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By Bobbi Pinkert, Class of 1999, and Monica Rodriguez, Class of 2015

Have you ever purchased a jar of pasta sauce only to realize the value of your coupon exceeds the price of the product? Grocery stores are not the only place where this can happen. You can also see this in the world of architecture through adaptive reuse efforts when national and Chicago landmarking incentives are layered together into a “lasagna” of perks. For the six developers represented on the Hotel Boom tour, adaptive reuse became a preservation windfall for Chicago and the environment as buildings that outgrew their usefulness were converted to boutique hotels in lieu of demolition.

The national effort for historic preservation began over 100 years ago with the formation of the National Park District in 1916. The National Historic Preservation Act was passed in 1966 and was the catalyst for the 1986 U.S. Tax Reformation Act. This act provided a dollar-for-dollar tax credit equal to 20% of the construction costs for rehabilitating an income-producing property. In addition, the Federal Government allowed a one-time charitable tax deduction equal to the cost of rehabbing the façade of a building through the Façade Easement Donation.

These incentives have accounted for over $116.34 billion in private investment to preserve over 47,000 properties across the nation since its passage. The program is overseen by the IRS, the National Park Service, and individual State Historic Preservation Agencies for all buildings listed on the National Register of Historic Places, National Historic Landmarks, and National Historic Landmark Districts.

To qualify for National Historic status, buildings or sites must be certified by the National Park Services and Illinois Historic Preservation Agency as having cultural value as an: event/person; type/period/method of construction; information or history. Despite the obvious financial incentives, there is no penalty for tearing down or significantly changing properties on the National Register. It is all carrot, and no stick.

Not, however, for buildings designated as Chicago landmarks. The Commission on Chicago Landmarks recommends buildings, sites, structures, and districts for LEGAL protection, and reviews all alterations, or demolitions of structures considered to be historically significant by: value; location; identification with person or persons; architectural type of style, important architect, engineer or builder; representation of an important theme or unique location. As of 2017, there are 256 Chicago landmark buildings and 49 Landmark Districts.

Once the property has been approved by the Commission, it is eligible for the Class-L Property Tax Incentive that reduces the property tax assessment levels for a 12-year period, provided the developer invests at least half of the value of the landmarked building in an approved rehabilitation project.

Under the Class L incentive, the assessment levels for the improvement or building portion of the assessment are reduced to 10 % for the first 10 years, 15 % in year 11, 20 % in year 12, and back to the regular assessment level in year 13. The other portion of the assessment, the land portion, is also eligible for the incentive if the building has been vacant or unused continuously for the previous two years.

The Pendry Chicago, Hampton Inn Chicago Motor Club, Virgin Hotels Chicago, The Langham Chicago,   LondonHouse Chicago, and Club Quarters Chicago Wacker at Michigan were all bought and developed within one year of receiving both Chicago and National Landmark status. They had to comply with the stringent requirements of the Landmark Commission, but in all instances, reaped substantial bottom line incentives and contributed to tourism in our city.

That’s one tasty lasagna!

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