Wednesday, April 8, 2015

When the Carrot Becomes the Stick: Who Will Preserve San Francisco's Heritage?

By: Jason Yots[1]

I recently spent a week with my family in San Francisco, my first visit since 1999.  At that time, the city’s real estate market was heating up as a result of the late 1990s tech boom in nearby Silicon Valley.  If the market was hot back then, it’s absolutely scorching today, for largely the same reason.  Conversations on streetcars, at parties, and in shops and restaurants - among recent and long-time residents alike - centered on $3,500 one-bedroom apartments and cash-purchases of million dollar townhomes.[2]  Even the unprecedented California drought (entering its fourth year) and the city’s alarming homeless crisis (approaching 8% of its residents) took a backseat to real estate chatter.

During my visit, I was reminded that 80% of the city’s buildings were destroyed during the unmatched earthquake of 1906.  As a result, the city has a relatively “young” building inventory when compared to the 18th and 19th century cities in places such as the American northeast, and to the even older building stock that exists in European cities.  Nonetheless, many buildings are older than the 50-year-old measuring stick applied by U.S. preservationists when assessing eligibility for listing in the National Register of Historic Places (and, by extension, for rehabilitation tax credits (RTCs)).



Building renovations and “tear downs”[3] abound, with seemingly little consideration for historic (or even civic or cultural) significance.   Pre-war structures are routinely masked by character-shifting facelifts, creating increasingly homogenized streetscapes in many neighborhoods.  In commercial districts, storefront openings are scraped clean, replaced by less appropriate new commercial units.  While there certainly are plenty of solid examples of urbanism throughout the city (my family did not use a car all week), its 20th century architecture is under siege, and no one seems much bothered by it.  Out with the old, in with the luxury.

The federal RTC - a critical budget-gap-filler in places like Rust Belt cities – would be a mere windfall in San Francisco[4], with residential rents rivaling stratospheric New York City’s and downtown office rents approaching $100 per square foot.  At those rents, a building will pay for its own renovation costs, without resorting to government incentives.  And therein lies the rub for preservationists: when their most effective “carrot” - the RTC - is more of a hassle than a feasibility indicator, how do you prevail upon developers and homeowners to honor the historic significance of their buildings?

The simplest answer may be that you don’t, at least for now.  When the carrot becomes the stick, even the silliest rabbit will avoid it.  But if the drought endures, and the tech market crashes (again), and the homeless population reaches a tipping point, and healthy urban density becomes overcrowding, then people will leave the city, and rents will drop correspondingly.  And then rehabilitation activity that once paid for itself will require the same incentives currently relied upon by San Francisco’s less affluent American counterparts.

Are preservationists being reduced to ill-wishers, hoping for the economic demise of a place just so that we can regain some influence over the direction of its historic resources?  I certainly hope not, but what alternatives are there to preserve and honor beautiful, historic cities like San Francisco?  Stand-by preservation tools – historic districting[5], preservation ordinances, conservation easements[6], civic responsibility/shame – likely will be ineffective in those places, where demand for shelter far outstrips its supply.  Until the carrot returns to being the carrot, preservationists may, in fact, be reduced to hoping against hope.




[1] Jason Yots is a tax credit attorney and the President & CEO of Preservation Studios, a Buffalo-based historic preservation consulting firm. www.preservationstudios.com
[2] Almost impossibly, the city has added nearly 95,000 new jobs, but only 10,000 new housing units, in the last five years, creating ever-increasing pressure on commercial and residential rents and on home prices.
[3] The phenomenon of acquiring a serviceable building, tearing it down and replacing it with a much larger new building.
[4] If it’s even accessed at all: in 2014, only four “Part 2” approvals (the government’s indication that a project’s design is RTC-worthy) were issued in the entire state of California.
[5] There are several local, state and National Register-listed historic districts in the city.  Based on the RTC statistics, the NR districts are not generating RTC activity (they otherwise have no teeth).  Local districts afford cities and citizens the most participation in historic resource decisions.  I could not locate (low-hanging) data indicating whether San Francisco’s are largely honorific, or if their preservation laws are actively enforced by a (staffed) commission with (binding) jurisdiction.
[6] San Francisco Heritage, the city’s preservation advocacy charity, has collected only 60 preservation easements since 1974.  Not shabby, but not game-changing in a city the size of San Francisco.

