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Loss of historic tax credits threatens to halt millions of dollars of Sioux City projects

SIOUX CITY |  Developers in the last six months have unveiled plans for more than $100 million of redevelopment projects in downtown Sioux City, from the long-awaited restoration of the historic Warrior Hotel to the transformation of three landmark office building into housing units.

Nearly all the projects would be in serious jeopardy if the House adopts a Republican-backed proposal to eliminate the federal Historic Tax Credit (HTC) program, as part of major overhaul of the nation’s tax code.

The House Ways and Means Committee advanced the tax reform bill last week, and the legislation could get a vote in the full House as early as next week.

A Senate version of the tax bill, unveiled Thursday, would retain HTC but would scale back the credits.

The historic tax credit program, administered by the National Park Service and Internal Revenue Service, in partnership with state historic preservation offices, is designed to encourage developers and municipalities to save historically-significant buildings that are abandoned or dilapidated. The program allows developers to receive a tax rebate of up to 20 percent on eligible projects over a five-year period after the work is finished. 

Developers and economic developments officials coast-to-coast have sounded the alarm over the prospect of the nearly 40-year-old tax credits being defunded, warning it would have a devastating effect on Sioux City and other communities.

Dougherty

"Our biggest concern, right now, is we have a very significant number of large projects in the development phase that are very, very good — especially for downtown Sioux City," Marty Dougherty, the city's economic development director, said.

Warrior/Davidson

One of the big-ticket projects at-risk is a proposed $54 million investment designed to breathe new life into the former Warrior Hotel and adjacent Davidson Building. Local owner Lew Weinberg, in a partnership with a developer that specializes in restoration of historic buildings, Restoration St. Louis, unveiled a plan this summer that would include converting the Warrior into a 146-room boutique Marriott brand hotel.

The project, which would rely heavily on historic tax credits, also calls for  transforming the vacant floors into luxury apartments, bars, restaurants and other retail outlets.

Justin Wan, Sioux City Journal 

Owner Lew Weinberg is shown Tuesday in downtown Sioux City in front of the former Warrior Hotel and adjacent Davidson Building. A $54 million deal to revitalize the two historic buildings would come to a halt if Congress eliminates the federal Historic Tax Credits available for rehabilitation of such historically-significant structures. 

Roger Cauldron, a spokesperson for Weinberg, said developers are alarmed by the GOP tax plan, saying it would kill momentum for the Warrior/Davidson and other downtown projects. 

“We don’t really understand why it’s being put on the chopping block because it (has) strong economic development impacts,” said Caudron, a former Sioux City economic development director.

The Warrior/Davidson project, for instance, would create 200-300 construction jobs and 250 full-time jobs, he noted.

“It’s been an important program for us locally and across the country,” he said.

‘Devastating’ effect

Julie Stavneak said

The loss of the federal historic tax credits would be devastating to an Omaha/Council Bluffs firm that recently unveiled plans to restore three historic buildings in Sioux City. It would open a 20 percent gap in funding on all three projects, said Julie Stavneak is a principal at J. Development, which specializes in repurposing historic structures.

Ian Richardson, Sioux City Journal 

Omaha developer J Construction Co. has purchased the former Hatch Furniture Building at 413 Pierce St. and plans to convert the structure into commercial space and 30 market-rate apartments. The project is one of three historic renovation projects the developer plans in Sioux City that would fall through if Congress eliminates the federal Historic Tax Credit program.

Asked if projects could be completed without the tax credits, Staveneak's simply said, "no."

The developer plans to invest $16.25 million to turn the 105-year-old Commerce Building into 77 apartments and 18,000 feet of first-floor commercial space; $12.4 million to convert the 93-year-old former hospital into 69 market-rate apartments, and another $5.95 million to build 30 market-rate apartments and establish 6,175 square feet of commercial space on the first floor of the former Hatch Furniture Building.

Historic tax credits

Stavneak estimates her firm has successfully used historic tax credits to offset costs for up to 20 projects over the last 13 years. She noted the program is not only crucial to J. Development but the communities that benefit from redeveloped buildings.

