective in the name of “deficit reduction.”

Tom Coburn's Back in Black Targets Preservation
Department of the Interior Programs to be Cut or Changed
This report rightly identifies the huge maintenance backlog at our nation’s historic sites and national parks. With an estimated $8-10 billion dollars of deferred maintenance and critical preservation needs, the Parks Service is in a difficult position to welcome 285 million visitors annually.[1] Coburn’s plan, “Back in Black” asserts that other programs housed within the parks service are “diverting” resources from the core mission of protection and preservation. The plan posits:
NPS spends millions each year for private, non-profit, and local government historic preservation efforts. Though each individual project has merit to its respective community, historic preservation funding for non-federal projects further erodes the agency’s ability to handle its core responsibilities.[2]
I like most preservation advocates completely disagree with Senator Coburn. Many of our nation’s important historic resources are held outside of the National Parks Service. Cahokia Mounds, a world heritage side is owned and operated by the Illinois Historic Preservation Agency. Other important historic resources are held in private, non-profit, or government hands. By allowing other partners to manage these sites, preservation is able to leverage more resources than if they were managed by the parks service alone. If we moved all of the sites of national historic significance into the hands of the parks service it is possible that the number of parks units could triple or quadruple. I doubt Senator Coburn would be excited with the prospect of bringing these “off-budget” historical resources “on budget” to the National Parks Service. I do agree that the maintenance backlog at our nation’s parks and historic sites must be addressed for their preservation and protection.

Cahokia Mounds is a World Heritage Site Administered by the Illinois Historic Preservation Agency (IHPA)
Senator Coburn points out specific “earmarked” preservation projects like the Route 66 Corridor Preservation Program, a program providing $2.9 million in grants and resources to historic features along Route 66. He identifies that it is redundant for the pre-existing Scenic Byway program for the Department of Transportation. I like Senator Coburn am hesitant to encourage specific set-asides from potentially competitive grant programs for historic corridors and byways. I am sure that if the Route 66 Corridor had competed it would have been able to win grant funds to support its preservation.[3] A competitive process ensures a level playing field for other historic corridors in American History including the National Road, Pacific Coast Highway, Columbia Road, etc.
Like President Obama’s budget, Coburn proposes ending the Preserve America Program and Save America’s Treasures, saving $300 million over ten years. He notes that Save America’s Treasures was originally intended to be a “two-year project” for the millennium, and the companion Preserve America came two years after.[4] This program has not been as successful as hoped, with standards and metrics of success proving to be highly variable from project to project. But Donavan Rypkema did an analysis of the economic effects of the program and found that of the jobs generated by the program, it only cost the federal government $13,000 per job. Compare that with the overall stimulus cost of more than $200,000 per job.
National Heritage Areas are also targeted in this report. The program, started by Congress has grown to include 49 heritage areas. Originally the program was intended to provide seed money with the ultimate goal of self-sufficiency for heritage areas. Unfortunately, many areas have failed to achieve self-sufficiency, continuing to rely on federal funding. The discontinuation of financial support for underperforming areas will result in $174 million in savings over the next 10 years.[5] My advice for National Heritage Areas is to seek diverse sources of revenue and maximize their fundraising efforts, as both Republicans and Democrats have identified the program as a target for cuts.
This report also targets Park Partnership Grants. This program was an attempt to leverage sponsors for the parks service. To end this program is counterproductive. Sponsorship and fundraising can bring many needed resources to National Parks. If the program is ineffective at securing sponsors and donors then the approach should be reworked. A proposed cut would save $30 million, but at what cost to sponsors not recruited?[6] Other organizations and agencies are acquiring sponsors. I just completed a visit to the new Capitol Visitor Center, and there were many private sponsors of this important project. Clearly, some organizations are reaching these sponsors and the Parks Service should be no exception.
Ending Preservation Tax Credits
Under the heading “End Special Interest Corporate Tax Breaks” Senator Coburn proposes ending the Preservation Tax Credit and Credit for the Rehabilitation of Non-Historic Structures. Senator Coburn views these projects as “wasteful” spending:
Millions of dollars in tax benefits were recently used to fund the $27 million development of a beer garden and microbrewery at a former Coca-Cola syrup plant in St. Louis. This included $14.4 million of financing for the project provided through a HUD-insured mortgage. The project also benefited from $1.25 million in state brownfields credits, $2.8 million in tax-increment financing, and a $5.3 million federal historic preservation tax credit. The brewery, a beer tasting room and a beer garden were developed in a 12,000 square feet building. In addition to the brewery there are 77 apartment units along with 16,000 square feet of commercial space available.
The $18-$20 million conversion of Milwaukee‘s historic Loyalty Building into a Hilton Garden Inn is also expected to be financed in part with federal historic preservation tax credits. The 6-story building was purchased for $1.7 million in March – an amount less than half of the tax credit the developer would receive if the final project cost is $20 million.
A similar $40 million project is expected to utilize these tax credits in Buffalo to renovate the Lafayette Hotel, after it was added to the National Register of Historic Places in August. The redevelopment project will see the upper floors converted into 115 one and two-bedroom apartments and a 34-room boutique hotel will occupy the second floor. Prior to the renovation, the building was home to a number of social services organizations that used the rooms for ―short-term emergency housing clients.[7]
This would be a colossal and catastrophic mistake. Let’s take each of these points one by one. I am unclear from this section what Senator Coburn thinks about how historic preservation should be used. It seems that in order to be “historic preservation” a building must be used as a museum. This approach to pure preservation fell by the wayside in the 1970’s and misses the tremendous impact of preservation in downtowns, special districts, and neighborhoods across America.
In St. Louis, a microbrewery and apartments is a great use for a historic syrup factory, and the photos of the project are outstanding. A review of the market-rate apartments did not reveal a “luxury” apartment building. The success of the Temtor mixed-use lofts in St. Louis should be celebrated, not condemned. In a weak-market city like St. Louis these projects require a great degree of public assistance, it’s basic real estate economics. When I reviewed how complex the capital source of funds was, the developer here deserves a medal for making the economics of this project work.

