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Mayor Communication re Vilsack Presidential AppointmentOffice of the Mayor City Hall 50 West 13th Street Dubuque, Iowa 52001-4864 www.cityofdubuque.org VIA a-mail & 1St Class Mail Vilsack.thomas@dorsey. com The Honorable Thomas Vilsack Dorsey & Whitney LLP 801 Grand, Suite 3900 Des Moines, IA 50309-2790 Dear Governor Vilsack, THE CITY OF I~UB E December 22, 2008 Congratulations on your appointment by President-Elect Barack Obama as Secretary of the U.S. Department of Agriculture, putting you in the Cabinet of the President of the United States. Over the years, I have considered it an honor to work with you and I have always appreciated your intellect and candor. As a former Mayor, you certainly understand the issues of Main Street. If I may be so bold, I want to offer a suggestion on how to help revitalize rural America. Small towns across America have historic structures that anchor their downtowns. Many of those structures are in need of repair. If the Federal Stimulus Package under consideration were to double the Federal Historic Tax Credit from 20% to 40% for the first $5 million in costs for any qualified historic renovation project, downtowns across the United States would see a huge wave of investment. This would not only reinvigorate main streets, but it would put hundreds of thousands of people to work, especially in rural communities and less populated states. Dubuque has seen positive results from this program. Just since the year 2000, projects taking advantage of this public investment have created 101 affordable apartments in our downtown area and resulted in over 635 new permanent jobs, for a direct payroll increase of nearly $22 million. This is in addition to the construction jobs created during the development phase. New construction is typically half materials and Service People Integrity Responsibility Innovation Teamwork The Honorable Thomas Vilsack December 23, 2008 Page 2 half labor. Restoration work, however, expends typically 70% of the total project cost on labor, with the balance being spent on materials. Restoring and re-using existing building stock has become a cornerstone of Dubuque's sustainability initiative. Anew energy-efficient building in a greenfield at the outskirts of town requires 40 years to recuperate the embodied energy (the cost of extraction, processing; manufacturing, transporting and installing materials) found in an existing building, or 65 years if a building is torn down to make way for the new. Several groups have advocated doubling the Federal Historic Tax Credit from 20% to 40% for small projects (see attached.) The suggestion in this letter is a variation on that theme that would double the credit on the first $5 million of projects large and small. A side benefit to implementing this increased historic credit on the first $5 million of any eligible project is that it will also benefit large projects in every town in America. Dubuque is an historic community, and many buildings are in need of some tender loving care. These refurbished buildings could provide affordable housing for the "creative class" workforce and provide new retail and office space in blighted urban cores. Historic preservation is also more sustainable than urban sprawl. Congratulations on your appointment and I look forward to working with you well into the future. Sincerely yours, ` Q ~~.~ Roy D. Buol Mayor RDB:jh cc: Michael C. Van Milligen, Dubuque City Manager Teri Goodmann, Dubuque Assistant City Manager Rob Nabors, Presidential Transition Team via a-mail - rob.nabors@ptt.us COMMUNITY REINVESTMENT CREATING VIBRANT COMMUNITIES THROUGH CAPITAL INVESTMENT AND ~1OB CREATION The Historic Tax Credit was proposed in 1981 as part of the Economic Recovery Tax Act to help lift the economy out of a recession by spurring the rehabilitation of America's historic and older buildings. Twenty-seven years later the nation fmds itself in similar circumstances. By modernizing the credit it can play the same positive role in stimulating economic development across America as it did back in 1981. Since its inception the credit has leveraged more than $45 billion in private funding for both commercial and residential properties. The key to the credit's success is its ability to leverage about $5 dollars of private investment for every $1 dollar in federal subsidy to rehabilitate vacant and underutilized buildings, which are typically located in communities that are economically depressed and socially diverse. In fact, the credit has created over 382,000 housing units of which 25 percent were low- and moderate-income. And according to the National Park Service Annual Report, in 2007 alone the credit generated $4.34 billion in private investment, which created over 40,000 local jobs, an average of 39 jobs per project. . However, with the current recession and regulatory limitations on the use of the historic tax credit, its full potential has not been realized, to the detrimeat of many communities. Enhancing the credit could provide rural and urban communities an important tool that would help stabilize neighborhoods, increase property values, create good paying jobs and preserve the community's history. The proposed modifications include: • Increasing the credit from 20 percent to 40 percent for smaller projects. This would target "main street" and rural developments for which tax credit transactions costs are currently too prohibitive. • Maximizing the creation of housing by targeting the use of the 10 percent credit for residential rental housing in low-income areas, specifically in HUD "Difficult to Develop Areas" and Census Bureau "Qualified Census Tracts" where capital investments are difficult to obtain. • Increasing the 20 percent credit to 26 percent for certified historic structures and the 10 percent credit to 13 percent for non-historic older buildings. This mirrors laws passed by Congress after Hurricane Katrina and the Midwestern floods. Now, with the credit markets tight, this would create an incentive for the credit markets to provide funding for these projects just as they did after these terrible disasters. • To spur on corporate capital investment in historic tax credit-eligible projects, eliminate recapture resulting from foreclosure for projects placed in service over the next 36 months. This would encourage investment in properties located in some of America's hardest-hit markets where there is currently a severe lack of credit. With these changes Congress will infuse new capital into the marketplace to help projects that are ready to go but for the lack of available credit under these current economic conditions. Greater use of the credit will generate good paying jobs and make a meaningful difference in the fight to end the economic recession and revitalize depressed areas of our cities and rural towns.