“We are working diligently to reach out to all the politicians and the folks that we can so that we can tell them, obviously, how important this is,” Stavneak said. “It’s been around since 1978 and it’s done so many great things for not only Sioux City, the state of Iowa, but for the country really.”

‘Restore, ReImagine, ReVeal’

The Lamb Arts Regional Theatre is in the midst of an $11.5 million campaign to relocate its operations to a 98-year-old building downtown that was Sioux City's first municipal auditorium and most recently the home of KCAU's television studios.

Although the building is historic, Russ Wooley, a Lamb Theatre co-founder and the production company’s artistic and managing director, said they had not planned to tap the HTC program.

Wooley

He explained that because a portion of the program requires buildings to be listed on the National Register of Historic Places — a process that can take years to complete — they are going in another direction and only plan to restore the building’s facade to its historic state.

The renovated interior will include a two-story atrium with a skylight and three theaters: a 220 to 250-seat thrust theater, a 50-seat cabaret-style bar and a second-floor 120-seat theater. Other rooms will include a costume shop, classrooms, a scene shop and a catering kitchen.

While the Lamb Theatre project won’t require HTC, Wooley remains a strong proponent of the program.

“This is a devastating proposal for the nation to remove these historic tax credits,” he said. “Not only does it stop projects and progress, what happens then is if these buildings, if they aren’t able to be refurbished and reused, they fall apart and then people tear them down and look at what we lost.”

Non-partisan issue

In October, the Sioux City Council unanimously passed a resolution supporting the HTC program and that also encouraged Iowa’s congressional representatives to endorse a bill to increase it to 30 percent.

During the discussion prior to the vote, Mayor Bob Scott said, “It’s not a Republican or Democrat issue. It’s a preservation issue, so it shouldn’t matter what politics you have. You should be supportive of it.”

Justin Wan / Justin Wan, Sioux City Journal Photo 

Scott

One group that is doing its best to preserve the credit by directly lobbying to lawmakers is the National Trust for Historic Preservation.

The Washington, D.C.-based privately-funded nonprofit is dedicated to saving America’s historic buildings.

Shaw Sprague, the organization’s director of government relations and policy, noted more than 42,000 buildings nationwide have been saved through the use of the HTC program since its inception. Combined, those projects have generated $29.8 billion in federal tax revenues, exceeding the $25.2 billion in credits allocated to it through the U.S. Treasury Department.

“What we’ve seen is that there is significant revenue generated at the both the local, state and federal levels when you take an often underperforming historic building and repurpose it for modern use,” he said. “Not only do you see taxable income at the local, state and federal levels, you create a catalytic asset throughout the community.

"As an example, if you look at the Municipal Auditorium that was rehabilitated in Sioux City in 2006, as a result of that rehabilitation you’ve seen other properties that have moved in around that area that haven’t used the historic tax credit.”

More than $13 million in tax credits were used to help turn the former auditorium into the Long Lines Family Rec Center, as part of a larger Vision Iowa project that included construction of the Tyson Events Center.

Great success

Since 2002, a dozen projects in Sioux City valued at about $60 million have benefited from the federal historic tax credits.

Some of the projects include the Castle on the Hill apartments housed in the former Central High School building, the rechristened State Steel offices on Third Street, and multiple structures on Historic Fourth Street, and the Orpheum Theatre.

“Can you imagine Sioux City right now without the Orpheum Theatre?," said Dougherty, who followed up by calling the 90-year-old performing arts theater as one of the city’s most valuable assets.

The Orpheum underwent a drastic nearly $13 million renovation project 15 years ago that included recreating and restoring a lot of the ornate theater's  original features.

“Historic tax credits were an invaluable part of that project and I’m not sure they would have succeeded without it,” Dougherty said.

Dougherty noted Sioux City has taken a lot of positive steps in the last few years in its quest to revitalize its downtown.

