Congress could eliminate the tax break that helped Miami Beach’s Art Deco renaissance

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This Art Deco hotel on Ocean Drive was approved for the historic tax credit program for $9 million of its rehabilitation budget in 2014. Buildings such as the Breakwater Hotel, designed by Anton Skislewicz and built in the 1930s in South Beach, benefit from the historic tax credit because they give developers a financial incentive to rehabilitate historic buildings. Roberto Koltun El Nuevo Herald

Behind the signature Miami pastels, perfectly symmetrical facades and terrazzo floors that give South Beach’s rich stock of Art Deco buildings its distinctive flavor, one section of the U.S. tax code fueled the rehabilitation of these once-crumbling structures.

 

As part of a sweeping tax overhaul, Republicans in Congress could eliminate the historic tax credit — a move that is upsetting local preservationists and developers who say the credit is an essential factor in the financial formula that keeps these decades-old buildings standing.

The tax plan passed by the House of Representatives on Thursday eliminates a 20 percent historic preservation tax credit. The tax plan under debate by the Senate currently keeps the tax credit, though it could be changed.

Locals who fight to save historic buildings and developers who take these buildings on as restoration projects agree that reducing the incentive would hamper future rehabilitation of Miami and Miami Beach’s historic architecture.

“In the development community, we take advantage of this,” said Sandor Scher, principal of Claro Development. “This is a real incentive.”

Claro is planning to rehab and reuse several late-era Deco and Miami Modern buildings in the redevelopment of Ocean Terrace, a block along the city’s north shore. Scher plans to apply for historic tax credits to help finance the project, which is currently under review by the city planners.

The credit enables developers to save on taxes and spend more on costly rehabilitation projects that preserve the facades of historic buildings while renovating the rest of the structure to make it economically viable.

Hotelier Alan Lieberman helped shape South Beach’s character through several historic restoration projects that met the stringent requirements set forth by the National Park Service, which runs the tax credit program and approves projects based on how faithful a restoration is to the building’s original look.

Lieberman’s company, South Beach Group Hotels, has preserved archetypal Art Deco hotels in the city’s tourist center, including the Collins Plaza Hotel, the Chesterfield and the Catalina Hotel and Beach Club. He said historic hotels are good for business because guests appreciate the uniqueness of the architecture.

So do people who live in the Beach, a rare intersection between tourism and resident interests.

“We take the buildings for granted,” Lieberman said. “It’s really nice, it’s interesting and it’s comfortable. People love historic buildings.”

Developers and preservationists argue the historic tax credit, which could be removed from the U.S. tax code by Congress under a proposed tax overhaul, provides a necessary financial incentive for owners of historic properties to rehabilitate old buildings such as this Art Deco hotel.
Roberto Koltun El Nuevo Herald

At least one member of the local Congressional delegation agrees and hopes the final bill will leave the tax credit untouched when it comes to a vote.

“I will vote for this monstrosity with the hope that many of these things will get taken care of once the bill comes back and we have a conference and people come to their senses,” said Rep. Ileana Ros-Lehtinen, R-Miami, of the House bill. But she did not rule out voting against the final bill if enough changes aren’t made.

“Preservation is so important in my congressional district, not only in the Gables but in Miami Beach. Oh my gosh, those beautiful Art Deco hotels and homes,” Ros-Lehtinen said. “We want to preserve them. I’m not in favor of doing away with those deductions. Why take it out on the little guys like that?”

Eliminating tax credits like the historic preservation credit is one piece of a massive restructuring of the nation’s tax code pushed by Republicans eager to pass one of President Donald Trump’s legislative priorities.

Among the groups urging Republicans to do away with many tax credits is Freedom Partners, a Koch Brothers-backed nonprofit that promotes free enterprise. In a letter to Senate Finance Committee chairman Sen. Orrin Hatch, R-Utah, last week, the organization said: “This assortment of political favors to select industries is exactly what tax reform was intended to fix. Every dollar that goes to propping up special interests is a dollar that doesn’t go to lowering rates and easing the tax burden for ordinary Americans.”

But preservationists on the state and local level point to the tax credit as a major reason historic architecture in Miami and Miami Beach has been saved.

“Miami is really an interesting sort of example of what the tax credit can do,” said Melissa Wyllie, executive director of the nonprofit Florida Trust for Historic Preservation. “The tax credit is not just preserving the most grand edifices of history, but really all history.”

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This photo from 1991 shows two Art Deco hotels on a relatively empty Ocean Drive. The rehabilitation and reuse of these kinds of buildings helped fuel Miami Beach’s renaissance in the past two decades, elevating the area to a premier tourism destination.
Jon Kral Miami Herald file

The history embedded in the stucco walls and porthole windows of these old buildings — relics from the 1920s and ’30s — fascinates tour guide Jeff Donnelly, historian for the Miami Design Preservation League. On the walking tours of South Beach’s Art Deco district he has guided since 1988, he regularly meets people who appreciate the sense of place created by the Beach’s architecture.

“There are people who are looking for an authentic cultural experience,” he said. “A one-of-a-kind experience in a place that has a character of its own, and a body and history to that character.”

The tax credit is available for any building or property that’s listed on the National Register of Historic Places and applies to any “rehabilitation expenses” made to the property. Wyllie said the tax credit helped to create more than 15,000 jobs in Florida from 2002 to 2015.

Scher echoed Wyllie’s concern for job creation, adding that rehabilitating a historic building creates new hospitality jobs while satisfying the community’s desire for keeping development within the scale of is surrounding neighborhood.

“All over the country, you’re going to find that the great preservation projects that take advantage of this, that creates thousands of jobs, will suffer,” he said. “Then the projects will either not keep the scale and scope in terms of the renovation, or they will maybe not happen at all.”

Wyllie said that the financial incentive provided by the credit is what lures preservation-minded developers to projects and that repealing the credit would be a major blow.

“I truly believe personally that for developers and individuals rehabilitating, it has to make financial sense for them. You have to make the dollars work,” she said. “I’m afraid that rehabilitation of a structure would be off the table. The best situation isn’t that we save an empty building; the best situation is that a building is used.”

Ros-Lehtinen’s district, which includes Miami Beach, received a total of $721.2 million in Federal Historic Tax Credit certifications from the National Park Service between 2002 to 2016, according to the National Trust for Historic Preservation. By far the biggest chunk of the credit, $317.1 million, went towards a 2009 project at the Fontainebleau resort.

The Fontainebleau declined to comment for this story.

The National Trust for Historic Preservation’s report also notes that $157 million in taxes was generated by the restoration projects.

“We have so little of the past in Miami. What little we have should be preserved,” Ros-Lehtinen said.

Joey Flechas: 305-376-3602@joeflech

by miamiherald.com

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