As the battle between growth and preservation rages, Nashville rarely uses the most lucrative incentive to rehabilitate old buildings, and lags drastically behind Memphis, Knoxville and even Chattanooga over the past 14 years.
The federal historic tax credit pays up to 20 percent of the rehabilitation costs to fix up commercial buildings.
Developers have taken advantage of the program across Tennessee, which ranks 25th nationally in terms of development costs associated with credits obtained. But Nashville is not keeping pace with its peer cities. Since 2002, Memphis projects have used the tax credits 73 times compared with just eight for Nashville. Knoxville had 43 projects use the tax credits, and Chattanooga had 14.
Preservationists tout the tax credits for saving historic buildings, aiding complicated projects and helping the economy. Since 2002, Tennessee’s 169 projects cost $600 million and generated $99 million in tax credits for property owners. According to research by the National Trust for Historic Preservation, those projects have generated $588 million in household income and $114 million in federal, state and local taxes.
There are a variety of explanations for why Nashville hasn’t utilized the federal historic tax credits very often. The most frequently cited reason for Nashville’s spare use of the tax credits is the city’s development boom. But a national expert pointed out that cities with equally desirable real estate markets have used the credits more often.
Others say the application process can be onerous and time consuming, which deters local developers eager to quickly complete their projects from pursuing the credits. Three of the eight Nashville projects to take advantage of the tax credit were led by local development firm the Mathews Co., which earned more than $7.3 million in tax credits. Despite its success with the tax credits, Mathews Co. President Bert Mathews theorized that the development climate and rigorous application process might diminish the number of such projects in Music City.