Put your money on DOWNTOWN!
Downtowns are back. In cities large and small, in villages small and smaller, communities are rediscovering their Main Streets. Why? Because that’s where the vitality is. Developers are buying buildings to rehab for the same reason Willie Sutton robbed banks: Because that’s where the money is. Government is putting the money there – in the form of grants, low-interest loans, income tax credits and property tax abatements. Why? Because that’s where the infrastructure is.
An interior of a totally rehab'd apartment in downtown Perry. This 7500 sf building leveraged all of the programs described - grants, historic tax credits, sale-leaseback. The apartments rent for 75% more than before and were leased before construction was complete.
Our region is no exception to this trend. In Mount Morris a visionary developer has purchased 20 buildings; in 2010 he and other galvanized owners were busy delaminating vinyl and T1-11 siding from facades, replacing windows and rehabilitating interiors, while they continue to recruit tenants in a coordinated strategy to create a viable mix of businesses. Down the road in Perry, a community-wide investment group is completing renovation of its second anchor building, having raised $600,000 in private capital as one part of a broader reinvestment that has transformed 40,000 sf of vacant Main Street real estate in 5 years.
Meanwhile, Corning’s Market Street has long been an exemplary model of a community-minded corporate sponsor taking an interest in the 1972 flood-devastated downtown as a long-term recruitment and retention strategy. Finally, Geneva has aggressively pursued grant opportunities on behalf of its building owners which, in coordination with the Geneva BID and enterprising building owners, is resulting in some highly visible successes throughout downtown.
Now, here’s the lesson in it all. In each case, private for-profit owners leverage public resources as a component of viable business plans. They put their money where their house is, and they take the long view. Through that lens, there are three public resource-leveraging strategies that each community’s leaders should be pursuing as ingredients toward successful downtown rehab. I’ll call them Compete, Comply and Postpone.
Get a grant. Those communities that have been advocating for their downtowns, completing projects with local money, and forming downtown citizen advocacy groups are positioned best for the current gold standard of downtown grants: the annual New York Main Street Program. Now matching up to $500,000 per community, it leverages far more than that in private dollars. Mount Morris, Dansville, Lima, Arcade, and Perry are some of the area’s the more recent recipients.
Get your downtown on the National Register. Many downtowns have within them potential districts with architectural and historical merit. Renovate a contributing building to a designated district in a sympathetic manner and you can get 40 cents of every dollar spent on rehab back, when federal and state credits are combined. Any individual or entity can nominate a district, but sit-downs with owners in advance of any such undertaking is crucial, in part to dispel the erroneous notion that such a designation will impinge on their freedom. The truth is, owners in a district who want to paint their buildings pink, tar and feather them or knock them down – even all three, sequentially – could still do so if they were allowed before. But, those owners who wanted to take advantage of very significant tax credits on passive income would have that option. For renovations over $200,000, these credits can easily exceed the extra costs of complying with rehabilitation standards. I know this because I’ve prepared historic district applications and tax credit applications. It works.
Lock your assessment at the pre-renovation value. Working with an IDA, some communities can offer a “sale-leaseback agreement” that extends the lower assessed value for five years and phases it in over five more (it also cancels out sales tax on your construction materials). Talk about a win-win! Tax jurisdictions benefit – in the long term – because this incentive will ultimately increase their tax revenues. Meanwhile, delaying that increase can save you $100,000 in taxes if the pre-renovation and post-renovation values were just $200,000 apart. There are simpler abatement programs too; some are as easy as filling out a one-page application available at your assessor’s office. Want more information? Search the web for NYS Real Property Law 485(a) and 485(b).
Committed owners will no doubt work towards all three of these strategies, while aggressively seeking tenants and low-interest loans, cash-back energy incentives and green design programs. They will advocate collectively to the proper municipal entities or downtown associations to pursue the grant, establish the district, and opt-in to existing programs.
It makes solid, long-term sense to invest downtown. Why? Because that’s where the future is.