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Local Incentives for Preservation
by Ron Emrich, Urban Prospects and Preservation Texas' Board Vice
President, Public Policy
Preservationists across Texas are increasingly interested in finding
creative ways of bridging the gap between the financial needs of
a particular preservation project and the funds available to make
that project successful.
Local property tax incentives are one of the most common - and commonly
sought after - inducements for historic preservation. Such incentives
have been allowed by the State of Texas since the adoption of a
state constitutional amendment in 1977, yet fewer than 25 Texas
cities and towns offer such an encouragement to the preservation
and restoration of historic properties.
Taxing authorities (cities and counties) may allow property tax
exemptions for all or part of the assessed value of a structure
if the property is either designated as a Recorded Texas Historic
Landmark (RTHL) by the Texas Historical Commission, or is designated
as historically significant and in need of tax relief to encourage
its preservation by the local taxing entity. Most communities that
currently offer some form of property tax-based preservation incentive
do so through their local landmark preservation ordinance mechanism.
Some cities offer full local tax abatement for a specified time,
while others partially reduce (or limit increases of) taxes.
A number of tax incentive programs, including those in Austin, Plano
and Round Rock, provide full or partial property tax exemptions
to specifically designated historic properties for a set period
of time. Brownsville offers exemptions on an ongoing basis to a
discrete list of landmark buildings, but requires annual review
by the City Commission (Council). Other cities require proof of
"substantial rehabilitation" as part of the eligibility for tax
relief: restoration costs must exceed between 20 and 51 per cent
of the pre-renovation value of the building in order to receive
a tax incentive.
The City of Dallas has offered a powerful set of tax incentives
since 1993 (The legislation will undergo "sunset review" early in
2001). More than $260 million was invested in private rehabilitation
and restoration of historic homes and commercial properties between
1993 and 1998, thanks to the incentives. In order for most preservation
projects to qualify, restoration costs must exceed 50 per cent of
the value of the structure (excluding the land value). Approved
projects have their tax assessments frozen at pre-renovation value
for 10 years.
In order to encourage preservation projects in targeted historic
areas and neighborhoods, Dallas also offers more comprehensive tax
exemptions (sometimes up to complete abatement of local taxes) for
restoration in endangered neighborhoods and for residential conversion
of underutilized historic commercial buildings.
Abilene offers two types of incentives located in the city's Historic
Overlay Zone: an automatic reduction in taxes of $200 per year (or
20 per cent of taxes) for all historic properties within the zone;
and a rehabilitation incentive amounting to a 50 per cent reduction
in taxes for investments totaling $750 or more.
San Antonio's program consists of a residential historic rehabilitation
incentive of a freeze of assessed taxable value at pre-renovation
levels for ten years. Commercial restoration projects can qualify
for a full tax abatement for five years, and if the property does
not change ownership, an extension for an additional five years.
In each of these cities, studies have shown that the economic activity
generated by these tax incentive-driven projects significantly offsets
the short-term cost to the city in lost property taxes. The 1998
study by eight Texas cities and the Texas Historical Commission,
reported in "Historic Preservation at Work for the Texas Economy,"
discovered that every $1 million of historic rehabilitation generates
22.1 jobs, $616,000 in new income and almost $100,000 in additional
state and local taxes, as well as long term improvement of the local
tax base, new housing units and improved quality of life.
Local tax incentives, often coupled with the very successful federal
income tax credit for commercial historic property restoration,
are useful and powerful tools for revitalization historic downtowns,
neighborhoods and beloved landmarks. To obtain more information,
or to contact representatives of many of the communities currently
offering such incentives, contact Preservation Texas at 512.472.0102.
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