An important aspect of our cultural heritage, Historic Preservation has also long been considered the stuff of museums and history buffs with deep pockets.  However, the economic impacts and benefits of preservation are far-reaching and important.  Preservation activities create jobs, add to state and local tax collections, increase property values, increase tourism and generate business investment, and often conserve an artifact of local culture and history. 

A 2005 study on the economics of historic preservation (Rypkema) concluded that “very few of the 500 or so categories of economic activity have as much economic impact (measured in relation to job creation, increase in household income, and demand created on other industries) as the rehabilitation of historic buildings.”  Most recently, a study by The Rutgers University Center for Urban Policy Research in cooperation with Professor Dan Rickman of Oklahoma State University (2008) found that a total of $357 million was directly spent in the state of Oklahoma annually, creating more than 8,000 jobs.  Those jobs in turn generated $460 million in output, $166 million in labor income, $243 million in gross state product, and $25 million in Oklahoma state and local tax revenues.

While the benefits have never been a question to most, the perception of higher costs often prevents a worthwhile project from proceeding.  However, a careful comparison of the economics of new construction as compared to the restoration or rehabilitation of a historic property can reveal a number of benefits to the balance sheet. 

Chief among these are the state and federal preservation tax incentives for the certified rehabilitation of a certified historic structure, each allowing a 20% investment tax credit applied towards the allowable costs of a certified project¹.  For projects which are not “certified”, a 10% investment tax credit is available (for the rehabilitation of buildings constructed prior to 1936).  Totaling 20% to 40% of the qualified costs of a rehabilitation project, these tax credits (not “deductions”) can have a significant impact on the economic viability of a preservation project. 

Also, while the Federal tax credits are not “freely transferable”, the Oklahoma state tax credits are.  Some development groups may therefore include entities which are primarily interested in being eligible for the Federal tax credits, whereas the Oklahoma tax credits can be “bought and sold” to others.

This past month, The Small Group purchased a historic building in downtown Edmond, constructed in 1906.  We are in the process of rehabilitating the property and plan to move our offices during the last week of September.  While we are not pursuing the “certification” route required for the 20/20 tax credits, we are planning to take full advantage of the 10/10 offered for qualified costs in the project.  The benefits of these credits in part made it possible for us to pursue the project.  Therefore, if you are considering a new home for your place of business, or simply considering development of an income-producing property, the rehabilitation of a historic property should be on your shortlist.

¹     Federal tax credits are authorized under the Tax Reform Act of 1986 (Section 47 of Title 26 of the United States Code).  The Oklahoma State tax credits are authorized under State Statute 68-2357.41.  The Oklahoma State tax credit was preserved by the legislature in 2010, although claiming the credits has been deferred until 2012.