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Why Moynihan Station Should Use Historic Tax Credits
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Historic tax credits for the redevelopment of the Farley building could lighten the financial burden on New Yorkers by up to $250 million. But it’s unclear whether the developers and MSG are willing to preserve enough of the historic features, like the lobby’s ticket windows and the brick walls of the future train hall, to qualify.
The MAS strongly supports the use of the federal rehabilitation tax credit in the redevelopment of McKim, Mead & White’s Farley Post Office, a city, state and national landmark, for two main reasons:
First, adhering to the rehabilitation standards required to qualify for the tax credit will safeguard the Farley building’s historic fabric, including significant interior areas.
Second, the tax credit would be a significant financial boost of Federal funding to the project – especially when faced with rising construction costs, tightening lending conditions, and the ever present danger of “unexpected” costs and delays.
Since 1976, the federal rehabilitation tax credit has encouraged the preservation and adaptive reuse of historic buildings by offering federal tax credits to owners. The tax credits represent a dollar-for-dollar reduction of federal taxes owed based on 20% of the cost of the rehabilitation project.
We think utilizing the rehabilitation tax credit is in the best interest of both the developers and the public. Here is how it could work:
Basically, there are 4 factors that determine whether a rehabilitation project meets the basic application requirements for the 20% tax credit. With a strong commitment from the developers to preserve the interior and exterior of the Farley building we believe it is possible for the project to meet all 4 factors:
1. The historic building must be listed in the National Register of Historic Places or be certified as contributing to the significance of a "registered historic district."
2. After rehabilitation, the historic building must be used for an income-producing purpose for at least five years.
3. The project must meet the "substantial rehabilitation test." In brief, this means that the cost of rehabilitation must exceed the pre-rehabilitation cost of the building. Generally, this test must be met within two years or within five years for a project completed in multiple phases.
4. The rehabilitation work must be done according to the Secretary of the Interior's Standards for Rehabilitation. These are ten principles that, when followed, ensure the historic character of the building has been preserved in the rehabilitation. (Source: U.S. Department of Interior)
We can check off factors 1, 2, and 3. The big question mark is #4 - whether the developers are willing to complete the project according to the Standards for Rehabilitation. The developers of Moynihan Station will have to work closely with the State Historic Preservation Office to determine which interior and exterior features define the building’s historic character. They must commit to preserving those features in the rehabilitation project.
For example, the rooftop addition over the western annex for the new MSG will have to be appropriately set back from the historic façade and not highly visual from the street. The lobby’s ticket windows must be preserved – not blasted through for new hallways. Another hurdle could be the “Wall Retention Requirement,” which requires the project to retain “at least 75 percent of the internal structural framework.” Some early renderings of the train hall showed the historic brick walls of the interior replaced with glass.
Due to complex tax rules, it’s likely the Moynihan Station Venture would syndicate the credit rather than redeeming it themselves. Syndication typically means “selling” the tax credit to an investor or group of investors exempt from passive loss rules (typically a large bank, corporation, or other institutional investor). The “investor” enters the partnership and provides upfront equity to the project in exchange for the right to redeem the federal tax credits. In other words, if the developers can’t use the tax credits, they find an entity that specializes in using them, and the developers form a partnership with them. As a result, both the public and the developers benefit from more federal funding.
Please let us know if you disagree or see some other way to leverage the tax credits. We'll have more info on preserving the Farley building throughout the week.
Resources
The Secretary of the Interior’s Standards for Rehabilitation
A guide to the Federal Historic Preservation Tax Incentives Program
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Secretary of the Interiors Standards of Rehabilitation
In response to your claim that the project meets 1, 2, and 3 of the Standards of Rehabilitation I would disagree. The project as of yet does not meet standard #3.
Each Property shall be recognized as a physical record of it's time, place, and use. Changes that create a false sense of historical development, such as adding conjectural features or archtectual elements from other buildings shall not be undertaken.
The James A. Farley Building/Post Office is a National Landmark dedicated in 1982 as a "monument" to the political career of former Postmaster General and Franklin Roosevelt's campaign manager James A. Farley. This dedication has historical significance because Farley is a historical figure. (comes via H. Res 368 1982)
Removing his name and the post office from the Landmark does not recognize the physical record of "it's time, place, and use." The assertion that the construction of the Moynihan Station inside of the Farley Building, somehow negates the fact that the Landmark is Mr. Farley's monument is a legally weak argument and is one of the largest historical crimes anyone has ever attempted in the City of New York in the name of Development. Daniel Patrick Moynihan would have been honored to have the station dedicated in his honor,
and it is only fitting that before he passed he warned those involved with the project "Good old Jim Farley's name should stay there!". The removal of the Farley Post Office from the Farley Building kills the project, and would be a crime against Farley's legacy and thus the nation, 2-4 billion dollars is not worth it.
How does the removal of the landmark post office and the name of an important historical figure such as Farley meet standard #3 Removing the Post Office and Farley's dedication does not recognize the physical record of time place and use. There must be clear separations and distinctions between the "Historic" Farley Post Office, and the reuse of part of the landmark as the "Newly Constructed" Moynihan Station. Transforming Farley into Moynihan is unacceptable and the two must be clearly defined to meet the Secretary of Interiors Standards. Its just that simple!
Financing Farley Penn Station with Historic Tax Credits
The use of Federal Historic Rehabilitation Tax Credits to finance a portion of the proposed development of the new Farley-Penn Station is an excellent idea. In fact, since 1998, CityScape Capital Group has encouraged the Municipal Art Society of New York to pursue Historic Tax Credits for this project. While the Wall Retention Test doesn't apply to the 20% Federal Historic Rehabilitation Tax Credit, the project will still need to satisfy the Standards for Rehabilitation and receive approval from the National Park Service (which is much more stringent than the Wall Retention Test that applies to the 10% rehabilitation tax credit for non-historic commercial buildings built prior to 1936). The project will also need to address tax-exempt ownership and usage issues which may ultimately result in a reduction of the qualified rehabilitation tax credits. Even though the Related Companies will probably syndicate the tax credits themselves, CityScape Capital Group stands ready to assist with the tax credit syndication process. Best of luck with the project!