The Mission of Preservation Chelsea

It is our mission to preserve Chelsea as a village rich with history and charm, reflected by historic buildings, surrounding farmlands, and as found in our beautiful and vibrant village center. We aim to work through education, offering to ourselves and the community the history of Chelsea as well as the issues shaping our future. We intend actively to preserve historic landmarks and to have a voice in all issues that affect any possible de-centralization of our village. It is our intention to pursue this mission with full involvement and input from merchants and citizens of Chelsea and to act in ways that make sense for the preservation of Chelsea's charm and historic integrity while supporting a vibrant and successful downtown.

Federal Screw Works

Federal Screw Works
This property has been under threat of total demolition since 2008--there are historically signficant and architecturally interesting sections that should be preserved!

Jackson Street Panorama

Jackson Street Panorama
The DDA voted at the meeting on 9.20.12 to demolish the Daniels Addition Car Showroom despite the letter from the State Historic Preservation Office. (please read below)

Thursday, July 12, 2012

Two other developers explain financials commonly used to redevelop historic properties to City Council 7.10.12

To Members of the Chelsea City Council,

As Chelsea leadership deliberated about the Longworth property and the proposals that were submitted to rehabilitate the property and revitalize the corner of Jackson and Main, it was suggested by some members of the DDA that the development group is not putting enough “skin in the game” relative to the financial package they’ve developed. To some, the group appears to be taking advantage of too many financial benefits—benefits that put them at an unfair advantage to others in town.

Not so. The financial tools specifically made available for historic preservation are designed to level the profoundly lopsided playing field that disadvantages the rehabilitation of historic buildings relative to other kinds of construction, especially new construction. Here’s what we mean by “lopsided.” Seeking financing at the bank, the historic property developer finds a banker who, almost always, is skeptical that an old building can be saved. The resulting loan-to-value ratio is low, forcing the developer to become extraordinarily creative in attracting any kind of loan, grant, or incentive available. The more complicated the package, the riskier. And the greater the risk, the less likely there is a return commensurate with what it takes to work on a property that has surprises at every turn – a weaker foundation than expected, asbestos in the plaster, rotted floor joists or ceiling beams, and the like. If returns were assured, generous, and easy, don’t you think everyone would be doing preservation projects?

In spite of these challenges, the Kadushin/Beal group has been skillful in suggesting a financial package that can revitalize the Longworth property, a large, complicated, deteriorated complex of buildings that only a seasoned preservation group would even consider taking on. Let’s take a closer look at the financial components proposed by the group.

A Tax Incentive Program:

For 32 years, the Federal Historic Tax Credit has quietly and effectively created skilled jobs, stimulated local economies, and revitalized historic buildings and communities. Nationally, 37,000 historic properties have been rehabilitated with the help of this credit, generating 2 million jobs and attracting $90 billion in private investment. The amount of tax credits paid by the U.S. Treasury is far less than the amount of federal taxes generated by these projects. Michigan has used the program since its inception. What many people forget is that the credit is not a benefit provided before the work is done. Rather, the investor must cover all rehabilitation costs and conduct all work in keeping with the “Secretary of the Interior’s Standards for Rehabilitation” without any assurance of qualifying for the credit. Only when returned to service and certified by the National Park Service, may the property owner claim the 20% credit that is taken against qualified expenses.
A Grant Program, a Loan Program:

Governor Rick Snyder is keenly interested in the revitalization of urban, suburban, and small town Michigan and last year created the “Community Revitalization Program” to make his vision a reality. He factored in historic preservation by having “creates jobs,” “addresses blighted properties,” and “works with historic resources” included among the selection criteria for program participation--clearly all of which play to the desire to see historic preservation supported. Successful applicants receive an incentive of up to 25% of rehabilitation expenses as a grant or a loan, both with dollar maximums. The pool of dollars currently assigned by the Governor is $100 million with at least $20 million for Brownfield and Preservation projects. The Michigan Economic Development Corporation is charged with getting the program up-and-running, and preservation projects have been among the first to be approved. We understand that Chelsea has been deemed a promising environment for successful use of this program.

A Tax Freeze Program:

Michigan’s Obsolete Property Rehabilitation Act (OPRA) was established in 2000 as another means by which to spur development. While not specifically for historic properties, they have often been the recipient because they reclaim some of the state’s most deteriorated properties. Unlike a tax abatement, OPRA freezes the current tax liability for a property so that improvements can be made without the taxes going up for from 1-to-12 years. A developer can finance a rehabilitation, an existing business can finance an increase in capacity or efficiency, or an entrepreneur can finance a start-up, knowing that they have a period of time to get underway. Rather than creating a competitive advantage for a project, it allows a project to compete when its neighbors may already be going concerns. The payoff? The municipal unit gets a more robust business able to pay its fair share at the end of the tax freeze, rather than one stunted by a tax burden that forever places it behind its neighborly competition. And of course, even as a historic property is being assisted through OPRA, the community benefits--i.e. sales tax is paid on building materials, people are employed to do the rehabilitation, employees in the new business spend their earnings in the community, income taxes are paid, visitors are attracted and spend their dollars around town, etc.

If Chelsea’s community leaders are not using all the tools available to make a historic preservation project successful, they are short-changing their community’s economic success and compromising the architectural history they are responsible for stewarding. Rather than making it impossible for the Kadushin/Beal team to work with the Longworth Property by dismissing their use of one tool or another, the City of Chelsea, its City Council, and especially its DDA should be helping create a great project—a genuine success story that will grab attention and attract others. And best of all, these tools are not just for outsiders who can bring new ideas and vitality to Chelsea. They’re for those who already have invested in Chelsea’s future and deserve a level playing field, too.


Scott Lowell
Traffic Jam and Snug Restaurant
Detroit, MI
Gregory Saxton
Director of Development
J. E. Johnson, Inc. 
Midland, MI
We challenge the belief held by some that the Kadushin/Beal group is taking advantage of too many financial incentives in lieu of their own equity – i.e. at a DDA meeting, it apparently was noted in a critical tone that the group had factored $500,000 into their term sheet for themselves.  It must be noted that Kadushin/Beal are not investors who simply are putting dollars into a project with no sweat equity involved.  Rather, they ARE the project.  They need to pay themselves for the hours they invest as professional architects, planners, builders, and retailers.  They need to pay themselves for the risks they are taking using the Federal Tax Credit which is not paid, or even assured, before the project is undertaken.  And don’t forget they have invested cash equity as well.  This is indeed “skin in the game.” 

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