The Warrior/Davidson project is one aspect of the city’s $134 million reinvestment district that also includes a five-story, 150-room hotel adjacent to the Sioux City Convention Center, Ho-Chunk Inc.’s Virginia Square residential development and an ag expo center.

Without the HTC, Dougherty thinks the entire reinvestment district, which received $14 million in state funding in August, could collapse.

“We’re on the verge of almost seeing a kind of a renaissance of downtown Sioux City,” he said. “A lot of that is underway today and we have momentum that we could lose here.”


Iowa
Iowa officials: Cutting historic tax credits could cripple economic development

DES MOINES -- The Orpheum Theatre in Sioux City.

Hotel Russell-Lamson in Waterloo.

The Hotel Blackhawk in Davenport.

Those are just a few among hundreds of renovation projects across Iowa that have been aided by a federal tax incentive program that is on the chopping block in Congress’ tax reform proposal.

The federal historic rehabilitation tax credit was used by more than 250 projects in Iowa between 2002 and 2016, helped spur more than $1 billion in development and produce nearly $230 million in tax revenue, according to the National Park Service, which implements the program.

The program also helped create nearly 9,000 temporary construction jobs and nearly 11,000 permanent jobs in the state, according to the National Park Service.

But that tax credit soon could be gone.

Republicans in Washington, D.C., are crafting legislation that would reform federal tax laws; it’s one of the top priorities for the party after taking control of the federal lawmaking process in the 2016 elections.

The two proposals that have been introduced include significant cuts to the historic rehabilitation tax credit, which has been around for more than three decades.

The U.S. House tax reform bill eliminates the historic tax credit.

The U.S. Senate tax reform bill cuts the credit in half.

Local officials, especially in economic development, expressed concern that ending the historic rehabilitation tax credit could severely limit future renovation projects.

“It’s crazy,” said Amy Gill, a developer with St. Louis-based Restoration St. Louis, which has done work in the Quad-Cities and is the developer for a proposed restoration of the historic Warrior Hotel and Davidson Building in Sioux City. “Studies back up the fact that these tax credits work. They provide jobs and renovate downtowns. How do you argue with that?”

The House and Senate tax reform bills make significant changes to a number of tax credit and incentive programs across the business and industry spectrum. The historic rehabilitation credit program is just one of them.

But it’s one that local officials are loathe to lose.

“In general, as an economic development professional, I favor tax cuts and stimulating the economy through tax reform and so on. But, in this case, I think they haven’t really considered the implications of (eliminating the historic credit),” said Marty Dougherty, Sioux City's economic development director. “Absolutely, we’re very concerned about it.”

The state of Iowa also has a historic tax credit program. That is not impacted by the proposed federal legislation.

Economic development officials say the federal historic rehabilitation tax credit program is worth maintaining because it provides a return on investment.

In Iowa, from 2002 to 2016 nearly $195 million in historical tax credits were awarded; the resulting renovation projects produced $230 million in tax revenue. By that math, every $1 in tax credits produced $1.17 in tax revenue.

That is roughly in line with national studies that have showed the historic credit returns $1.20 to $1.25 in tax revenue for every dollar invested, according to the National Trust for Historic Preservation.

“I just don’t see why they’re messing with a tax credit that actually puts people to work and returns money on the investment,” said Jim Hobart, of Hobart Historic Restoration in Cedar Rapids.

The historic tax credit program allows developers to claim 20 percent of eligible expenses against their federal tax liability. The program is designed to provide financial assistance to expensive renovation projects involving old buildings; such projects might not ever happen without the financial boost given by the tax credit, economic development officials say.

“There are a lot of buildings that would continue to sit empty or would have been demolished by now had that tax credit not been available to make the project economically sound,” said Steve Dust, president and CEO of the Greater Cedar Valley Alliance and Chamber. “And that’s repeated all over Iowa.”

Common projects include restorations of old buildings and converting abandoned warehouses into both commercial and residential properties.

“This is one of the few government programs where people can actually see and feel the impact,” said B.J. Hobart, also of Hobart Historic Restoration in Cedar Rapids.

