WILMINGTON — The historic value of Wilmington is a point of pride for the city. From the historic riverfront buildings to brick-paved streets, a part of the past has been preserved in Wilmington. But the comprehensive tax reform that is currently moving through Congress could put the future of Historic Wilmington in question.
Tony McEwen works for the City of Wilmington, specifically he’s assistant to the city manager for legislative affairs. This means when it comes to how federal legislation will affect the city, McEwen has answers.
McEwen describes his job saying, “I work on behalf of the city manager and council to formulate and advance City Council’s legislative agenda. As well, I monitor legislative and political activity on their behalf that may he impactful to our community.”
The new tax reform that has been making its way through both houses of Congress would have a direct impact on the City of Wilmington McEwen said, specifically in the form of the Historic Preservation Tax Credits.
According to the State Historic Preservation Office, “Income tax incentives for the rehabilitation of historic structures are important tools for historic preservation and economic development in North Carolina. A federal income tax credit for the rehabilitation of historic structures first appeared in 1976 and today consists of a 20 percent credit for the qualifying rehabilitation of income-producing historic properties.”
The tax credit has already been “watered down” by the state, but it is still currently one of the driving factors when it comes to historic preservation and redevelopment in the downtown area, McEwen said. If passed, the new tax bill could potentially eliminate the tax credit, or at a minimum severely reduce it, he said.
“This tax bill in particular is concerning for us, this tax bill will have major impacts on us … to lose the federal tax credit, which was the case on the Senate side, the initial proposal would be very dire for our downtown historic community,” McEwen said.
McEwen said he thinks there will be a compromise made where the tax credit will remain in place, but perhaps at a lower percentage as well as dispersed over an extended period of time instead of a lump sum.
“If you’re a business and you redo a building downtown and you utilize a historic preservation tax credit for an income producing property, when you open your doors you are given the full credit. The way the proposals are evolving on the federal side for how to change this is basically that benefit would no longer be when you open your doors, it would be given out over five years. That makes it just less attractive,” McEwen said.
Tax reform’s local impacts
If the tax bill does pass through Congress and the Historic Preservation Tax Credits were eliminated or modified the impact could have consequences on Wilmington’s historic buildings.
“What happens to our downtown community which is a jewel in our crown? What happens if folks are less interested in spending the extra money it takes to redo one of these buildings down here and preserve it? People would lose jobs because of that, the craftsmen who work on it and the people who would work in it ultimately,” McEwen said.
The tax reform would not only affect the historic district in Wilmington, it could also do away with Private Activity Bonds. PABs are tax exempt bonds issued to private investors for projects that have public benefit, according to Investopedia.
These bonds have been used to help fund projects like affordable housing, something Wilmington is currently lacking.
“We have a major affordable housing issue not only in this community but statewide. Public Activity Bonds is one of the key components that attract investment in affordable housing. I’ve read a figure that the first year this would be in place, if they got rid of the PABs is that it could have a $1 billion impact in affordable housing construction,” McEwen said.
For now, it is a wait and see situation while Congress puts the finishing touches on the tax reform and brings it forward for an official vote.
Michael Praats can be reached at [email protected]
