Aug. 29--GALESBURG -- The first draft of the city of Galesburg's comprehensive plan recommends that the city market tax credits to developers to help address the problem of blighted rental housing in Galesburg.
The plan spotlights two existing tax credit incentives that assist developers in renovating or constructing rental housing units. The first incentive is a 20 percent federal income tax credit, run by the National Park Service and administered by the Illinois Historic Preservation Agency, for rehabilitating historic properties. In order to qualify, properties must be certifed by the National Park Service for the tax credit, listed on the National Register of Historic Places or contribute to a historic district listed on the National Register of Historic Places.
The tax credit applies to rented residential buildings and owner-occupied condos, but not single-family detached units. Although the comprehensive plan found that Galesburg has more single family detached units in the city than any other type of home, Houseal Lavigne recommended the tax credit because Galesburg needs rental residential development most. According to the comprehensive plan, the city needs to add 936 more rental units just to meet the need for residents earning $10,000 per year or less.
Sean Tapia, associate at Houseal Lavigne Associates, said the historic tax credits could be used to develop units affordable for renters within that income range.
"It also allows the city to repurpose older buildings that still have good bones and historic character that they would like to see remain in the city," Tapia said.
The state of Illinois will also implement a 25 percent state income tax credit for rehabilitating historic properties starting on Jan. 1, 2019, for which developers could apply.
The comprehensive plan also recommended that the city market low-income tax credits for rental development, administered through the Illinois Housing Development Authority. The U.S. Department of the Treasury runs the program and allocates federal money through the U.S. Department of Housing and Urban Development to administer to state agencies, including the IHDA, for the tax credits. The program is estimated to cost $9 billion annually, according to the Congressional Research Service.
The program grants developers either a 4 or 9 percent state income tax credit -- based on the project's eligibility -- to assist with the cost of constructing or rehabilitating affordable rental properties. The program could be used to help redevelop the "large swathes" of vacant properties in Galesburg, "especially on the south side of the city," Tapia said.
"That would be a wonderful thing that we could offer if it was available," said Judy Guenseth, housing coordinator for the city.
Tapia said other cities Houseal Lavigne has worked with -- including Eden Prairie in Minnesota and Aurora in Colorado -- have used both the historic and low-income tax credits to help revive their communities.
"They're pretty broad and common credits that are available to developers and subsequently municipalities around the country, and oftentimes they are underutilized simply because a municipality isn't fully aware of the option, or they don't have staff available to research and seek out these opportunities," Tapia said.
He recommended that the city and the Knox County Area Partnership for Economic Development market the programs to developers on their websites, through pamphlets and by notifying developers that the programs exist during in-person meetings.
"KCAP advises our retail, commercial and industrial clients to consider federal historic rehabilitation tax credits when appropriate," said Ken Springer, president of the Knox County Area Partnership for Economic Development.
City Planning Manager Steve Gugliotta said the city's staff would be happy to sit down and work with developers on applications for either tax credit program.
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