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Tax credit denial stalls developer

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Robin Durant, owner of Pinnacle Assets, which holds the Howe Street Cottages on Howe and Ellis streets in Brunswick, poses for a photo Thursday outside one of the rental homes. Durant is wrangling with the state after it denied his application for a historic preservation tax credit, which he says his rehabilitated rental homes deserve.

For champions of downtown Brunswick’s renaissance, there may be no greater unsung hero than Robin Durant.

The New Orleans riverboat baron helped facilitate the Richland Rum distillery, a centerpiece of downtown’s revitalization. He’s rehabbed six derelict homes on Howe and Ellis streets, and he has plans to breathe life into three more vacant buildings downtown.

But a recent decision by the state of Georgia may stymie those ambitions.

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Robin Durant, owner of Pinnacle Assets, which holds the Howe Street Cottages on Howe and Ellis streets, sits on the porch of one of the rental homes Thursday. Durant is wrangling with the state after it denied his application for a historic preservation tax credit, which he says his rehabilitated rental homes deserve.

Durant owns the Howe Street Cottages, a row of homes built around the turn of the 20th century. It’s safe to say the dilapidated houses had seen better days when Durant and a business partner bought them in 2004.

The properties were tangled in litigation until 2014, when Durant gained full control. To date, he’s spent more than $650,000 gutting the houses to the studs, replacing floors, and in some cases, re-arranging walls. After they opened as rental units in late 2017, the Brunswick Historic Preservation Board praised the project, calling it a “you can do it” effort that turned an “eyesore” into a “gem.”

To help pay for it all, Durant was betting on a state historic rehabilitation tax credit. But according to the Georgia Department of Natural Resources, which oversees the tax-credit applications, Durant went too far.

DNR denied his application in November 2017, and now, Durant says he’s unable to move forward with other projects — including two major mixed-use developments on Newcastle Street in Brunswick.

Without the tax credits, Durant said he won’t have cash to jump-start other projects.

‘ECONOMIC AND TECHNICAL FEASIBILITY

Since 2004, the tax-credit program has given qualifying property owners a break on their state income taxes in exchange for preserving some of Georgia’s most endangered properties. Eligible property owners can apply for an income tax credit of up to 25 percent of the qualifying rehab costs, capped at $100,000 for residential properties and $300,000 for those that produce income.

Durant’s application made it through the first phase of approval, but was ultimately denied final certification.

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The Howe Street Cottages, pictured, on Howe and Ellis streets in Brunswick were built around the turn of the 20th century and fell into a state of neglect until their owner, Robin Durant, rehabilitated them.

In a December 2017 letter to Durant, the director of DNR’s Historic Preservation Division, David Crass, wrote Durant’s “completed work includes the removal of all historic flooring and replacement of flooring that does not match the historic material in profile.” He also wrote the addition of features like decorative doors and crown molding rendered the properties ineligible for the tax credits because “there was no historic evidence that these features existed historically.”

Durant cried foul that same month. He petitioned for an appeals hearing with DNR and was denied. He then retained St. Simons Island-based lawyer Zachary Harris of the firm Choate & Co. On Durant’s behalf, Harris has filed for an appeals hearing with a state administrative law judge. That decision is pending.

In a letter to DNR in April 2018, Harris, requesting that hearing, claimed the Historic Preservation Division had intentionally misled Durant through the process in an effort to collect application fees. He also claims DNR failed to consider the “economic and technical feasibility” of adhering to strict rules about using historic materials and design elements. He notes no one from DNR’s Historic Preservation Division ever visited the properties in person.

‘RURAL AND URBAN DIVIDE’

He and Durant also argue the state is giving preferential treatment to tax-credit applicants in Georgia’s more wealthy urban counties.

A December 2017 study by Georgia State University found that between 2008 and 2017, 341 projects across Georgia used the historic preservation tax credits. Of that, 86 percent — 292 projects — were in just 10 of the state’s 159 counties.

The vast majority of projects, 277, were in Georgia’s six most populous counties (Fulton, Bibb, Chatham, Muscogee, Richmond and DeKalb).

