New State Law Tinkers with Local Historic Preservation Policies

The Pinkus-McBride commercial building anchors a corner of a six-pointed intersection in Madison, and provides a sense of the neighborhood's history while a new apartment building rises behind it.

The Pinkus-McBride commercial building anchors a corner of a six-pointed intersection in Madison, and provides a sense of the neighborhood's history while a new apartment building rises behind it.

A new state law in Wisconsin places new provisions on local historic preservation ordinances, but does not include proposed changes that would have disabled the ability of cities, towns and counties to provide long-term protection for important historic places. We wrote about the proposed Bill here

The new law requires Wisconsin municipalities (counties, cities, towns) to hold a public hearing on any proposed historic designation for an individual property or historic district, and to notify all property owners about the public hearing by paper mail. The law also provides for an appeal process, by which any property owner who is "affected by a decision of" a Historic Preservation Commission may appeal the decision to the County or Town Board or city Council, who may overturn the Commission's designation by a simple majority vote.

The law leaves intact the ability of counties and towns to designate landmarks and historic districts under powers of zoning that have been affirmed by the US Supreme Court in several cases. It does, however, require changes to some municipal preservation policies that currently require a 3/4 super-majority vote of the Board or Council to overturn a decision of the Commission. It leaves intact the ability to designate historic properties over the objection of the current owner. This was perhaps the most critical provision of the proposed bill. We argue in a previous post that historic preservation is a long game, and that allowing any owner, no matter how briefly they own the property, to opt out of local historic guidelines would lead to the rapid erosion of historic places in many Wisconsin communities.

The Wisconsin Trust for Historic Preservation lobbied, alongside the National Trust for Historic Preservation, the Milwaukee Preservation Alliance, other organizations, and several town mayors, for the wholesale removal of the section of the Bill dealing with local Historic Preservation laws. We were successful to the extent that the most dramatic provisions of the bill were amended before it became law.

AB-586 - Highlights from Committee Hearing on Bill That Would Devastate Local Preservation Ordinances in WI

The Assembly Committee on Housing and Real Estate held a public hearing Thursday on several bills, including AB-568 that would make local historic preservation ordinances in Wisconsin optional.

WTHP registered in opposition of the bill because it includes clauses that would require the consent of property owners before properties could be designated as historic places under local ordinances. They would also make design standards for historic properties and historic districts unenforceable.

The thread that ran through much of the testimony against AB-568 was that municipalities prefer to retain local control of their own territory, and that a statewide remedy for regulating cultural places is a blunt instrument that can not address the varying needs of Wisconsin communities to determine their own character. Testimony in favor of the bill came mostly from real estate and rental management organizations, and were focused on property rights and economic hardship arguments.

Jail Alley - Mineral Point

Jail Alley - Mineral Point

One of the bill's sponsors, Rep. Rob Brooks (R-Saukville) testified that the bill is not intended to be retroactive. He said the "owner consent" provision would apply only to historic designations going forward, but would not be applicable to properties already designated. The draft of the bill that was available on prior to the hearing did not include a retroactivity clause. 

Rep. John Jagler (R-Watertown), Chair of the Committee, said he heard from representatives of Watertown in his 37th Assembly District, and also from the communities of Columbus and Waterloo that they have "grave concerns about this [owner consent] provision." They are concerned that "efforts to revitalize their downtowns would be greatly hampered by this if its voluntary." 

Curt Witynski, Assistant Director of the League of Wisconsin commented that the bill "strips municipal power in many ways," including the power to regulate historic and cultural resources that are important to community identity and character. 

Larry McDonald, Mayor of Bayfield testified that the "owner consent" provisions of AB-568 "particularly affects the city of Bayfield", which he called the "economic powerhouse of that corner of the state." "We have built a market," McDonald said, "to show ourselves off as a historic waterfront community," and that "the Chamber of Commerce and Visitors' Bureau promote the historic quality of our town." Bayfield uses a triple bottom-line model to measure their success and quality of life. It requires that residents are taken care of, businesses are profitable, and environment (including the cultural character) is well-protected. "Our community" he said "wants to be held accountable. We have a tremendous concern about what it would do to our economy, and we really believe it would really devalue the surrounding historic neighborhoods and buildings. We've got a brand, we've got a look, and we've got a community that's going to ask you to not impose any of the historic or aesthetic portions of this bill."

Shawn Reilly, Mayor of Waukesha testified against the provisions stating that "Waukesha has a very successful historic area. The downtown is pretty much all historic." Reilly articulated the adverse impact that the provisions would have on the state's Certified Local Government (CLG) program. 

