HomeMy WebLinkAboutTax Abatement for Historic Preservation and the Preservation Program 1
Commission Memorandum
REPORT TO: Honorable Mayor and City Commission
FROM: Courtney Kramer, Historic Preservation Officer Tim McHarg, Planning Director
SUBJECT: Tax Abatement for Historic Preservation and the Preservation Program
MEETING DATE: October 22, 2012
AGENDA ITEM TYPE: Policy Discussion
The purpose of this policy discussion is to discuss the effectiveness of the Tax Abatement for
Historic Preservation and the future of this program. The issues arising from the Tax Abatement
conversation can be extrapolated into a larger conversation about the future of Bozeman’s
historic preservation program and the role of the Bozeman Historic Preservation Advisory Board within that program. The goal of the broader conversation is to recognize the limited resources available for historic preservation activities and discuss how to utilize those resources to achieve
the maximum benefit.
Tax Abatement
Tax Abatement for Historic Preservation is enabled through State Statute 15-24-1601, passed in 1989. The statute enables a local government to “abate” the increase in property taxes resulting
from reinvestment in the property by holding the taxable value at the pre-project value for a
period of one construction year and up to five subsequent years. Unfortunately, there is a
dichotomy between the Department of Revenue’s (DoR) method of calculating an increase in
taxable value and historic preservation’s perspective on an “appropriate” addition. Typically, only substantial additions of square footage cause the DoR to significantly increase a property’s
taxable value. Historic preservation practice recommends that additions to historic structures be
subordinate; thus the taxable value abated on a qualifying project is generally financially
negligible.
In 1989 the City of Bozeman passed a resolution enabling Tax Abatement for Historic Preservation which depended on the Secretary of the Interior’s (SOI) Standards for the
Treatment of Historic Properties to certify qualifying projects. Renewed interest in 2007 brought
the Tax Abatement program to light again and after struggling to apply the SOI Standards, the
City Commissioners directed BHPAB to draft more Bozeman-specific rules. BHPAB did so, and specific requirements were enacted with Commission Resolution # 1744 on September 15, 2008.
Since 2007, the City has approved five Resolutions granting tax abatement to various property
owners, of which the statistics for four properties are available. The statistics for the first two
Tax Abatements are mis-leading, as both properties appealed their taxable value in 2008.
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Application for the first two tax abatements was also received and processed prior to
implementation of Resolution #1744; neither property would qualify under the revised rules, as
the additions constructed exceed the 10% cap on additional square footage. The Commission
approved Tax Abatement for one other property in July 2012 and another application is pending.
Table 1: Total value of Tax Abatement for Historic Preservation since 2007
Property
Value of Abatement
Received Per Year
Abatement Period
(Years)
Total
Abatement Value
Bon Ton 1 $7,722.53 3 $23,167.60
South Tracy/ South Black $454.47 5 $2,272.33
Cooper Park $38.45 5 $192.25
Bon Ton 2 $321.87 5 $1,609.35
Total $ 8,537.32 $27,241.53
If the first two, non-qualifying Tax Abatements are removed, the numbers look like this:
Table 2: Total value of Tax Abatements since implementation of Resolution #1744 in 2008
Property
Value of Abatement
Received Per Year
Abatement Period
(Years)
Total
Abatement Value
Cooper Park $38.45 5 $192.25
Bon Ton 2 $321.87 5 $1,609.35
Total $360.32 $1,801.60
Average $180.16 $900.80
There is a cost on City resources to process the Tax Abatement applications, for which the City
charges no application fee. Each application takes about 15-20 hours of Staff time to process,
including time to guide the applicant towards appropriate modifications at the outset, creating memos for the BHPAB and the City Commission, drafting Commission Resolutions and
attending and presenting the application to the City Commission, as well as communicate with
the DoR following Commission action. A value of Staff’s time can be calculated utilizing Staff’s
hourly pay rate. Though the value of Staff’s time is small, the Tax Abatement program also
diverts valuable Staff time from other, more potentially fruitful preservation efforts.
Table 3: Staff cost in time and wages of processing a Tax Abatement application
Staff Cost of Tax Abatement
Hourly Rate
(Salary and
Benefits)
Hours
Staff Cost Per Tax
Abatement Project
Tax
Abatements
Processed
Total Staff Costs
of Tax Abatement
Program
$30.00 20 $600.00 4 $2,400.00
The Tax Abatement program also utilizes the resource of time donated by volunteer Bozeman Historic Preservation Advisory Board (BHPAB) members. As directed by Resolution, the
BHPAB reviews each Tax Abatement application and forwards a recommendation to the City
Commission. This is usually done at the BHPAB’s monthly meeting, and often takes 1-2 hours
of BHPAB meeting time. The BHPAB chairman often follows up on the conversation by drafting a memo summarizing the BHPAB’s comments about the tax abatement to the applicant and City Commission, taking additional time.
