From the Good Ideas File: incentives that actually have a demonstrated good impact

I’m often assumed to be totally opposed to economic development incentives.  I’m not.  I just want the benefit to the broader community to be worth what we’re spending.  And a lot of times we don’t know, or we don’t ask, or we don’t want to know…. or we don’t ask because we don’t want to know because  they probably don’t.

One big exception to that, pretty consistently, has been historic preservation incentive tax credits.

There’s good evidence from all over the country that historic preservation investment tax credits work — that they trigger many times more in additional reinvestment, that they fill critical market gaps to return economically non-functioning properties to productive, tax-generating, decent-job-creating use.  And time and again they show that a good rehab of a small number of strategic buildings in a struggling neighborhood can be that long-sought-after “catalyst” to reinvigorating a community.  It’s not a matter of a big new project.  It’s a matter of fixing up a few of the old things that we have, and as a result teaching the market that a real economic opportunity awaits them under the boarded-up windows.

And yet, politicians keep trying to cut them.  This is dumb.  Just dumb.

This opinion piece from North Carolina’s NewsObserver.com sums the situation up pretty nicely:

What if North Carolina had an effective, proven way to preserve historic properties, create thousands of jobs and attract millions of dollars from private investors?

In fact, we do. North Carolina’s Historic Preservation Tax Credit, an economic incentive for the otherwise prohibitively expensive rehabilitation of historic buildings, is a resounding economic success. Yet the program is at risk. Eliminating this incentive – which pays for itself many times over – would cost North Carolina jobs and discourage private investment at a time when our economy seems to be getting back on track.

Since 2001, the historic preservation program has attracted $1.4 billion of private investment and created an estimated 23,000 jobs. Projects in 90 of our 100 counties have leveraged these incentives by attracting private investment to preserve and improve historic properties. Qualifying projects receive a federal incentive that, combined with North Carolina’s, makes otherwise financial unfeasible rehabilitation projects work.

 Um, yeah.  And you can show the same thing all over the country.
As I articulated in the book, the point of an incentive should be to (1) overcome a market gap between what is feasible from purely private-sector sources today, and what could be, and (2) by doing so, create a substantial  benefit to a community over and beyond the benefits that might accrue to the property and business owners.  And note the “and” in that sentence.
Historic preservation investment tax credits, over and over and over again in the past 20+ years, have been show to do this.  Over and over again.  This should be a non-debate.  If anything, we should be trying to understand better why historic preservation investment tax credits have consistently performed so well, and had such consistent benefits, and such a relative lack of boondoggles and questionable deals compared to other kinds of incentives.  We ought to be learning from historic preservation tax credit programs how to make all incentives work better.  We should not be cutting them.
So don’t let your community/state/feds do something dumb.  Thanks.

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