Friday, March 6, 2015

The Envelope, Please: NPS Issues Its Annual Rehabilitation Tax Credit Report


By: Jason Yots

We’ve entered that exciting season that straddles Winter and Spring:  Award Season.  Yes, yes, there are the Academy Awards, and all that sexy red carpet stuff, but more importantly for places like Buffalo, NY, it’s time for the annual Rehabilitation Tax Credit Awards!  Each year, the National Park Service publishes a titillating report discussing the performance of its rehabilitation tax credit (RTC) program.[1]  And the big winners for 2014 are . . .

Best Supporting Actor in the Role of Job Creation

We’ve said it before, and we’re saying it again: preservation means jobs.  In 2014, the RTC program created nearly 78,000 jobs, or roughly 1.5 times the office worker population in downtown Buffalo.   And these are not minimum-wage, service-sector jobs: the average annual pay-day on an RTC project is over $40,000.  Bravo RTCs!

Best Director of Taxpayer Dollars

The RTC leverages private sector investment with taxpayer dollars.   As a result, the program is relatively efficient in its delivery of a wide array of end-spaces: rental housing (42% in 2014), offices (18%) and commercial, such as retail, hospitality, manufacturing, performance, etc. (25%).  The RTC program also serves a broad spectrum of users in nearly every corner of the nation.  For example, among the nearly 20,000 new rental housing units generated by the RTC program last year, a full third will be available for low- and moderate-income tenants.  This is great news for both high-rent cities (where affordable housing is vanishing daily) and poorer regions (where competition for affordable housing subsidies is fierce).  Encore, encore!

Best Choreography of Economic Development Incentives

As a result of this flexibility, the RTC program can be used to double-down on other economic development subsidies, such as federal low-income housing tax credits (4% of RTC projects), state rehabilitation tax credits (50%), property tax abatements (18%), brownfields tax credits and others.  Based on an NPS survey of RTC program users, 88% of program participants used multiple economic development resources to achieve economic feasibility.  Raise your glass to a proven budget-gap-filler: the RTC!

Lifetime Achievement Award for Awesomeness

The Lifetime Achievement Award for Awesomeness goes, again, to the RTC program!  This is becoming embarrassing! But seriously folks, this program gets economic development done.  Since 1977, it has:

* Created 2.47 million well-paying jobs

* Generated $73.8 billion in rehabilitation activity across 40,038 projects nationwide

* Helped finance the construction of 255,994 housing units, of which 137,978 are available to low- and moderate-income renters

* Prompted many of the 1.59 million listings in the National Register of Historic Places

RTC, you are, in a word, awesome.  Keep up the good work!


Jason Yots is a tax credit lawyer and President of Preservation Studios LLC, an historic preservation consulting firm headquartered in Buffalo, NY.  www.preservationstudios.com.


[1] “Federal Tax Incentives for Rehabilitating Historic Buildings: Statistical Report and Analysis for Fiscal Year 2014” (http://www.nps.gov/tps/tax-incentives/taxdocs/tax-incentives-2014statistical.pdf )

Tuesday, February 3, 2015

Can Property Taxes Discourage Demolition By Neglect?

By Jason Yots

Buffalo Rising recently reported about the ongoing preservation battle at 110 - 118 South Park Avenue, in Buffalo's Cobblestone Historic District (1).  In short, the owner would like to demolish the building and replace it with a multi-story tower.  Having been denied a demolition permit in 2011, the owner now is ignoring code enforcement directives and allowing the building to rapidly deteriorate.  Efforts by surrounding business owners to buy-out the owner have been rebuffed.

Our city's building code enforcement process can and should do more to discourage demolition by neglect.  But tougher code enforcement alone will not eradicate DBN tendencies.  Hitting owners in the wallet, however, might be effective.  One such measure that's been considered in other states is land value taxation, through which the land beneath the building - rather than the building itself - is allocated most of the property's value.  Under our current property tax system, as an owner disinvests in his/her property, the market value drops and, eventually, so will the property tax assessment, making it easier for a DBN-owner to stay in title without reinvesting.  Under a land value taxation system, DBN is discouraged because an owner's taxes are based on the value of the land (which generally is not negatively affected by DBN), requiring an owner to maintain his/her building to keep it cash-flowing.

Coupled with a receivership-based code enforcement process, land value taxation can be a valuable tool for communities battling DBN.