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This BHPAB participation also should be evaluated in terms of value of time “spent” processing
a Tax Abatement, as well as the simple amount of time diverted from other historic preservation
activities. While this is not a direct cost to the City, it is an opportunity cost to the board, the
community and the historic preservation program. Through the City’s contract with the Montana State Historic Preservation Office the hourly value of time donated by volunteer board members
is set at $17.71/ hour. This number can be used to determine the value of volunteer resources the
City is expending to process a Tax Abatement application
Table 4: BHPAB “cost” in time and donated wages processing a Tax Abatement
application
BHPAB Cost of Tax Abatement
Volunteer
“Hourly
Rate”
Hours
Spent Per
Application
Cost of
BHPAB
Member Per
Application
Average
Number of
BHPAB
Members
Total
BHPAB
Cost Per
Application
Tax
Abatements
Processed
Total BHPAB
Costs of Tax
Abatement
Program
$ 17.71 2 $35.42 12 $425.04 4 $1,700.16
The combined total use of City Preservation resources for tax abatements since 2007 is
calculated as follows:
Average Cost of Tax Abatement Program
Per Tax Abatement
Staff: $600.00
BHPAB: $425.04
Total: $1,285.04
Total Cost for 4 Tax Abatement Applications
Staff: $2,400.00
BHPAB: $1,700.16
Total: $4,100.16
Total Time Required for Tax Abatement Program
Per Tax Abatement
Staff: 20
BHPAB: 24
Total: 44
Total Time Required for 4 Tax Abatement Applications
Staff: 80
BHPAB: 96
Total: 176
Compare the average value of the historic preservation tax abatements to the costs of
preservation program resources to process each Tax Abatement request:
Property Owner Benefit over 5 years: Cost to Preservation Program:
$900.80 $1,285.04
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Further, Tax Abatement can lead to conflict within the BHPAB. Some members (and former
members) tended to be more liberal in granting the tax abatement. Others were not, and the
conversation between the two factions has lead to a number of valued BHPAB members resigning from the Preservation Board because they felt their time reviewing the tax abatements was wasted.
It’s also become apparent that property owners are not pursuing tax abatement for monetary
reasons, but rather as recognition of their project’s success by the local historic preservation
community. The cost of this recognition, however, is disproportionate to its value. The City and the BHPAB should work to identify more cost effective and efficient ways to acknowledge
preservation projects worthy of individual recognition.
At this time, there seems to be several options for resolving the tax abatement issue.
1. Eliminate the program. 2. Eliminate the program, and replace it with a more efficient recognition program to recognize exceptional historic preservation projects. 3. Retain the program, but make changes to increase efficiency. These changes could
include modification of the tax abatement qualifying criteria, delegation of review
authority to staff, or other solutions.
Staff and the BHPAB request specific direction from the City Commission in terms of which way to proceed with this program. Staff and the BHPAB would prefer a moratorium of a specific
time period (1-2 years) in order to give the BHPAB and staff time to find an alternative program
which recognizes excellence in historic preservation at a lower “cost” to the community’s
preservation resources. At the August 23, 2012 BHPB meeting a motion was made to
recommend to the City Commission that they suspend the Tax Abatement ordinance or its implementation. The motion was approved unanimously.
Bozeman’s Preservation Program
In order to qualify for a Tax Abatement, a property must be located within one of Bozeman’s
nine Historic Districts or be one of 50 properties individually listed on the National Register of
Historic Places. These districts were all formed as a result of the 1984 survey, which used the Montana Architectural and Historical Inventory form to determine historic significance of
properties.
The Inventory is also the basis for Bozeman’s Neighborhood Conservation Overlay District, a
zoning overlay established in early 1990’s. The NCOD encompasses about 4,000 properties, for
which a Certificate of Appropriateness is required prior to modifications to the property.
The COA program does two things:
1. Protect established historic districts by ensuring modifications which do not diminish the
historic integrity of a historic property. This is accomplished by review of design
elements such as window location and division, materials, height, architectural detailing
and treatment of existing design elements. This review is based upon the applicable design guidelines for these various elements.