The Temtor Lofts Project in St. Louis is an Excellent Adaptive Re-Use Project (St. Louis Post-Dispatch)
The Loyalty Building in Milwaukee illustrates again a lack of understanding of the economics of historic real estate development. The report argues that the acquisition price of the building is too low relative to the tax credit to be received. This also is incredibly misleading, as the historic tax credit program does not grant any credits on the price of acquiring a building. It is an investment tax credit, providing a tax credit for the amount of qualified rehabilitation expenses to be invested into the historic building. If this developer is investing $20 million into the project the amount of jobs and economic activity generated will be significant. I have talked about how preservation means jobs in many previous posts. This is something again to be commended, and I am sure construction workers in Milwaukee, another weak-market city, are excited about this prospect. Also as a preservation advocate myself, it’s a pretty amazing historic building in Downtown Milwaukee.

Photo of the Loyalty Building (University of Wisconsin)
The Lafayette Hotel project seems to espouse that replacing temporary housing for a social service agency with a hotel is a bad use for a building. What the report fails to mention is that an out-of-town owner who had invested little in the structure, raising a number of concerns from the Planning Board, owned the hotel.[8] The newspaper report does not have positive things to say about this absentee landlord. The new purchaser is from Buffalo and planning to invest $40 million, removing asbestos, making critical upgrades, and generating jobs in Downtown Buffalo including new retail tenants that are locally owned.

Hotel Lafayette (Buffalo News)
The federal rehabilitation tax credit is an incredible success and an invaluable resource to our nation’s historic buildings. It has almost universal praise from politicians, businesses, residents, developers, and community leaders. Some of its ultimate popularity stems from its “bricks and mortar.” Politicians love grand openings, and they love bricks and mortar projects, a physical manifestation of revitalization and success. The before and after photos of these buildings, grand openings, and celebrations give this program a political strength that most other programs fail to achieve.