Georgia State University’s study backs up Harris’ claim. It recommended “modifying the award process in a manner that encourages geographic diversity of projects between urban and rural areas.”

One of the largest projects to receive the tax credits was Ponce City Market in Atlanta. Once a retail and distribution center for Sears, Roebuck & Co., the sprawling campus re-opened in 2014 after a developer converted it into a mixed-use retail, office and living space.

The project received $48 million in federal historic tax credits and $300,000 in state credits, according to Georgia State University. That’s despite many of the apartments in the project including some of the very same amenities Durant incorporated into the Howe Street Cottages.

Closer to Brunswick, The Grey Restaurant in Savannah received $300,000 in state historic tax credits when it was transformed from a bus station to an eatery and opened in 2014.

‘HISTORICAL DEFINING CHARACTER FEATURES’

William Hover, the historic resources section chief of DNR’s Historic Preservation Division, said there are differences between Ponce City Market and The Grey and the properties owned by Durant.

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The Howe Street Cottages, pictured, on Howe and Ellis streets in Brunswick were built around the turn of the 20th century and fell into a state of neglect until their owner, Robin Durant, rehabilitated them beginning in 2014. Durant says the state recently denied his application for a historic revitalization tax credit.

With The Grey, for example, it’s clear there was never a bar in the bus station. But when the new owner was converting it to a restaurant, DNR worked to identify “historical character defining features,” Hover said.

“We basically identified those features, and what he (The Grey’s owner) wanted to do there, and even though it was a different use, it didn’t diminish those features,” Hover said. “When they added a feature, they did it in a manner that you could identify as a contemporary alteration.”

A “contemporary alteration,” Hover said, is when features are added that would not have been in the original building — for example, a dish washer added to a home built in 1902.

Durant, according to Hover, did not make distinctions between some of the newer features he added to the houses on Howe and Ellis streets.

Decorative sunburst features in the corners of the homes’ porches, for example, were likely not in the original homes, Hover said, thus disqualifying Durant for the tax credits. Those decorative outdoor moldings and features are described by designers as “gingerbread.”

In DNR’s November 2017 letter of denial to Durant, it cited a standard that “the removal of historic materials or alteration of features and spaces that characterize a property shall be avoided.”

‘WHAT IS THE POINT?’

Durant said he’s confused why his properties — which were originally residences, and have been restored as such — do not qualify for the credit, yet a former bus station converted into a swanky restaurant does.

“If I had known some of these features were disqualifying, they never would have gone on there,” he said.

Additionally, Durant said he has old photos of some of the homes that show the features like the so-called “gingerbread.”

Durant said he is tired of hearing what he called “spin” from DNR.

“They have the discretionary authority to approve the credits, if they wanted to,” he said. “What is the point of these tax credits? It seems like it would be to get someone to come in, spend their own money and revitalize a neighborhood, and that’s exactly what we’ve done here. To arbitrarily deny the application because of ‘gingerbread’ is absurd.”

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The Howe Street Cottages, pictured, on Howe and Ellis streets in Brunswick were built around the turn of the 20th century and fell into a state of neglect until their owner, Robin Durant, rehabilitated them beginning in 2014. Durant says the state recently denied his application for a historic revitalization tax credit.

That may not matter though. Because the historic rehabilitation tax credits are prescribed by Georgia law, Hover said the DNR is obliged to enforce the guidelines and has no authority to consider outside factors like a project’s likelihood to spur economic development or neighborhood revitalization.

“We’ve heard that argument before, and the reasoning, basically, is that if the legislature determined we should consider that, we would,” Hover said. But, he added, it hasn’t.

Harris said it appears to him the state could approve Durant’s tax credits, but simply isn’t interested in Brunswick or its historic appeal.

“It’s just really disappointing that you’ve got Robin Durant spending real money in downtown Brunswick, and he’s basically getting no support for a meritorious project from the state,” he said. “If you look at the data, I don’t know if it’s him personally, or the city of Brunswick, but it appears Brunswick is not terribly too important to the state right now.”

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