Dougherty said the program has helped a number of projects in downtown Sioux City, including the Orpheum.

“It’s really sparking a renaissance in the downtown area,” Dougherty said. “I’m not sure any of (the renovation projects) would be successful without that tax credit program.”

Economic development officials said they have pleaded with Republicans in Congress to maintain the historic rehabilitation tax credit program. At least one of Iowa’s federal representatives, U.S. Rep. Rod Blum, has pledged to fight for the program.

Blum, a Republican who represents eastern Iowa, said he has lobbied U.S. House leaders to preserve the program.

Dubuque, which is in Blum’s district, has featured 36 projects totaling nearly $180 million in historic tax credits, according to the National Park Service data.

“I am continuing to work very hard to educate my colleagues of the benefits of historic tax credits to ensure they survive tax reform,” Blum said in an emailed statement. “Although they were absent from the version that recently passed through the Ways and Means Committee, the fight is not over. I am hopeful the Senate version will include this important program and I will continue to push for its inclusion through conference.”

The Senate version keeps the program, but reduces the percent of eligible, deductible expenses from 20 percent to 10 percent.

U.S. Sen. Chuck Grassley, an Iowa Republican, said tax reform is about growing the economy and increasing wages and jobs by lowering rates and reducing deductions and loopholes. But he added the Senate bill recognizes the importance of the historic tax credit by maintaining it at 10 percent for the future while allowing projects already under way to retain the 20 percent credit.

Jim Hobart said the Senate version would “save a few more buildings.”

“Would I rather see 10 percent than zero? Yeah,” Hobart said. “Would I rather see them not fool with it at all and leave it at 20 percent? That would be my choice.”

Dougherty said economic development officials will continue to lobby their federal representatives and in the meantime will be “holding our breath to see what they’re going to do.”

“A lot of these buildings are part of the fabric of your community, part of the character of your community. I just can’t imagine Sioux City without the Orpheum Theater,” Dougherty said. “I think (cutting the historic tax credit program) is a little bit short-sighted.”


Goodfellows
Journal annual Goodfellow charity in full swing

SIOUX CITY | The Sioux City Journal has sponsored Mr. Goodfellow Charities during the holidays to raise money to purchase toys for needy children in Siouxland for more than a century. 

Sunday marks the first day the Journal launches a daily page A1 feature that recognizes the many businesses, groups and individuals that have contributed $1,000 or more to the charity. The goal this holiday season is to raise $135,000 to buy toys for nearly 6,500 underprivileged children.

"Mr. Goodfellow is as important today as it was 103 years ago as many families are trying to make ends meet," said organizer Sue Stusse. "Providing toys for the children takes the stress off those families that are trying to meet the basic needs of food, shelter and clothing."

The fund drive culminates with the annual sale of the Little Yellow Dog pup at noon on Dec. 9 in the atrium of the HoChunk Centre in downtown Sioux City. Last year, Aspen-- a 14-week-old Maltese at the time-- went to the high bidder to a tune of $16,000. This year's dog has not been revealed.

Families must apply for the Goodfellow toys with the application that is running every day in The Journal and in the Siouxland Shoppers Guide. An application can also be picked up at The Journal, 515 Pavonia St. The toys will be distributed on Dec. 10 and Dec. 16 at the warehouse directly south of the Journal building. 

A Journal reporter started Mr. Goodfellow Charities in 1914. Organizers sold the first Little Yellow Dog in 1936.


Local
Tri-State Specialists eyes South Sioux riverfront for new $37M surgical facility

SOUTH SIOUX CITY | Surgery patients will have the unique opportunity to complete their recovery in a hotel setting rather than a hospital bed following procedures at a new multi-million-dollar surgical center planned along the South Sioux City riverfront.

Tri-State Specialists plans to open the $37 million Riverview Surgical Center next to the Delta Hotels by Marriott, 385 E. Fourth St., next fall. The proposed two-story structure will include nearly 50,000 square feet of space to house operating rooms, medical offices and patient suites. 

