Tax credits prove to be a 'historic headache' for some - KTIV News 4 Sioux City IA: News, Weather and Sports

Tax credits prove to be a 'historic headache' for some


While the Historic Tax Credit program has saved several of Sioux City's old buildings from the wrecking ball, some developers have found challenges in the process.

Others refuse to use it.

If you've driven down 3rd Street in downtown Sioux City you've likely noticed the United Center's got some new window treatments.

"They wouldn't be my first choice," said Bart Connelly, Connelly, Tiehen & Sons, Inc.

When developer Bart Connelly took on the task of transforming an old warehouse into a vibrant commercial center, this is not exactly the look he had in mind.  However, Connelly had to cover these windows to get the tax credits he was expecting.

"It's 25% of the cost," said Connelly.

The back of the building had no windows.  The original entrance is now in an alley.  So, the back became the front. 

"That was interpreted to be historically confusing," Connelly explained.

Connelly said he had the plan approved twice, but when the building was finished, the project was denied.  The State Department of Cultural Affairs oversees the program, using standards set by the National Park Service.

"They do look at details, they want to maintain the historical integrity," pointed out Jeff Morgan, of the Iowa Department of Cultural Affairs.

"At the local level the interpretations get interpreted and that becomes messy and confusing," Connelly.

The issues Connelly ran into are not uncommon.  A few blocks away, work on the windows at the Badgerow Building was brought to a standstill.

"We believed based on professional guidance that we were in compliance," said developer Bruce DeBolt, owner of Mako One Corporation.

DeBolt's team replaced 250 windows on the back of the building.  Then they found out they'd have to do it all again.  He says the state denied his tax credit application because of the absence of a shadow line.

On the left of your screen are the 80-year old building's original windows.   On the right, the new windows that have to be replaced. The issue not only cost time but money. He estimates in the range of five to six figures.  Still, he stands to lose more if his project doesn't meet historic standards. 

"There's much more at stake here than just the cost of some windows.  It's not as if you lose the tax credits for just the windows.  You lose the tax credits for the entire project," said DeBolt.

That's four million dollars he's counting on.

"Is it a hiccup, absolutely.  Is it a show stopper?  Absolutely not," said DeBolt.

However, the very specific, some say over-restrictive parameters of the program have scared some developers away.  

"Developers have chosen not to use tax credits because of the fear of having to meet too many restrictions," said Marty Dougherty, Sioux City's Economic Development Director.

"When it came to Pearl St. that was the choice that I made.  Do I handcuff myself to some of these more slower restrictive type things to take the money, or do you kind of do it your own way, make it cool and move forward.  I chose the latter," explained developer Rick Bertrand.

Bertrand said the program wasn't flexible enough for his restoration of historic Pearl Street.  It's a common complaint that officials fear will put future economic development of historic buildings at risk. 

"It's really unfortunate because the tax credits themselves really end up with a great result.  Not only preserves our history but makes the building competitive in the real estate market," added Dougherty.

For now, the window treatments stay, but Connelly did receive those historic tax credits and he says that will enable him to start a new project here in Sioux City. 

Participants in the program go through a three-step process and their designs have to be approved in each step.  However, no money is handed over until restoration is complete.

Connelly did not receive his tax credits until two years after the United Center was finished.

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