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2. Protect the broader neighborhood character by ensuring modifications and new
construction reflect the established character of the neighborhood in terms of height,
massing, scale, materials, development patterns, and relationships to the streetscape.
Historic preservation standards and guidelines have, over time, become the mechanism through which neighborhood character is protected. This generates an unnecessarily detail oriented review process for COAs outside of established historic districts. The depth of COA review is
often based upon the 1984 Inventory’s declaration of a property’s historic significance.
The Inventory has not been substantially updated since its creation 28 years ago. A recent project
utilized the City’s GIS layer to create a visual map of the 1984 results. The BHPAB then volunteered their time to update a specific area of North Church Avenue, and a second GIS layer
was created to visualize the change in the area since 1984. The results reflected really impressive
private reinvestment in the North Church potential historic district and found a potential historic
district on North Church and North Wallace Avenues.
The NCOD and COA program is staffed primarily by the Historic Preservation Officer, although additional Planning Staff picks up projects as needed. Amongst other HPOs in the state of
Montana, it is unusual for the HPO to process development applications and can create
perceptions of a conflict of interest. Over the last five years the Department of Planning has
averaged 180 COA applications per year, with an average of one hour of staff time per
application. Many of these COA applications involve only neighborhood character issues, not historic preservation. The utilization of the Historic Preservation Officer to process COA
applications that do not involve historic preservation comes at an opportunity cost to other
historic preservation activities such as proactively working with property owners on challenged
historic properties, securing grant funding, article-writing, pursuit of new historic district
nominations and education and outreach to the public.
Potential modifications to the NCOD could benefit free up some of the HPO’s time, thus
improving the effectiveness of the Preservation program. Staff would like to propose a long term
(5 year) reinvention plan to create a program which recognizes the difference between historic
preservation and neighborhood character conservation:
• Further differentiate historic preservation from neighborhood character conservation
• Re-survey the City and pursue new district nominations for potential districts
• Creation of physical character studies upon which to build neighborhood character
guidelines/ statistical standards
• Continue COAs in established historic districts; move to a system of dimensional
standards to conserve neighborhood character in non-historic districts.
In freeing up Staff time, the City and the community should clarify the role of the Historic
Preservation Officer in order to properly allocate resources and achieve improved outcomes. Would the community like the HPO to work to assist property owners on new National Register
nominations? Write quarterly newsletters and/ or articles? Assist owners of historically
significant but distressed properties in finding positive outcomes for the property? Pursue grants
for both bricks and mortar investment in historic properties and program initiatives?
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The BHPAB has advocated for a new Survey of historic properties annually; it has been on their
list of goals for the last decade. Enumeration of unrecognized historic resources and
improvement to the NCOD program, ordinances and methods is something the BHPAB is
interested in working on.
The BHPAB’s Role in the Preservation Program
In addition to clarifying the expectations of the HPO, the BHPAB, Commission and community
should discuss and clarify the BHPAB’s role in the City’s preservation program. The Ordinance
creating the BHPAB is very broad; essentially directing the BHPAB to be everything
preservation-wise to everyone, including Gallatin County.
Over the past five years the BHPAB has primarily functioned as an informal review body for a variety of projects. They’ve reviewed and formally commented on “major” historic preservation
projects and sent comments to the Commission. The board has been focused on two particular
paths:
1. Planning and Policy: This focuses on improvement of existing preservation-related policy and development of new policy and regulations. Specific topics have included tax abatement, development of a historic sign code, Demolition by Neglect/ International
Property Maintenance Code and Bonding New Construction. This effort would benefit
significantly from Commission direction and prioritization of the new policies and
regulations, as well as expectations of the roles of the BHPAB and Staff in implementation.
2. Education and Outreach: This includes hosting walking tours, Cemetery Tours, the
Historic Preservation Awards and other education and outreach events, and website
maintenance. These efforts have been fruitful, but depend heavily on Staff time to
execute. As the interest level of the BHPAB swings back and forth between Planning and Policy and Education and Outreach, BHPAB member participation in planning and
executing these events has waned.
The crucial question seems to be what does the Commission, the BHPAB and the community
want the role of the BHPAB to be? How is this valuable resource, of donated time, best utilized
to maximum benefit? BHPAB members will discuss these questions at more length with the Commissioners during the October 22 meeting.
UNRESOLVED ISSUES: The principal direction being sought from the Commission can be
summed up as follows:
• What outcomes does the City Commission want to see from the historic preservation program?
• How should staff and HPAB accomplish those outcomes?
Report compiled on: October 11, 2012
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