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Historic building owners find tax haven in restoration

Oregon’s special property program allows the assessed value to be frozen for up to 10 years

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Posted: Wednesday, January 2, 2013 10:51 am

“I’m a retired architect, so this is fun for me,” said Ted Osborn about his fixer-upper – the Allen Building – on the corner of 10th and Commercial streets in Astoria.

“I’m doing this as a hobby, not as a business.”

For Osborn, it’s a labor of love without money as a main consideration. For many historic building owners in Astoria, though, renovations can be a fruitful yet financially prohibitive burden in the short and longterm.

The Special Assessment of Historic Property Program, which was founded in 1975 and is run through the State Historic Preservation Office, has allowed historic property owners such as Osborn to freeze the assessed value of their property for up to 10 years while agreeing to make improvements.

It is one of several tools Astoria property owners can and have used to save on their own taxes while improving their buildings and the city’s real estate values.

“I’m fascinated with the old building, and I love Astoria,” said Osborn about why he invested his own time and money in renovating the Allen Building. “I’m really, really interested in rejuvenating that building and getting the block kicked off. I wanted to do something nice for the city.

“I thought that building was an eyesore, and it needed help. Since I’ve been working on my building, it seems like there’s been more activity” at the intersection of 10th and Commercial streets.

Out of the 462 eligible properties on the National Historic Register in Clatsop County, said City Planner Rosemary Johnson, only 17 are going through renovation under the auspice of the assessment program.

Fifteen of those properties are in Astoria. There is also the Officers Quarters on Russell Avenue in Hammond and a house in Gearhart currently in the midst of their 10-year assessment freezes.

“The John Jacob Astor was the biggest example,” said Johnson of the program in Astoria. “It was just an empty hulk. It was worse than the Waldorf. The police were using it for urban police training. In 15 years (of special assessment), there was $500,000 worth of taxes saved.”

Other locally famous structures that have taken part include the Fishers Brothers, Fort George, Niemi Hotel and Sanborn buildings. The number of properties on their 10-year assessment freezes varies, said Johnson, but generally has ranged between 12 to 20 properties over the last 30 years. She added that it’s been mostly commercial buildings taking advantage, although several residences have also taken part.

“If you get a fixer-upper, it can help,” she said.

Special Assessment is a program through Oregon’s State Historic Preservation Office. In consideration for this assessment value freeze, the applicant agrees to make certain improvements to the structure during the 10 years, increasing the value of the building. After 10 years and the improvements are completed, the property is reassessed and the applicant pays taxes on the increased value. Improvements are generally substantial and are not just facade upgrades.

“The bottom line is it gives them one more way to pay for that restoration,” said John Goodenberger, chairman of the Lower Columbia Preservation Society.

There are several requirements for the program:

• The property must be listed in the National Register of Historic Places, either individually or as a contributing property in a historic district, or be considered historic by the State Historic Preservation Officer and listed within two years of applying for the benefit program.

• A preservation plan must be prepared that outlines substantial rehabilitation work the building will undergo during the 10-year period.

• There is an application fee equal to one-tenth of 1 percent of the assessed value of the building.

• Ten percent of the real market value of the property must be invested in rehabilitation within the first five years of the program.

• An approved plaque must be installed on the building.

• State Historic Preservation Office approval or local government approval, whichever is appropriate, is needed for exterior projects and interior projects of substance.

To receive the maximum benefit, an application should be submitted before any rehabilitation is undertaken. This helps assure that the “frozen” assessed value is the pre-rehabilitation value. Commercial and residential properties can also apply for a second 10-year assessment freeze, although it comes with more specialized requirements. For a more in-depth explanation of the program, visit http://www.oregon.gov/oprd/HCD/SHPO/pages/tax_assessment.aspx

Income-producing historic buildings may also apply for a federal tax credit program (http://www.oregon.gov/oprd/HCD/SHPO/Pages/FED_TAXCREDIT_NEW.aspx).

“I work directly with property owners,” said Johnson, with the city of Astoria. “I try to make them aware of the program and how it works.

“It is fairly select. You’ve got to have a fixer-upper to make it work.”

In addition to the state and federal tax abatements and subsidies, said Johnson, there are also state and federal grants that come up for national historic properties, along with “pass-through” grants that the city administers.

“I was doing the (demolition) for a good month, because I did it myself,” said Osborn, who also obtained a $20,000 grant through the state preservation office to fix up the outside of his building. Osborn, who purchased the former tanning salon in December 2011, added that he had no trouble spending the necessary amount on improvements to get the assessment freeze, ripping out layers of ceiling, removing tanning booths, painting, installing new fir and hexagonal tile floors and creating a bump-out window display.

“The special assessment has been very successful in downtown,” said Goodenberger. “When you have this cohesive downtown, you’re going to attract more people to do business there.”

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