1. The People vs. Darryl Carr (February 2, 2015, http://buffalorising.com/2015/02/the-people-vs-darryl-carr/)

2.  Photo credit: Buffalo Rising

Monday, January 19, 2015

New York’s Brownfields Cleanup Program: Back From the Landfill?


By: Jason Yots

Like most Rust Belt states, New York has its version of a brownfields cleanup program (BCP) that offers financial assistance to developers willing to remediate and redevelop environmentally contaminated land and buildings.  In New York, that assistance is provided largely in the form of reimbursement-based state tax credits.  The last iteration of the BCP legislation was set to sunset at the end of 2015, prompting renewal negotiations in Albany last year.

At issue in those negotiations were perceived abuses (mostly downstate) of the redevelopment component of the program.  Critics argued that, despite prior rebalancing, the BCP still was too light on remediation results and too heavy on redevelopment upside (for which, goes the argument, there are other incentives, if needed, or the private market itself).  Proponents of the program argue that in hard-to-develop areas like upstate New York, the BCP is a critical component of the bundle of economic development incentives required to plug the funding “gap” that plagues most real estate redevelopment projects.

Backing critics, New York Governor Andrew Cuomo recently vetoed the legislative renewal of the BCP, casting a cloud over numerous upstate projects that would have relied on the program in the coming years.  But there may be a silver lining:  The Buffalo News reported today that Governor Cuomo is stepping back from his prior veto in exchange for more changes to the program during the budget process.[1] 

The most significant change for historic rehabilitation projects may be that the redevelopment component of the BCP would be available only if at least one of three criteria is satisfied:

1.            The area surrounding the project is “economically distressed” (to be defined, but presumably will take a cue from similar provisions in New York’s rehabilitation tax credit law).

2.            The project involves “affordable housing” (generally meaning households earning less than 60% of the area’s median income).

3.            The project is “upside down” (meaning that the cost of the remediation exceeds the current market value of the building).

Will these new requirements constrict the overall flow of projects toward the BCP?  Potentially.  But most upstate New York projects enjoy the dubious benefit of satisfying one, if not all, of the new criteria.  Hopefully, that will mean that the BCP - which has become so critical to the feasibility of historic rehabilitation projects in upstate New York - will remain fully available and funded.



[1] “Cuomo Plans Changes for Brownfields Tax Breaks”, The Buffalo News, January 19, 2015 (http://www.buffalonews.com/city-region/cuomo-plans-changes-for-brownfields-tax-breaks-20150118)

Saturday, March 22, 2014

National Park Service Issues Its Annual Historic Tax Credit Report Card


By Jason Yots

If you’re like me, then you’ve been anxiously awaiting the issuance of “Federal Tax Incentives for Rehabilitating Historic Buildings”, the National Park Service’s annual report about the performance of its historic tax credit (HTC) program.  Well, wait no longer because the 2013 version hit inboxes this month (Note #2), and this year’s issue was illuminating to watchers of the historic rehabilitation industry.

Preservation By Numbers

Like all good annual reports, the HTC report is packed with statistics.  On the macro level, the historic tax credit program generated over $6.7 billion in new investment in 2013, an increase of 21% from 2012.  At the micro level, the average cost of an HTC project was $5,820,000, while forty percent of all HTC projects cost less than $500,000 to build.  An interesting tidbit for small cities like Buffalo, NY: projects both large and small can work with HTCs.

Jobs, Jobs, Jobs

In historic preservation, we never tire of that broken record: “Preservation Means Jobs!”  Because it’s true.  Since 1978, the HTC program has created over 2.4 million new jobs.  In 2013 alone, the program created nearly 63,000 net new jobs, up from 58,000 in 2012.   And before you can ask, “Where, in China?”, we read that an average of 78 new LOCAL jobs are created with each HTC project.  Factor in the $40,000 average annual pay-days on HTC jobs, and suddenly it’s a no-brainer that small market cities like Buffalo should be encouraging HTC development.

Lofts, Lofts, . . . Affordable Housing?

The HTC program is a strong housing generator.  In 2013, the program rehabilitated 247,625 units and helped to spur the creation of another 236,886 new units.  Of those 484,511 total units, 131,438 – or a full 27% - were low-to-moderate housing.  So, while the perception at times may be that HTCs only result in fancy urban lofts, the reality is that the impact of HTCs on the housing industry is in fact diversified.