Steve Cummings, Mayor of Oshkosh, testified that AB-568 usurps local control of quality-of-life issues. quality of life...sees local regulation of housing stock as "equity protection."  Healthy neighborhoods and economic development go hand-in-hand. "If you want companies to locate in your city, and bring their workers to your city, you have to have healthy neighborhoods. You have to have quality-of-life, and quality-of-life means healthy neighborhoods."

John Decker, Evansville attorney, and president of the Wisconsin Association of Historic Preservation Commissions, called the owner consent provisions "reverse spot zoning."  The provisions, he said "delegate local legislative authority to property owners simply on the basis that they don't consent. They can withhold their consent for a good reason, for a bad reason, or no reason at all." 

Brenda Wood representing the City of MKE said the bill "strikes at the heart of what local government does," including protecting the health, safety and welfare of its citizens, improving and maintaining neighborhood conditions, decreasing blight, increasing investments and economic vitality throughout the city. Protecting and preserving housing stock." she said, "is a benefit to stabilization, homeowner and taxpayer investment, and to overall health of city's tax base."

One point of disagreement articulated by Rep. Brooks was that his information on how the bill would affect the state's CLG program differed completely from what he heard from testimony.

According the the Wisconsin State Journal, Brooks said after the hearing that they would take input from the hearing and "go back to the drawing board."  

Bill in WI Legislature Would Strip Local Historic Preservation Ordinances

Historic district - Greendale (federal greenbelt town)

Historic district - Greendale (federal greenbelt town)

A bill (AB-568), currently in the legislature’s Committee on Housing and Real Estate, would strip the power of Wisconsin towns to protect their own historic places by making compliance with local historic preservation ordinances optional for property owners.  Local preservation ordinances often include some protections for historic properties through a town’s power of zoning, as opposed to the National Register of Historic Places program at the federal level, which provides no protection. Municipal zoning powers that include preservation laws have been affirmed by several decisions of the US Supreme Court.

The bill adds an “owner consent” provision to state law. Under the bill, Wisconsin municipalities may not designate a property as a historic landmark without the consent of the owner. Also under this bill, Wisconsin municipalities may not require or prohibit any action by an owner of a property related to preservation of the historic or aesthetic value of the property without the consent of the owner. Property owners would have to opt in to the regulatory provisions of local ordinances, and owners of already-designated properties would be able to ignore adopted standards designed to maintain the historic character of these properties. It would affect owners of individually designated properties as well as those in historic districts.

Commercial building - Kenosha

Commercial building - Kenosha

The bill’s impact on Wisconsin’s Certified Local Government program, authorized by the National Historic Preservation Act, is being evaluated. The CLG program brings federal money to Wisconsin towns to survey, identify and nominate properties to the National Register of Historic Places, which makes them eligible for state and federal Historic Tax Credit programs to encourage private investment.

The practical impact of the “owner consent” provision would be that Wisconsin towns and cities would not be able enforce their local preservation ordinances. Standards designed to maintain the character of historic properties and districts would be unenforceable. Municipal planning staff would find themselves working to delist historic places, take down historical markers, and rewrite their preservation ordinances. Tourism brochures and websites would need to be revised as historic places drop off the lists. Wisconsin’s heritage sites and buildings would no longer have regulatory protections.

Well-regulated historic landmarks and districts have advantages to Wisconsin towns and cities. They tend to have more stable, and often higher, property values, they contribute to a community’s character and identity, and in many towns they are a key attraction for heritage tourism.  If property owners in Wisconsin’s local historic districts are able to opt out of local zoning regulation, the benefits of those districts would dissolve as owners opted out. The character of historic districts would be subject to passing, individual tastes, rather than a cohesive set of standards. Demolitions of historic buildings would likely increase statewide as owners opt to ignore inconvenient local regulation.

Jules Iverson Park - Stevens Point

Jules Iverson Park - Stevens Point

The provisions in this bill threaten the foundational purpose of historic preservation ordinances in Wisconsin communities like Cedarburg, Stevens Point, Mineral Point, Sister Bay, and Superior.  They undermine the ability of Wisconsin communities to identify those places that are important to them, and to protect their integrity for future generations. Historic places in Wisconsin – their condition and their very existence - would be subject to the mercy of passing owners, no matter how brief their stewardship.

Wisconsin Legislature retains Historic Tax Credit program

Construction crews take a break during the rehabilitation of Longfellow School in Madison to residential apartments. The project used Wisconsin's new 20% historic tax credit in 2014 to increase Madison's property tax base, create jobs, and increase housing options, and retain an important and irreplaceable piece of the city's history.  

