Editorial: Saving California’s history, sweetened with a tax break


A recently passed state bill designed to advance the preservation and renovation of historic buildings would offer a 20% state tax credit to developers restoring structures listed on the National Register of Historic Places or the California Register of Historical Resources. The bill, AB 1999, authored by Assembly Speaker Toni Atkins (D-San Diego), also prudently requires that projects demonstrate they can generate at least as much tax revenue for the state as they get in tax credits. This is a smart mechanism for boosting investment in the rehabbing of historic buildings without taking a toll on the state’s tax revenues.

Private residences are eligible for smaller credits — a maximum of $25,000 per property owner — if they can demonstrate a measurable community benefit. But income-producing commercial projects would get the biggest boost from the credit and, in turn, would generate revenue for the state through sales taxes on construction materials, wage taxes paid by workers during the renovation and beyond, and tax revenue from tourism and business. Tax credits often encourage historic renovation in rundown neighborhoods because they help generate investment in riskier projects in those areas.

A comparable federal program, which has existed for more than 30 years, has fostered revitalization across the nation, supporters say. The L.A. Conservancy estimates that in California alone, nearly $1.5 billion has been spent over the last 10 years on historic renovation projects that took advantage of federal tax credits. The federal program, like the proposed California program, allows a credit equal to 20% of the rehabilitation costs of the project. Generally, developers transfer the credit to investors in exchange for equity, which lowers the amount of financing the developer needs to undertake the project.


The state tax credit could be used along with the federal tax credit. Supporters — including both developers and preservationists — expect it to trigger more historic redevelopment. These credits could be particularly helpful to developers seeking to renovate historic buildings that face expensive seismic retrofitting requirements. There is also an added 5% bonus tax credit for projects that include low-income housing.

There are historic tax credit programs in 35 other states. The one that the California law would create is modeled on Ohio’s program, which requires a project to show that it can generate at least as much money for the state as it takes from the credit.

This bill could boost economic development while encouraging the preservation of historic structures. Gov. Jerry Brown should sign it into law.

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