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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

Spending on historic preservation projects soars in Spokane

Spokane is seeing a huge upswing in investment in historic buildings.

Owners of 23 projects are seeking $39 million in property tax exemptions this year, a record for Spokane. A dozen of the projects are downtown, and most of those involve multimillion-dollar investments.

The previous property tax exemption record was $27 million in 2002, the same year the Davenport Hotel reopened. A year ago, the Spokane City-County Historic Preservation Office processed just $1.7 million in property tax exemptions for four projects, although many of the projects seeking property tax relief this year were in the works last year. The exemptions are available for qualified historic renovation projects.

This level of spending is one gauge of an expanding economy in Spokane and points to an optimism among historic building owners that their investments will pay off in the future.

“I think it shows the economy has absolutely turned around, but even more important, it shows Spokane’s dedication to our historic buildings,” said Megan Duvall, the city-county historic preservation officer.

Jim Kolva, a historic preservation consultant, said, “I think it’s a testimony to the vibrancy of downtown. I also think there is a recognition these buildings have value.”

Indicators appear to point toward more economic vibrancy in the overall economy. Unemployment is down by a full percentage point from last year, and sales tax collections are up about 5 percent so far this year across the county. Per-capita income is also on the rise.

Building owners can take advantage of the tax breaks by having their properties listed on the Spokane Register of Historic Places and then applying for a special property valuation, which deducts qualified rehabilitation costs from the assessed value for 10 years.

There is a caveat. Owners must spend at least 25 percent of the assessed value of their property on qualified rehabilitation to get the tax break. The qualified expenses can accrue for two years prior to the application.

In exchange, property owners must agree to protect mainly the exterior character of the building, to keep its historic context intact.

In addition, the Spokane City-County Historic Landmarks Commission must review each application for its adherence to historic rehabilitation standards, but upgrade items such as fire sprinklers, rewiring and elevators are eligible.

Applications this year will take effect for taxes to be paid in 2017 through 2026.

In the case of the Civic Building at 1020 W. Riverside Ave., the Philanthropy Center LLC spent $2.7 million upgrading the property for the nonprofit Empire Health Foundation.

The building, which once housed the Spokane Chamber of Commerce, is valued for 2016 at $767,000 with an anticipated tax of about $12,000. The historic property tax exemption will drop the taxable value to zero, meaning there will be no property tax on the building. It’s likely the building will pay no property taxes for 10 years, which could amount to about $130,000 in savings under the special valuation.

The exemption is seen as an incentive to get owners to preserve and maintain their historic buildings, Duvall said.

The public apparently has embraced the exemption. Duvall said she has heard no complaints about it. Historic buildings are valued because “they are an important part of our story,” she said.

The family that owns Diamond parking lots has spent $2.9 million through its Diamond Plaza LLC to upgrade the Paulsen Building, 421 W. Riverside Ave., with new elevators, window and hardware restoration, fire alarms and other features.

At the Globe Building, 204 N. Division St., a series of improvements, including fire sprinklers and a security system, are expected to net a $750,000 tax exemption for a building currently valued for 2016 at $864,000.

Landmarks commission

moved beyond political turmoil

Duvall runs the preservation office by herself with the help of a half-time clerical person. The landmarks commission is made up of volunteers with expertise in history, architecture, archaeology, preservation and real estate.

Duvall took the lead staff job in September 2014 following months of political rancor over the makeup of the landmarks commission and the participation of Spokane County commissioners in helping fund the office. The political turmoil virtually shut down the commission’s work at the end of 2013.

Elected leaders at City Hall and the courthouse smoothed out their problems just in time for this year’s onslaught of applications.

Of the 23 projects that applied for the exemptions, 17 still need the commission’s approval.

In addition to the property tax exemption, owners may also qualify for federal tax incentives by listing their properties on the National Register of Historic Places. Owners of commercial properties often pursue the federal tax breaks.

Duvall said she is confident the local commission can process the remaining property tax exemptions by their deadline at the end of the year.

“It’s a great problem to have,” she said of the volume of work this year.

Historic buildings don’t have

to be architectural jewels

Last month, Lynda Peterson appeared before the landmarks commission on her nomination to place Lowell School, 2225 S. Inland Empire Way, on the Spokane register. The commission approved the nomination and sent it to the Spokane City Council for final approval.

“This is a new endeavor for me,” Peterson told the commission last month. She is part-owner of Dick’s Hamburgers and Frankie Doodle’s restaurant, but is doing the Lowell School project on her own. She wants to turn the school into a neighborhood brewpub.

She said Spokane has so many historic buildings being preserved that “it’s exciting to be part of that history.”

That prompted landmarks Commissioner John Hagney to ask, “Does this mean we can get a Double Whammy?” at her future pub, referencing the famous Dick’s burger.

Commissioner David Shockley said he was struck by the “really big spaces, wonderful spaces for dining” inside the old school.

Originally built in 1899, the Lowell School was rebuilt and enlarged in 1917 on its old foundation to house more students. It closed in 1954.

The stucco-clad building has arched front windows and doorways. The top of the roof holds a small cupola. The building was converted to a single-family residence after the school closed and was occupied by an engineer for about 30 years.

Many of the 1917 features remain, including the exterior facade; the original arched windows and entryway; granite capstones on a decorative porch railings; vestibule entrance doors and windows; and built-in cabinets.

The rehabilitation project, which dates to 2013, has not been cheap. Historic replacement windows alone will cost $135,000. Asbestos removal was $35,000. The sprinkler system, which is fed by a 4-inch water line, is $100,000, according to Kurt Holbart, of Holby Construction.

Peterson has applied for a $3 million exemption on expenses so far, and may apply again in the future for an additional exemption on costs yet to be incurred, Duvall said.

Historic buildings don’t have to be architectural jewels. The 1892 Genesee Block, 819-821 W. Riverside Ave., is a case in point. Its exterior has been dramatically altered over the years. Even so, it was approved by the commission for the Spokane historic register because it is one of the oldest brick buildings erected after the Great Fire in 1889. The City Council still must approve the nomination.

“It just looked like an underutilized building in a great location,” said owner Mike Craven, of Craven Co. LLC.

He is expecting to spend more than $1 million on the purchase of the building and rehabilitation. He plans to create two commercial spaces on the ground level and four residences on the second story.

Craven said there is so much investment occurring in Spokane now – not all historic rehabilitation – that it makes the risk of undertaking the Genesee project a good business move.

His project is among a group of additional properties that are expected to be up for property tax exemptions next year as more rehabilitation projects move forward.

Kolva said the number of downtown buildings that still need serious preservation work is dwindling. The 1100 block of West First Avenue, including the old Otis Hotel, is one such location, he said.

Kolva said a group of developers and investors who specialize in historic buildings has learned over the years that old buildings have an appealing durability.

Duvall echoed that view.

“Maybe you can build it cheaper (new), but it’s not going to have the lasting quality.”