Tax
Credits Give New Life to Historic Hotel Governor in Jefferson
City
By Scott Hall
The State of Missouri has multiple tax credit programs to provide
incentives for investments and charitable contributions. This
regular column features examples of how the various Missouri
state tax credit programs benefit the state and the st. louis
region.
There is an old saying in the real estate business that alleges
property can be valued by three criteria, “location, location,
location.” That said, Jefferson City’s historic Hotel Governor
building remained empty for more than a decade despite being
across the street from the majestic Governor’s Mansion and in
the shadow of the Missouri State Capitol Building. The once
prominent landmark that served not only as a hotel, but more
importantly, as a nucleus of State political activity, was closed
in 1988 and remained vacant for more than 10 years. Many worried
that the building would never be renovated. Despite several
attempts, the Hotel Governor remained abandoned, burdened by
the great expense of suitable restoration. However, with help
from the Missouri State and Federal Historic Tax Credits, an
otherwise impossible renovation turned into a remarkable success.
Built in 1941, the Hotel Governor stood as one of Jefferson
City’s most prominent landmarks not only because of its prime
location, but also because of the six-foot sign that adorned
its rooftop. The hotel was a hotbed of political activity, most
of which took place in its famous bar, the Rathskeller. But
like many in Jefferson City, the Hotel Governor encountered
a great political constant, change. By the mid-’90s the sign
atop may have said ‘Hotel Governor’ but the building said ‘Vacancy.’
Instead of hosting the Governor’s Inaugural Ball or political
power lunches, the Hotel Governor’s newest guests were pigeons.
It was this terrible deterioration that caught the attention
of Belleville developer Bruce Cohn.
Cohn wasn’t the only developer to notice the potential in restoring
the Hotel Governor, and he wasn’t the first one either. Before
Cohn took on the massive job of renovating the historic hotel,
other developers had tried, but none succeeded. Previous plans
never got past the concept stage. It seemed that nobody could
make the numbers work. But Cohn had an ace up his sleeve. He
understood the power of State and Federal tax credits.
In 1997 Missouri Governor Mel Carnahan enacted legislation that
created the Missouri Certified Historic Rehabilitation Tax Credit.
Effective January 1, 1998, this program offered credits against
Missouri State income tax for 25 percent of the qualified costs
for rehabilitation of a certified historic building or any eligible
building in a certified historic district. But more importantly,
these credits are transferable to other Missouri tax payers.
Thus, to the extent that Cohn could not use these historic tax
credits against his own Missouri State income taxes, others
can. By selling his excess credits through a capital account
to Firstar’s Community Development Corporation, who sells them
to other qualified Missouri tax payers, Cohn was able to close
the gap on an otherwise impossible project. In exchange for
the proceeds invested by Firstar’s Community Development Corporation,
it retains a 99 percent interest in the project.
In addition to the State credits, Cohn was also able to use
Federal Historic Tax Credits, which offer an additional 20 percent
for rehabilitation of national historic landmarks, making the
Hotel Governor one of the first Missouri projects to use both
the State and Federal Historic Tax Credits. “Plain and simple,
the project wouldn’t have taken place without the tax credits
and the help of Firstar Bank,” Cohn says.
The Hotel Governor building is once again up and running, but
not as a hotel. Instead, it houses a number of State and private
offices including Mailboxes Etc., Premier Bank, the Missouri
School Board’s Association, the law firm of Bartemus, Frickelton,
and Presley, the Missouri Public Service Commission and others.
In addition, the building boasts a new name, the Governor Office
Building. But despite a new name and its revised use, the building
still serves the same important function. “We look at this as
a continuation of a historic corridor. It’s a significant part
of the history of the city,” Cohn adds.
The renovation of the Hotel Governor building marks a turning
point for Missouri developers. Historic buildings that previously
were considered lost, can once again be restored to their original
grandeur. The use of both State and Federal tax credits closes
the financing gaps. “It makes the projects more financially
feasible,” notes Kathy Bader, Chairman of Firstar’s Community
Development Corp-oration.
By using both Federal and Missouri State Historic Tax Credits,
the renovation of the Hotel Governor has paved the way for dynamic
re-development not only in Jefferson City, but throughout Missouri.
Scott
Hall is an associate of DFC Group, Inc., tax credit consultants
to the Firstar Tax Credit Clearinghouse.
