How old buildings can bring a city new life

The tax credits help attract tax shelter-seeking investors, who provide all or much of the capital. The investor receives the first two tax credits the first year of the completed project (the state credit is limited to New York State taxpayers, which makes it harder to attract out-of-state investors) and the housing credit each year for 10 years. The value of the tax credits, which fluctuate, are currently worth 80-85 cents on the dollar for the federal historic preservation credit, 50 to 60 cents for the state credit, and 75 to 80 cents for the housing credit, Beasley said.

The non-profit developer also charges a 10 to 15 percent development fee, which is loaned back to the investors, Beasley said. Neighbors of Watertown forms a subsidiary for each stand-alone project, partnering with Industrial Development Agencies, local or regional economic development corporations (EDCs), community agencies or private sector developers (sometimes in combination). As the general partner, Neighbors is responsible for guaranteeing completion as well as budget oversight, compliance and management of the project. Investors benefit not just from the tax credits but also from writing off the losses and depreciation, and the income is funneled to the local community.

Payments in lieu of taxes

Beasley said another valuable tool is a PILOT-type program authorized by Section 581a of state Real Property Tax Law — if 20 percent of the residents qualify for low-income housing, the building is assessed based on that rental income, rather than at the market rate. (The developer must apply each year to qualify for the lower assessment, he noted.)

The examples of projects in Beasley’s presentation included a circa-1905, 76-room hotel converted into six floors of 36 apartments, with the first floor taken over by a commercial owner. (Pristine mosaic tile floors were discovered when the linoleum in the lobby was removed.) There was also a 1928 building with a blighted storefront (replaced by a replica of the original after the original manufacturer was tracked down) with 11 affordable housing units on the upper floors and two storefronts, and a 1901 row house rehabilitated for 22 affordable housing units.

The row house, which consists of seven buildings, was located in a rundown neighborhood. Neighbors had it listed on the National Register and worked with the city, which used federal Community Development Block Grants over the course of two years to buy up blighted buildings and fix them up for resale to first-time home owners. The $10 million development project encompassed six square blocks and also included new bus stops and traffic slowdowns installed by the state Department of Transportation, as well as the opening of a grocery store, Beasley said.

Some things, only government can do

One of the most challenging projects was the conversion of a long-abandoned YMCA from the 1920s, a building that was too complicated to ever attract a private developer, Beasley noted. The two-story gym was converted into duplex apartments, spectacularly illuminated by the restored arched windows; a long-buried arcade from 1900 was reopened; and a replica of the skylight that once graced the swimming pool was installed, with the space currently being converted to a 70-seat theater. The building is also green, with specially made thermal glass inserted into the huge windows. The project came in under $10 million, with approximately $4 million in tax credits, and is currently operated at a profit, Beasley said.