Historic Tax Credits in Wisconsin - New statewide studies

Get Historic Tax Credits for your historic building.

Get Historic Tax Credits for your historic building.

Two new studies evaluate the statewide economic impact of Wisconsin’s Historic Tax Credit (HTC) program. Both studies were conducted in response to changes proposed to the program by state lawmakers that would have dramatically reduced it effectiveness.  The reports of both studies are available below.

Background

Since 1989, the State of Wisconsin has offered a 5% tax credit on qualified expenditures for rehabilitating historic commercial buildings. Since then, an average of 11 commercial projects per year were approved under the program – projects that have helped revive community downtowns, create jobs, and increase the value of taxable property. In most cases the state tax credit can be used in conjunction with a similar federal credit of 20%. The programs have worked in tandem to provide a significant financing tool for rehabilitation projects that may otherwise be prohibitively expensive due to their sensitive historic materials.  Under the 1989 program Wisconsin was one of 34 states that offered an HTC program, and one of 16 states that had no aggregate cap on the credit. On January 1, 2014, the Wisconsin HTC was increased to 20%. Usage of the program skyrocketed, and later in the year the state legislature suspended the program while they re-evaluated its provisions. Legislators proposed revisions to the program that would have made it unattractive to many developers and property owners, including an annual cap on the value of projects that could claim the credit. In the face of lobbying by developers and preservation advocates like the Wisconsin Trust for Historic Preservation, the legislature withdrew proposed changes and reinstated the program under the original provisions. 

The Studies

Washington Avenue - Cedarburg, WI

The first study (download the pdf here) was conducted by national accounting and advising firm Baker Tilly. It looked at 25 HTC projects in 2014 (a total of 31 were approved) that make up more than 99% of the total credit amount for that year. Key findings include:

  • Rehabilitated commercial properties supported by the HTC program are projected to generate $277.7 million in direct spending, and $139.9 million in secondary spending, for a total impact on Wisconsin’s economy of $417.6 million by the end of the first year of operations.
  • Annual operations of rehabilitated commercial properties supported by the HTC program are estimated to contribute $63.7 million and construction is estimated to create $353.9 in revenue for Wisconsin’s economy.
  • For the $34,799,764 awarded in Historic Tax Credits since January 1, 2014, the 25 evaluated projects supported by the HTC program are anticipated to create over 2,800 FTE jobs as a result of construction activities and permanent jobs in the state.
  • The program is estimated to see a complete payback of State of Wisconsin tax revenue by Year 7 of post-rehab operations, with an estimated $14 million being paid back to the state by the end of construction. These funds will be paid directly to the State of Wisconsin prior the beginning of operations and likely before the State of Wisconsin revenues are reduced by the tax credit.
  • Between labor and business purchases, the 25 approved projects are estimated to create up to $480.8 million in construction spending, and $88.7 million in annual operations. After 5 years of operations, the projects are estimated to create up to $951.6 million in community spending.
  • By Year 10 of operations, the evaluated projects are estimated to directly pay more than $46 million in tax revenue to the State of Wisconsin, a 133% return on the original $34.9 million approved. Including estimated indirect and induced tax payments, by Year 10 of operations, the approved projects will have paid an estimated $96.8 million in taxes within Wisconsin.

 

The second study (download the pdf here) was conducted by the Historic Preservation Institute (HPI) in the School of Architecture and Urban Planning at the University of Wisconsin-Milwaukee, and sponsored in part by the Wisconsin Trust for Historic Preservation. It looked at all 31 HTC projects approved in 2014, and compare that data to projected data based on changes proposed for the program in 2015. Key findings of this study include:

Performance of HTC Program in 2014 (20% credit, under provisions of original 1989 program) - Economic impact and job creation.

  • $35,071,257 Wisconsin Historic Tax Credits approved by WEDC - 31 projects within the 20% State HTC
  • $35,071,257 US Historic Tax Credit money from Feds - 31 projects within the 20% Federal HTC Program
  • $211,269,257 Direct private investment and expenditures associated with the 31 HTC projects - Based on applicant predictions
  • 4,062 Jobs created - 1,692 construction jobs and 2,370 permanent jobs - Using NPS calculations - ($52,000 Investment/job created)
  • $20,310,000 - Annual state tax revenue from 4,062 created jobs at $5,000 of state taxes per job
  • $187,993,422- Amount paid by employers to 4,062 new employees - Based on national studies - $46,281/job

Projected economic impact and job creation in 2015, under proposed changes ($10,000,000 cap and  recapture clause)

  • $10,000,000 Wisconsin Historic Tax Credits requested of WEDC - 20% Wisconsin HTC Program
  • $10,000,000 US Historic Tax Credit money from Feds - 20% Federal HTC Program
  • $60,240,000 Direct private investment and expenditures associated with the HTC projects - Based on applicant predictions
  • 1,158 Jobs created - 482 construction jobs and 676 permanent jobs - Using NPS calculations - ($52,000 Investment/job created)
  • $5,790,000 - Annual state tax revenue from 1,158 created jobs at $5,000 of state taxes per job
  • $53,593,398 - Amount paid by employers to 1,158 new employees - Based on national studies - $46,281/job

Impact of proposed changes on the HTC program – differences beween original provisions and proposed changes.

  • $25,071,257 Wisconsin HTC dollars saved - Money saved from lowering the $35,071,257 total to $10,000,000 Cap
  • $25,071,257 Federal HTC $ not coming to Wisconsin - Fewer projects pursued with $10,000,000 Cap
  • $151,029,257 Direct private investment and expenditures not realized - Less money - $10,000,000 Cap
  • 2,904 Jobs not created - 1,210 construction and 1,694 permanent jobs - Fewer jobs using NPS calculations
  • $14,520,000 - Tax revenue not received - Annual state tax revenue from 2,904 jobs at $5,000/job
  • $134,400,024 - Amount not paid by employers to new employees - National studies - $46,281/job

 

Intangible benefits of the HTC program?

State Street historic commercial district - Madison, WI

  • Historic rehabilitation projects help revitalize commercial centers in Wisconsin communities. Many Wisconsin communities have vintage commercial and industrial buildings from the late-19th and early-20th centuries. Tax credits help underwrite the usually higher cost of rehabilitating old buildings.
  • Historic rehabilitation and restoration projects create more jobs per $1m of investment than new construction. Rehabilitation projects are more labor-intensive, while new construction tends to be more material-intensive.
  • Re-using old buildings is more environmentally sustainable. Existing buildings already embody the energy it would otherwise take to mine, refine, transport, and erect the materials it would take to build them new.
  • Old buildings are great background for Placemaking projects. In fact, historic buildings are often the visual interest and cultural heritage that make Wisconsin communities unique places that attract and reward visitors to Wisconsin communities.