The House Economic Development and Regulatory Reform Committee took testimony May 28 on HB 135 which would authorize a nonrefundable credit against the income tax and certain business taxes for the rehabilitation of a vacant industrial site.
Several witnesses offered proponent testimony: President Mark Wagenbrenner of Wagenbrenner Development in Columbus, Vice President of Governmental Relations Michael Hartley of the Columbus Chamber of Commerce, President Dave Sobochan of the NAIOP Ohio Chapter, Principal and Chief Financial Officer Zachary Price of Triad Architects, and President Ted Graham of Marion Industrial Center.
All witnesses said the legislation would provide an important impetus for the rehabilitation of vacant industrial properties. Wagenbrenner noted his own company specializes in refurbishing of “difficult” urban spaces with the support of tax credits including Clean Ohio.
“That does not mean personal and investor capital is not the driving force of the projects — private businesses must have skin in the game for a development to be truly successful,” he said. “However, there are many projects that would never get off the ground if some risks were not mitigated with timely public support.”
Sobochan provided the hard numbers, identifying 2,101 industrial buildings in Ohio that are 100 percent vacant. He said Indiana and North Carolina have passed similar tax credits, and that HB135 has “unique elements” that should make it successful in Ohio.
Price compared the legislation to Ohio’s existing Historic Preservation Tax Credit and New Markets Tax Credit Program. He said a study by Cleveland State University’s Maxine Goodwin Levin College of Urban Affairs projects that the Historic Preservation Tax Credit will produce $10 billion in economic impact and 6,900 jobs between 2007 and 2025.
Graham said after 40 years of personal involvement in the rehabilitation of industrial buildings in Ohio, the profit margin for refurbishing such properties has been reduced “almost to nothing,” and that many useful buildings are going unattended. “We need to have some incentives to redevelop it.”
Rep. Burkley asked Wagenbrenner whether projects are started on speculation, or whether there is generally an end-user in mind. The witness said the latter. Rep. Driehaus and Chairwoman Baker asked him about the future of brownfield remediation under Clean Ohio. “The green money is still flowing through the Legislature. … The brown side has been spent down,” noted Driehaus.<image001.png>
Wagenbrenner said her concerns are valid. “A lot of low hanging fruit has been picked,” he said. “A lot of heavy lifting on the environmental side still has to be done.”
Burkley asked Sobochan to what degree credits would really spur owners or developers to rehabilitate industrial properties. He said banks have been known to offer bridge loans to projects based on the award of tax credits.
Baker told Price the committee would be interested in full information on the CSU urban study of the Historic Preservation Tax Credit. “The return on investment is what we must always consider,” she said of state tax expenditures.
Baker also asked Graham about industrial rehabilitation versus full demolition and redevelopment of unused industrial properties.
“Tearing down and rebuilding them is really not an option when your outside Franklin County,” he said, again pointing to costs and return on investment.