Opportunity zones, distressed areas in Maryland and across the U.S. where investors can get tax breaks, aim to match record amounts of capital with overlooked communities. (Barbara Haddock Taylor / Baltimore Sun video)
Champions of revitalization and community development were right to cheer Gov. Hogan's recent announcement to provide additional incentives to spur action and interest in the state's newly designated federal Opportunity Zones. Unfortunately, missing from the governor's plan was any mention or support for Maryland's critical yet tragically underfunded and overlooked historic tax credit.
Established in Maryland in 1997, mirroring a similar federal program created under the Reagan administration, the state historic tax credit provides a 20 percent credit against the expenses associated with rehabilitating an historic structure. Since its creation, the program has resulted in thousands of catalytic projects that have transformed communities across the state – from Baltimore to Cumberland and beyond. Coupled with its federal counterpart, the credit is a must-have tool to spur the kind of smart growth infill that politicians up and down the political ladder clamor for and suggest they support. Without this tool, complex and costly reuse projects often fail to coalesce.
The economic impact of these projects has also been nothing short of spectacular. Reports by the Abell Foundation and others have consistently shown a remarkable 8 to 1 return on investment for Maryland taxpayers and nearly 90 jobs created for every $1 million in rehab work. As a result, the program has quietly created nearly 30,000 jobs and yielded almost $3.5 billion in economic activity in just over 20 years of its existence. It has been a wise and fruitful investment for Maryland — not something we can say about every tax credit the state has created. It has also saved and revitalized important architectural landmarks in Baltimore, such as 10 Light Street, the American Brewery, the mills of the Jones Falls and hundreds more. Elsewhere across the state, the program has also played a major role in revitalizing places like downtown Frederick and more recently Cambridge, where the credit is providing an economic boost to the renaissance of the historic downtown and nearby Phillips Packing Plant.
Maryland’s 188 lawmakers go back to work Jan. 9 for their annual 90-day General Assembly session. Top issues include money for schools, legalizing sports betting and raising the minimum hourly wage in the state to $15.
Despite the demonstrated and concrete success of the program, the annual appropriation has been slashed by nearly 70 percent over the past dozen years — with a paltry $9 million available annually to support large, community-scale redevelopment projects across the state. Perhaps it's for this reason that the Maryland Department of Housing and Community Development declined to even mention the historic tax credit on their new Opportunity Zone website that lists other revitalization credits and financing available from the state.
Maryland is also falling behind its peers in supporting this kind of proven program. By comparison, Virginia invests nearly $100 million annually, and neighboring West Virginia now invests $30 million. In Pennsylvania, the story is the same where legislators are debating a $50 million increase to their program. As a result, Maryland is losing out as developers head for states where a more friendly business environment makes these challenging projects possible. Examples abound of stalled Maryland projects — including an affordable housing project utilizing a historic structure in Hagerstown that has languished for lack of available state historic tax credits. The future of places like Ellicott City will also greatly depend on the availability of credits from this program, which is designed to make complex and costly rehab projects possible — precisely the kind of projects that will have to be undertaken to restore that incredible place.
As lawmakers and the governor prepare to justify spending levels for the upcoming budget, the state historic tax credit should be a top contender. Unlike other tax credit programs where incentivized jobs and businesses are able to pick-up and leave the state once the incentive dries up, a rehabilitated building cannot be picked up and moved across the Potomac River. It's a sound and wise investment that the Maryland Department of Legislative Services previously called out as a model tax credit.
If the state and governor are serious about making Opportunity Zones work and incentivizing the reuse of our existing structures, we also must make increased funding for the historic tax credit a priority. Leaving it out of the discussion of funding a package of incentives to accelerate growth in our state would be to the state's economic detriment. For these reasons, in the coming legislative session, Preservation Maryland intends on working with legislators from across the state and political spectrum to support legislation that would improve the program and provide much needed increased funding. We hope Governor Hogan will lend his support to these proposals and to a cost-effective program that truly makes Maryland open for business.