Politicians & Community Leaders Love Ribbon Cuttings (Aiken Standard)
The report laments that the rehabilitation tax credit program will “give away” $500 million in federal funds with $400 million for corporations in 2011 and $600 million in 2012. The program is not “giving away” anything, as it is a 20% tax credit that leverages investment at a rate of 4 to 1. Additionally it requires that the rehabilitation be done in accordance with the Secretary of Interior Standards for Rehabilitation, ensuring a historically sensitive rehabilitation. Of course the report conveniently leaves out the “but-for” test; but for this tax credit of $500 million, $2 billion of economic activity and investment in historic buildings would not happen. These purchases, jobs, and investments create a ripple effect throughout our economy. In a period of limited economic activity this is a “shot in the arm” for America’s lethargic construction industry. Additionally, many developers form as corporations to limit their liability, a practice common with business activity. These are not “corporate giveaways.”
The report claims that the program is “duplicative” with other agencies. It says:
These tax credits are highly duplicative of numerous other federal grant programs allowing federal funds to be used for promotion of historic preservation, such as the Community Development Block Grant, the National Community Development Initiative, and USDA‘s Rural Development program.[9]
Again, this is misleading. Community Development Block Grants, the National Community Development Initiative, and the USA Rural Development Program may include limited preservation projects, but that is not their sole purpose. This tax credit program is a preservation-only program with a preservation-only focus on real estate development.
The last point the report states is perhaps the most misleading. It claims that the federal program duplicates state tax credits for historic preservation:
Many states have a similar state tax credit in place, including:
- Minnesota, which has a 20 percent tax credit in addition to the federal tax credit;
- Wisconsin, which has a 5 percent tax credit in addition to the federal tax credit;
- Rhode Island had one that has been at least temporarily discontinued because of fraud and budget concerns;
- Michigan had one that was recently eliminated.[10]
These state programs were added after the federal program, and are a complement to, and not a substitute for the federal program. These state programs have boosted federal efforts, and leveraged even more dollars, and have not “replaced” the federal program. See my analysis of Ohio.
Ending the New Markets Tax Credit Program, a Friend of Historic Preservation
“Back in Black” proposes the discontinuation of the federal New Markets Tax Credit (NMTC) Program, a program managed by the Treasury department to provide tax credits for catalytic community development projects. The NMTC program is not expressly a preservation program, but many preservation projects incorporate the use of these credits in catalytic projects. I have studied the regulations for this program and they are incredibly complex. The amount of lawyers, legal structures, and administration involved with the NMTC program is prohibitive for most projects. The report identified:
These credits have been used to subsidize expensive construction projects like the $116 million renovation of the landmark Blackstone Hotel in downtown Chicago, a Marriott hotel. This project‘s main beneficiary was Prudential Financial Inc., the second-largest U.S. life insurer, which received $15.6 million in New Market Tax Credits.[11]
This is incredibly misleading. These large financial institutions are project investors, purchasing these tax credits to provide capital to developers of these projects. Prudential Financial was not the project beneficiary. This argument would be the equivalent of saying we should not provide tax benefits for 410k retirement plans because the money just goes to MetLife, Prudential, or other big Investment Funds. Moreover, NMTC credits are allocated on a competitive basis. The community development institution that thought this was a worthwhile and important project for the community allocated these credits.
Making the Case for Preservation
Preservation advocates cannot allow this short-sighted misinformation to go unaddressed. Senator Coburn’s plan would do irreparable harm to Preservation in America. As part of deficit reduction, we should be prepared to identify programs that are not meeting core needs, but we absolutely have to lobby for programs that have been invaluable to preservation, including the Rehabilitation Tax Credit Program. Most legislators are not preservation experts and may not understand the economic impacts, community development impacts, and policy impacts of their actions. Advocacy is a crucial part of the education process.
[1] Back in Black, “Department of the Interior” p. 9
[7] Back in Black “Reforming Tax Expenditures & Ending Special Interest Giveaways”, p. 10
[8] http://www.buffalonews.com/city/article20023.ece
[11] Back in Black “Reforming Tax Expenditures & Ending Special Interest Giveaways” p. 5