Construction crews take a break during the rehabilitation of Longfellow School in Madison to residential apartments. The project used Wisconsin's new 20% historic tax credit in 2014 to increase Madison's property tax base, create jobs, and increase housing options, and retain an important and irreplaceable piece of the city's history.  

Wisconsin's dramatically successful Historic Tax Credit program will continue unchanged. The state Historic Tax Credit program is available to owners of historic properties designated under the federal National Register of Historic Places program. It offers a direct credit to the owner's state income tax obligation in the amount of 20% of expenditures on restoration or rehabilitation work that meets federal historic preservation standards. It can be coupled with a federal program that also offers a credit of 20% of expenditures for a total of 40% credit for qualified expenditures. The federal credit was initiated in 1981 as an incentive to leverage private investment in older commercial building stock. Wisconsin initiated a companion program in 1990 offering a 5% credit, then boosted the state credit to 20% in 2014.  The programs are powerful financing tools for developers taking on risky historic rehabilitation projects that can include unforeseen costs, and unique permitting regulations. Though risky, these projects often extend the lives of beloved and well-crafted buildings that have some special connection to their communities’ heritage.

Prior to the 2014, the state's program was used for an average of 11 projects per year. In 2014, there were 31 projects approved for a total of $35.1 million in tax credits, and leveraging $211 million in private investment in local real estate. These projects provided rehabilitated space in historic buildings for businesses and housing, and have increased property tax bases in 24 towns and cities across the state, including Milwaukee, Madison, Schofield, Eau Claire, Oshkosh, Dodgeville, La Crosse, Mayville, Ashland, DePere and Baraboo.

Governor Walker’s proposed 2015-17 budget would have capped the program at $10 million, made the credits competitive based on projections for job-creation, and provided for the recapture of credits if job-creation numbers did meet projections. The changes would have dramatically reduced the use of the program because the $10 million cap could be reached with just 2-3 large projects, and developers would have had a much more difficulty finding investors to purchase the tax credits accumulated by large projects, as is commonly practiced. The changes would have made the program too restrictive and too risky for most developers.

Preservation organizations and real estate developers united to lobby for the Historic Tax Credit (HTC) program. The Wisconsin Trust for Historic Preservation worked with the Historic Preservation Institute (HPI) at the University of Wisconsin-Milwaukee to study the economic impact of the HTC program in 2014. The Institute, in turn, sponsored a study by accounting and advisory firm Baker-Tilly to estimate the economic impact of the 2104 change from a 5% credit to 20%.

The HPI study found:

  • 31 projects used the program in 2014 at 20%

  • $35,071,257 in credits approved by WEDC in 2014

  • $35,071,257 federal tax funds returned to Wisconsin property owners.

  • $211,269,257 in direct private investment and expenditures on tax credit projects in 2014.

  • 4,062 Jobs created - 1,692 construction jobs and 2,370 permanent jobs in 2014.

  • $20,310,000 – Estimated annual state tax revenue from 4,062 jobs created.

  • $187,993,422- Estimated amount paid by employers to 4,062 new employees.

The Baker Tilly study projected:

  • $417.6 million total impact on Wisconsin economy by the end of the first year of operations: $277.7 million in direct spending, and $139.9 million in secondary spending related to HTC supported projects.

  • For the $34,799,764 awarded in Historic Tax Credits since January 1, 2014, the 25 evaluated projects supported by the HTC program are anticipated to create over 2,800 FTE jobs as a result of construction activities and permanent jobs in the state.

  • The program is estimated to see a complete payback of State of Wisconsin tax revenue by Year 7 of stabilized operations, an estimated $14 million being paid back to the state by the end of construction. These funds will be paid directly to the State of Wisconsin prior the beginning of operations and likely before the State of Wisconsin revenues are reduced by the tax credit.

  • Between labor and business purchases, the 25 approved projects are estimated to create up to $480.8 million in construction spending, and $88.7 million in annual operations. After 5 years of operations, the projects are estimated to create up to $951.6 million in community spending.

  • By Year 10 of operations, the evaluated projects are estimated to directly pay more than $46 million in tax revenue to the State of Wisconsin, a 133% return on the original $34.9 million approved. Including estimated indirect and induced tax payments, by Year 10 of operations, the approved projects will have paid an estimated $96.8 million in taxes within Wisconsin.

These two studies suggests that while the program is structured as a tax credit, it has a unique ability to leverage investments from a variety of sources, including the federal historic tax credit program, out-of-state investment companies and in-state development teams. The historic tax credit program is a true economic development program for our state. As an added bonus the program encourages restoration of unique existing  buildings in communities across Wisconsin.