Most Importantly, How Did WE Perform?

In the end, it’s all about us, so let’s close with some statistics specific to our state.  2012 was an active HTC year for New York, and 2013 built on that momentum.  In overall “Part 2” approvals (the government’s OK to start work on your HTC project), New York placed 5th with 63, behind Virginia (128) Louisiana (119), Ohio (78) and Massachusetts (72).   To give that number some context, however, consider that New York led the nation in total HTC project costs with an eye-popping $1.165 billion in estimated HTC investment (that is, about 17% of all HTC investment in the nation in 2013).  Ohio placed a distant 2nd in that category with $612,610,000.  New York’s total investment undoubtedly skewed a bit higher due to New York City’s propensity for mega-projects, but it’s clear that New Yorkers in general are aware of what only a handful of other states have figured out: commitment to the HTC program means new investment, new jobs and new lives for old buildings.

Jason Yots is President and CEO of Preservation Studios LLC  www.preservationstudios.com.

Notes:

1.  For background on the federal and NY HTC programs, please see http://buffalorising.com/2012/10/survival-of-nys-historic-tax-credit-program-may-depend-on-bifurcation/

Sunday, March 9, 2014

Scajacuada Creek and Expressway


Written by Derek King, Architectural Historian at Preservation Studios.
In August of 2012, an urban explorer who runs the blog "Concrete Aperture" explored the tunnels that comprise the capped stretch of Scajacuada Creek. The blogger and his friend traversed the three miles of capped creek from Forest Lawn to the edge of Buffalo, documenting the smells, sounds, and sights (or lack there of, in the pitch-black darkness), of one of the most curious urban planning decisions in Buffalo's history.
tunnel-14
Entrance to the capped section of the Scajacuada Creek, from Concrete Aperture's exploration of the tunnels.
In 1921, the City of Buffalo responded to the concerns of citizens in the quickly multiplying urban developments of the city's East Side. The Scajacuada Creek, a tributary that flowed westward from the surrounding towns out to the Niagara River, was being polluted by nearby factories, overflowing waste, and negligent homeowners. Rather than address the reasons why the creek was contaminated, and thus, smelled awfully, the City decided to construct a concrete cap over the three mile stretch from the city's Largest Cemetery all the way out to Cheektowaga. Constructed at the height of Buffalo's wealth, the capping of the Scajacuada was an engineering feat, but an irresponsible and wasteful one that defines the blunders of Buffalo's planning history.
Many of Buffalo's decisions over the last century followed similar simplistic logic. Like many cities, Buffalo pursued the easiest solutions to problems rather than the most correct ones. The city ran highways through parkland, and railways through neighborhoods. They let 500,000 square foot factories emerge right next to schools. They demolished entire blocks of buildings in order to combat blight, without any plan to address the poverty that leads to it in the first place. From 1920 until 1980, the actions of Buffalo's planners, whether pushed by modernist hubris or by an automobile-based planning ideology, irreparably harmed the landscape of the city.
If the capping of the Scajacuada Creek represents the modern ideal that there is a man-made solution to any natural "problem", the created of the Scajacuada Expressway represents the sacrifices made to appease car-dependent citizens in the years after the Second World War. Route-198 was finished in 1961, connecting the Niagara Thruway (which runs along the waterfront) with Route 33, an urban arterial that was finished around the time as the Scajacuada and runs downtown. The NY-198 corridor has been praised as one of the only east-west corridors through the city, but at what cost?
The route runs through the middle of Delaware Park, the heart of Olmsted's Parkway System here in Buffalo. Frederick Law Olmsted, designer of Central Park in New York City, chose Buffalo to highlight the true capabilities of urban parks. His parkway system  here connected the entire city to the large Delaware Park, running wide tree-lined boulevards and large-roundabouts through neighborhoods, all leading back to "The Park." 
Elm-ave-Bridge-Buffalo-NY-steel-1
Aerial Photograph of Elmwood Avenue and Delaware Park prior to the creation of the Scajacuada Expressway
Combined, the creation of the NY-198 and the NY-33 represent two of the most irresponsible blunders on the part of Buffalo planners in the past.  The NY-33, or “The Kensington Expressway,” created a rift through one of the city’s most affluent African American neighborhoods, creating a literal canyon down what had been Olmsted’s most glorious parkway in the city. The Scajacuada Expressway bisects Delaware Park with a four-lane highway in the middle of one of Buffalo’s best public spaces, and then runs along and over the western terminus of the Scajacuada Creek.
Together, the condition of Scajacuada Creek and the fate of route NY-198 are intricately tied, as citizen-groups advocate not only for the remediation of the waterway, but the downgrading of the highway, if not its outright removal. Though representative of much larger issues in Buffalo (aging and disruptive infrastructure, and neglected natural resources), these two campaigns signify the growing trend in Buffalo to not blindly accept the mistakes of previous generations.
Scajacuada Creek, with expressway in background.
Scajacuada Creek, with expressway in background.
Over the course of the next few months, I will explore the history of the Creek and Expressway, the current campaigns regarding their improvements, and lastly, what the broader implications are for similar problems throughout the city. The series will take a closer look exhibits at Buffalo’s History Museum and Burchfield Penny Art Museum that are highlighting the issues surrounding these two campaigns, as well as the community groups and organizations driving the effort to effect change on these hot-button issues.
Looking back at these mistakes, however, the intent is not to assign blame. Instead, with 100 years of urban planning blunders, this series, and these campaigns, are about learning from previous lessons, and creating a Buffalo that we not only want, but that we deserve.
Like the “UrbEx” bloggers who trucked through three-miles of sewage and stagnant water that currently defines the Scajacuada Creek, the goal is not to criticize and complain, but to understand and improve, so that maybe the future of the creek, and expressway, wont be as dark as the caverns that wind beneath Buffalo’s East Side. 
This piece also appeared on the Buffalo Exchange.