Those needing post-surgery care will have an option to recover in one of nine riverfront patient suites within the center, but some will also have the option to stay in the adjacent Delta Hotels by Marriott with family under nurse and doctor supervision. 

That's something Tri-State Specialists CEO Lee Hilka said will make it a unique program in Siouxland. He pointed to the hotel recovery program at Tria Orthopaedic Center in Bloomington, Minnesota, as the nearest such program. 

"It's all about the patient experience," Hilka said. "I want them to get in and out as quickly as possible, ensure that they’re comfortable and that it's cost effective."

During their hotel stays, patients can have family stay with them and will be attended by personal nurses, visited by doctors and physical therapists. The setting is meant to be more relaxed and help ease the transition back to home life. 

"We think when you talk to the plastic surgeons, that most of their patients would probably opt for the hotel," he said.

Provided 

Tri-State Specialists' planned Riverview Surgical Center will look out over the Missouri River from its location in South Sioux City. The $37 million facility will provide surgical services and allow residents to recuperate at the nearby Delta Hotels by Marriott.

Hotel owner John Gleeson said he looks forward to having a positive working relationship with the surgical center. 

"We are very pleased and willing to work with the surgical center on providing guest rooms and food and beverage services for the patients," Gleeson said.

The Delta Hotels by Marriott was formerly known as the Marina Inn. The property went through major renovations prior to transitioning to the national  brand last month.

Hilka said surgery services at the new center will include orthopedic, gastrointestinal, plastic surgery, some OB-GYN and ear, nose and throat.

The bottom floor of the structure will be the surgery center, which will include four operating rooms, four recovery rooms and pre- and post-surgery rooms. 

The top floor will include doctor's offices, which Hilka said are already entirely leased out. He said he has commitments from some Omaha and Sioux Falls specialists to come to Sioux City and provide services that patients would otherwise have to drive for. 

"They can do the consultations here. They don't have to do the surgery here, but I want to make it more convenient," Hilka said. "The physician should be coming to the patients, not the other way around." 

Approximately $28 million of the $37 million price tag for the surgery center will be equipment costs, he said. Approximately half of the staff would work at the surgery center, while the rest will be physicians and imaging and nursing staff on the second floor. 

Work on the project will begin next week and should take 11 to 12 months, Hilka said, depending on the weather. W.A. Klinger will serve as the contractor. 

Hilka said Tri-State Specialists, which is based on the campus of UnityPoint Health -- St. Luke's Hospital in Sioux City, chose the riverfront location because of its proximity to the hotel. 

"We were looking for comfort suites for an overnight stay," he said. "So we had to find basically a vacant lot for sale next to a hotel that we think is a prestigious hotel." 

Hilka said another reason to locate in Nebraska was because that state does not require surgical facilities to undergo the process for a Certificate of Need, a regulatory review process required for surgery centers in the state of Iowa. 

That factor also played in the location of the Dunes Surgical Hospital in Dakota Dunes, South Dakota, when it opened in the mid-1990s. 

Hilka said Tri-State Specialists opted not to locate in South Dakota because that area already had the surgical center's presence. 

The Siouxland Chamber of Commerce will hold a ground breaking ceremony for the South Sioux City project Wednesday morning. 

News of the new development comes as Tri-State Specialists continues plans for a new two-story clinic at the southeast corner of the intersection of 27th and Pierce streets.

Hilka said that separate $3.5 million project will include urgent care on the first floor with doctor offices on the second floor. Construction will begin in March and is expected to be complete around August or September, he said. It will employ 20 to 25 people. 

Construction on the clinic was pushed back due to the reconstruction of Pierce Street. Plans had originally been to open in spring 2018, but that would now mean opening in the midst of construction on the 27th Street intersection, which would limit the facility to one access point.


Jim Lee, Sioux City Journal 

Aspen, the 2016 Little Yellow Dog, was sold for $16,000 last year for the Journal's Mr. Goodfellow charity that kicks off Sunday.