CONCORD, NH - Governor John Lynch launched a new tax incentive that encourages investment in downtowns and village centers at a signing ceremony on Monday, July 10. The incentive gives the owners of qualifying buildings temporary relief from increased taxes due to rehabilitation efforts.

Legislative sponsors included Judith Spang (Durham), Robert Theberge (Berlin), Eric Stohl (Colebrook), Peter Schmidt (Dover), and Senators Bob Odell (District 8), Sylvia Larson (District 15), and Martha Fuller Clark (District 24).

The New Hampshire Preservation Alliance, N.H. Main Street Center, N.H. Housing Finance Authority, and the Concord and Nashua Chamber of Commerce, have praised the legislators and Gov. Lynch for adopting a new tool that advances smart-growth, historic preservation, and housing goals.

"This new program is designed to encourage investment in our downtowns and village centers, and to discourage sprawl that robs communities of their vitality," said Rep. Judith Spang. "It complements existing municipal planning tools that reinvigorate our towns and cities by promoting economic development, encouraging residential use of downtowns, and meeting historic preservation goals."

Any city or town may adopt the incentive program with a majority vote of its legislative body. Once it is adopted, a property owner who wants to substantially rehabilitate a building located downtown, or in a village center, may apply to the local governing body for a period of temporary tax relief. The law is structured to encourage not only rehabilitation of downtown structures, but housing in the downtown area.

The temporary tax relief consists of a finite period during which the property tax on the structure will not increase as a result of its substantial rehabilitation. In exchange for the relief, the property owner grants a covenant ensuring the continuation of the public benefit during the period of the tax relief. Once the tax relief period expires, the structure is taxed at its full market value, taking the rehabilitation into account.

Proponents of the measure believe that the design provides a strong public process with local discretion, and gives communities the benefit of increased tax revenues from rehabilitation efforts that otherwise would have been delayed indefinitely or never initiated at all.

From a fact sheet produced by the Preservation Alliance and partners:

HB 657, Community Revitalization Tax Relief Incentive

This legislative proposal encourages investment in downtowns and village centers with a new tax incentive modeled on existing New Hampshire statute (the so-called Barn Bill). Its goals are to encourage the rehabilitation and active use of under-utilized buildings and, in so doing, to

• promote strong local economies and,
• promote smart, sustainable growth, as an alternative to sprawl, in accordance with the purpose and objectives of RSA Ch. 9-B (State Economic Growth, Resource Protection, and Planning Policy).

How it works:

• In a town that has adopted the tool created by this legislation, a property owner who wants to substantially rehabilitate a building located downtown, or in a village center, may apply to the local governing body for a period of temporary tax relief.
• The temporary tax relief, if granted, would consist of a limited period of time during which the property tax on the structure would not increase as a result of its substantial rehabilitation. In exchange for the relief, the property owner grants a covenant ensuring there is a public benefit to the rehabilitation.
• Following expiration of the limited tax relief period, the structure would be taxed at its full market value taking into account the rehabilitation.

The legislation offers strong community process and discretion:

• Any city or town may adopt this program with the majority vote of its legislative body.
• Applications by property owners are made to the governing body and are accompanied by a public notice and public hearing.
• The governing body may grant tax relief if the application meets the guidelines and public benefit test.
• The governing body may deny the application in its discretion: "..such denial shall be deemed discretionary and shall not be set aside by the board or tax and land appeals or the superior court except for bad faith or discrimination." (79-E:4 V)

Qualifying properties:

A property owner can apply for the tax relief only if:

• The building is located in the community's downtown district (or equivalent), and
• The rehabilitation costs at least 15% of the building's pre-rehab assessed value, or $75,000, whichever is less, and
• The rehabilitation is consistent with the municipality's master plan or development regulations.