Tuesday, February 11, 2014

Embody This

By Jason Yots


Historic preservation advocacy is delivered in many forms – economic, environmental, aesthetic, political, moral, ethical.  Some concepts are more accessible than others, but they all share a goal: to promote historic preservation as a path toward more sustainable living.

Perhaps the most direct path to that goal is the historic preservation argument built on the notion of “embodied energy.”  Before you jump back to Reddit, hear me out.  This is actually pretty interesting stuff, especially if you like to geek-out on preservation stats.

Let’s start with some dictionary.  One way to define “embodied energy” is “the energy required to extract, process, manufacture, transport, and install building materials” (Note #1).  In other words, it’s the collective energy required to bring a new building into the world.  Compare this to “operating energy” – the energy expended in using the building – and you’ll see that we’re heading into some new theoretical territory.

Most “green building” efforts focus on the operating energy side of the equation, where the primary focus is on building the most energy-efficient structure possible (within your budget, of course).  The proliferation of the U.S. Green Building Council’s “LEED” energy ratings for new and existing buildings is an example of this emphasis.  However, particularly where a building will be demolished and replaced by a new building, a tight new building envelope and efficient new systems are only part of the analysis, argue some preservationists.  In that scenario, one must also factor in the embodied energy that is squandered when a building with a remaining useful life is demolished and landfilled.  When you do, “green” buildings become, well, less green.

Still a little fuzzy?  Maybe some math might help.   The May T. Watts Appreciation Society created an intriguing online program called “The Embodied Energy Calculator” (Note #2).  Using only your building’s type and its gross square footage, the EEC estimates your embodied energy investment in a building.  The EEC also calculates the “demolition energy” that would be generated by demolishing a building by factoring its construction type and its gross square footage.

Let’s say that Developer plans to demolish a 25,000 sf masonry building to construct a similarly sized “green” building on the same site.

41,000,000 – mBTUs (Note #3) expended to build the tear-down
     387,500 – mBTUs expended to demolish the tear-down
41,000,000 – mBTUs expended to construct the new-build
82,387,500 – total mBTUs to construct the new-build

How much energy is 82,387,500 mBTUs?  One measure would be the equivalent of 716,413 gallons of gasoline, or enough to propel my Honda CR-V over 14 million miles.  Yeah, that’s a lot of energy for one medium-sized building, however green it may be.

Based on this methodology, then, a building’s overall efficiency would seem to depend heavily on the decision to include in the equation the embodied energy from the construction and demolition of the building it replaced.  Whether that's a fair measurement of a building's energy efficiency may be debatable but the adage “the greenest building is the one already built” certainly merits serious consideration.
  
Notes:

1 – Wayne Curtis, “A Cautionary Tale.”  Preservation (Jan./Feb. 2008).


3 – One mBTU = 1000 British Thermal Units.