historic preservation Archives - Page 2 of 2 - Warfield at Historic Sykesville

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Maryland DHCD: An Important Strategic Partner for Warfield and the Town of Sykesville
posted by: Steven D. McCleaf   

15th February 2021

Building H, now occupied by Alderson Loop

In a previous article, we discussed how most large-scale historic preservation projects require multiple government incentive programs to achieve financial viability. In particular, we covered the essential role that federal and state historic tax credit programs play in such projects, and how a proposed Catalytic Historic Tax Credit would help bridge a significant part of the current funding gap for Warfield and other large projects in Maryland.

In this piece, we look at the importance of another state program called the Strategic Demolition Fund, which is a revitalization program run by the Maryland Department of Housing and Community Development (DHCD). More generally, we will discuss the much larger role that the DHCD can play in both Warfield’s and the Town of Sykesville’s future success.  

The name of the Strategic Demolition Fund is a bit misleading given that grants can be used for more than just the demolition of blighted structures. Funds can also be used for activities such as site acquisition and assembly to create redevelopment-sized parcels for solicitation or planned development, site development, and construction-level architectural and engineering design. According to DHCD’s website, the “Strategic Demolition Fund seeks to catalyze activities that accelerate economic development and job production in existing Maryland communities,” which is a much broader mandate that one might initially assume.  

Warfield was recently awarded a $750,000 grant from the Strategic Demolition Fund by DHCD. Funds from this grant will be used to perform wetlands remediation work in Carrie Dorsey Park, the town park situated in the middle of Warfield, as well as other park improvements including additional asphalt trails, bridges, and modifications to the existing man-made oval pond located along Piney Run on the northern edge of the park. Not only will these improvements benefit residents of the Town of Sykesville who use the park, but they will satisfy project regulatory requirements that will enable two of the vacant land bays at Warfield to be developed to their full potential.  

We also intend to use the current grant award to repair and improve an internal road and parking lot serving buildings occupied by ZeteoTech and Alderson Loop, two of the three companies located at Warfield. These improvements are long overdue and will include the milling and repaving of asphalt, curb and gutter and sidewalk repairs, parking lot restriping, and minor drainage improvements. Such improvements are vital to retaining and attracting commercial users at Warfield.

Although grants from the Strategic Demolition Fund alone will be a smaller piece of the long-term funding puzzle than historic tax credits, they are a very important source of early-stage development funding for the project. More importantly, these grants will be part of a much larger package of incentives available through DHCD to support the Warfield project, that we expect will rival and even surpass the financing provided by historic tax credits. These resources could include access to additional tax credits for housing, and tax-exempt bond financing. 

It is important to note that DHCD’s investments in Warfield will also be an investment in the Town of Sykesville and Carroll County. DHCD’s support will enable and accelerate the development of the project, which will result in the expansion of the town’s and county’s respective tax bases, as well as significant economic development. There could even be additional direct state investment in the Town of Sykesville.

In recent years, DHCD has made apparent its willingness to invest in the Town of Sykesville. Since 2011, DHCD has invested over $500,000 in several town projects, most of them related to Main Street revitalization. Since 2013, DHCD has also made approximately $5.5 million in loans to Sykesville residents through Community Development Administration single-family loan programs. This demonstrates a remarkable commitment by DHCD to invest in a small town of 4,000 residents.

For more information on DHCD’s Strategic Demolition Fund, go to https://dhcd.maryland.gov/Communities/Pages/programs/SDF.aspx

For more information on DHCD in general, go to https://dhcd.maryland.gov/pages/default.aspx

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Exploring Issues with the Maryland Historic Preservation Tax Credit
posted by: Steven D. McCleaf   

29th January 2021

Group photo taken at the Jan 2020 legislative session, including MD State Senator Katie Fry Hester (front row, 3rd from L) and Steven D. McCleaf (2nd row, 2nd from L)

Historic preservation tax credits are the most significant source of project funding for rehabilitating historic complexes like Warfield. In addition to the Federal Historic Preservation Tax Credit Program, which is administered by the National Park Service and Internal Revenue Service, 39 states including Maryland have programs offering historic preservation tax credits. The federal and state programs all require rehabilitation of projects in accordance with the Secretary of the Interior’s Standards for Rehabilitation, which are quite extensive. 

Unfortunately, the existing Maryland Historic Preservation Tax Credit program falls short in many respects as a public policy tool and provides limited incentives for developers to undertake historic preservation projects. We at Warfield have been vocal advocates of overhauling the Maryland program, starting with the removal of (or a significant increase in) current program caps which currently stand at $9 million annually and $3 million per project.  

In general, developers will pursue a project only if it is financially viable without the state credit. The state credit does not provide a huge incentive to undertake difficult preservation projects and is often viewed by developers only as “icing on the cake.” Why is this? Simply put, low program caps make the process of securing state tax credits competitive, and therefore highly uncertain. In short, the current program is insufficient to create a true catalyst for rehabilitation, community revitalization, and economic development. 

Also, the existing caps make the program insufficient to meaningfully benefit large projects. In the case of Warfield, we estimate that a project including rehabilitation of all nine of our remaining vacant buildings at once be mathematically eligible for approximately $10 million in tax credits, which far exceeds the current program caps. Although this $10 million state tax credit alone would not be enough to make rehabilitation of the property feasible, it would be a vital part of a package of incentives including the federal historic tax credit, federal low-income housing tax credit, and various other government grants and financing programs. The Warfield project requires an “all of the above” approach to financing, which is not uncommon with historic preservation deals – particularly large ones.  

The Warfield team is working with state officials to find a solution to overcome deficiencies in the existing state historic tax credit program. In particular, we are working with Senator Katie Fry Hester (District 9) on a bill that would position Warfield to be the pilot project for a new “Catalytic Historic Tax Credit” that would operate outside of the state’s existing historic preservation tax credit program. This bill was originally slated for the 2020 legislative session, but unfortunately the COVID-19 crisis ended the session prematurely and killed any hopes for passage of the bill at that time. An updated bill will be introduced in the 2021 legislative session. 

We believe that a “Catalytic Historic Tax Credit,” originally proposed at $10 million per project, would not only benefit Warfield but would also be a useful tool to help preserve many other state-owned or formerly state-owned historic campuses around the State of Maryland. We are grateful for Senator Hester’s support in sponsoring the legislation to get this potentially transformational program on the table. 

Investment by states in historic preservation tax credit programs results not only in the preservation of historic resources but also in community revitalization and economic development that pays for the tax credits many times over. In The Economic Benefits of Maryland’s Historic Revitalization Tax Credit Program, Ethan Reed of Real Property Research Group estimates that each $1 of tax credits invested yields the state $8.13 in total economic output. He also indicates that job creation is significant, with 49.2 jobs created during the construction period throughout Maryland for each $1 million investment by the state.

Public support for the Catalytic Historic Tax Credit bill will be an important factor in getting this legislation passed. Be sure to follow us on Twitter and Facebook to stay current with the latest information on how you can get involved.

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