Secretary of Interior Ken Salazar Talks Historic Tax Credits in Detroit
studiozONE, llc and Integrity Building Group, LLC had the great pleasure of attending a public hearing led by Secretary of Interior Ken Salazar today at the historic Odd Fellows in Southwest Detroit organized by Senator Carl Levin.
Detroit has one of the country’s largest collection of historic buildings and obviously many need significant renovation and improvement. The Department of Interior has had a Historic Tax Credit program to help defray the additional costs of historic renovation for years. The program is an Earned Income Tax Credit program which essentially means you have to spend the money first to even qualify for the tax credit.
The way the Historic Tax Credit program works is relatively simple.
Step One, the developer has to have the historic property nominated and certified by the Department of the Interior.
Step Two, the developer must identify the historic features and spaces of the building and show how the building will look when the proposed improvements are completed. This is where architects come in, architects document the existing conditions and the proposed improvements as well as the design. The Department of Interior will review the proposed improvements and if they follow the Secretary’s Standards, grant approval for the project to be built as designed.
Step Three, the developer must complete all the improvements and construction according the approved proposed design. This is where the builder comes into the project.
Step Four, the developer must document the final improvements after construction as well as the costs for all the improvements and have this certified by the Department of the Interior. Both the architect and builder are involved in this cost as well as an accountant to certify all the costs.
If the developer completes all these steps and the Secretary of the Interior approves the final improvements, then the Department of Interior will send a letter to the Department of Treasury and IRS who will process the tax credits.
Essentially, the tax credit benefits for the developer are for every dollar he spent, he will get twenty cents back in tax credits. So if the developer had spent $1,000,000, he will earn a $200,000 historic tax credit.
Its not as simple as all that as this requires a lot of effort to monetize the historic tax credit but it helps defrays the costs of the construction and improvements.
Secretary Salazar was in Detroit to get first hand feedback on how the program was working and what improvements could be made. The audience provided a lot of great feedback as the audience was full of developers, architects and builders who have been involved in the historic tax credit process.
Ultimately Secretary Salazar is going to compile recommendations, both legislative and administrative within the Department of Interior. These are to be ready by March 1st, 2013.
studiozONE, llc and Integrity Building Group, LLC have been leaders in the historic renovation field, both as architects and builders. The renovation of the Grand Army of the Republic Building in downtown Detroit in which studiozONE, llc and Integrity Building Group, LLC is a perfect example of our team in action with historic tax credits.
The Grand Army of the Republic renovation will utilize historic tax credits as part of its financing for the project. We have received approval from the Department of the Interior for the proposed improvements and we have recently completed Phase I, the building envelope. Phase II, the interior improvements are set to begin shortly.
Keep following our blog to follow the steps as the Grand Army of the Republic building moves forward to its full restoration.
Many Owners needing to revamp their office space or build an addition will ask themselves this. The short answer is yes. Many view architects as “an unnecessary expense” and don’t see what paying an architect will do for them. Let’s try an answer this simple question.
What is an architect?
A true architect is more than a draftsman or designer, they are building and construction specialists who should be able to understand the aspects of your business and how they will work with you or your team. In the legal sense, to call yourself an “architect” you have to graduated with an advanced degree beyond the usual B.S. degree, you have to go through the Intern Development Program (IDP) and you have to pass a licensing exam. Most states are in a common format now using the NCARB test which has greatly simplified the process to become an architect.
Are all architects the same?
No, while we have common training, design, knowledge of the engineering components of a building, construction experience, like doctors and lawyers, we tend to specialize in certain fields. Some architects focus on residential projects of all sizes, some have built up practices with most of their work in a specific construction type, educational facilities, religious buildings, healthcare structures or retail spaces. Some architects are able to work across a wide variety of project types. The most important question to ask related to experience and your unique business that the architect will be interfacing with is “Can the architect effectively communicate and understand my business”. If he can, then it will probably be a good fit.
What are some of the steps I should take to hire an architect?
A first important step is to get referrals from others you trust, if your friend had a good experience, it is probably a good bet that you will too. Once you have an architect in mind, get some references from them or go on-line and see what they have done. It is especially important that you talk with others who have worked with them. With larger firms, especially, you are going to want to know who is the person who will actually be doing the work for you, like any company, they have some people who do a better job or are a better fit for your needs and personality.
Shouldn’t I just hire a builder?
No and Yes, let me explain. If the builder provides comprehensive “design-build” services, this could be a great fit. When I say comprehensive “design-build” services, the builder needs to have a professional architect on staff or have teamed up with an architectural firm to provide the architectural related services. If the builder doesn’t have the staff or relationship, you are probably going to be disappointed.
Our firms, studiozONE, llc and Integrity Building Group, LLC provide comprehensive “design-build” services. studiozONE, llc performs all design and architectural related services and Integrity Building Group, LLC manages the construction. In our organization, the lines between the two groups are very blurry as we move between the two disciplines. The big advantage owners get with “design-build” is a single source of responsibility for the Scope, Schedule and Budget for a project. Early on in the process, the owner will have an idea of what he wants to do will cost and often a Guaranteed Maximum Price (GMP) contract can be entered into. This allows the owner to set the maximum budget and define the quality and the architectural/construction work together to achieve this.
We have used “design-build” on a number of projects, the Grand Army of the Republic renovation in downtown Detroit, the Myst Nightclub renovation in Southfield and the University of Detroit Mercy Titan Hall renovation also in Detroit. With all these projects, the owners have a much tighter control of their budget and quality. This will ultimately provide the owner the highest value.
Design Build combines the traditional Design-Bid-Building process where an Architect or Engineer prepares design and construction drawings, has multiple bidders submit bids from which a bidder is selected to construct the drawing. While providing the owner with multiple prices, the owner doesn't really know what his project will cost until he has invested a considerable sum of money have the drawings produced and bid.
The Design-Bid process combines both the design and construction into a single entity, a Design-Builder. Early on, the owner will be able to have a strong idea of what the final project will cost. In many cases a Design-Builder can provide a guaranteed maximum price for the Owner at an early stage.
Sometimes, a Construction Manager or General Contractor will contract with an architect who will work under the direction of the Construction Manager. In other cases, this is a single, unified entity, with architects and construction managers all within a single organization. At studiozONE, llc, we provide the latter.
studiozONE, llc, along with its sister organization, integrity Building Group, LLC provides owners with a single source of responsibility for both design and construction. Owners are able to streamline and shorten the entire process while having a project that will be finished within the owner's budget. studiozONE and IBG Detroit have successfully delivered projects for Owners using the Design-Build method.
For example, the Myst Lounge, in Southfield, Michigan, was designed by studiozONE and constructed by IBG Detroit under a single Design-Build contract. The owner, Chris Roberson, was able to know at the very beginning of the project what the project would cost along with what he would be obtaining with the design. During the construction process, the owner wanted to make a number of changes and with Design-Build this was able to be quickly accomplished on the fly to maintain the construction schedule. At its best, Design-Build can provide early on a clear design and associated budget and eliminate many of the uncertainties for the Owner earlier than the traditional Design-Bid-Build process.